Many services that we use in our homes or businesses have some form of a monthly charge to cover the cost of providing the service. It might be called a service charge, basic charge, fixed charge, or monthly minimum charge. For Goodhue County Cooperative Electric Association (GCCEA) members, this monthly charge is called a service charge. It plays an important role in ensuring the financial health of the co-op and influences our ability to provide safe and reliable electricity while also allowing for a balanced investment among our members.

Traditionally, electric utilities recovered the majority of operating costs through variable kilowatt-hour charges. That practice evolved as cost-of-service studies uncovered a trend that greatly impacts the fiscal health of electric cooperatives throughout the U.S.: variable kilowatt-hour rate structures do not address fixed costs in an equitably proportionate way among coop members and can impact the long-term financial health of the co-op due to variations in energy use.

As an electric cooperative, GCCEA’s rates and structure are influenced by the principle that all members shall pay an equitable and reasonable investment back into the cooperative. Relying solely on kilowatt-hour charges creates an uneven balance of investment between low- and high-energy-use member accounts and impacts the ability of electric co-ops to address the increasing costs of equipment, materials, labor, software, and the financial impact of evolving state and federal regulations. The advantage of having fixed costs covered by fixed charges is the ability to maintain a sound financial position and reliable services that are not influenced by fluctuating kilowatt-hour sales.

GCCEA’s service charge helps offset many of the regulatory and business requirements associated with the costs of operating an electric cooperative: the operation, repair, and maintenance of GCCEA’s entire system of lines (including materials), meter testing, pole inspection, tree-trimming, interest, depreciation, and property tax expenses, as well as insurance. These expenses are relatively fixed; they do not vary according to your electricity use.

The service charge also addresses the challenge of low- or no-use accounts: the cost to operate and maintain our system exists even if no electricity is used. It helps to protect our investment per electric service, which is independent of kilowatt-hour sales. Whether a kilowatt hour of electricity is used or not, GCCEA is accountable for providing safe and reliable electricity to over 5,000 services comprising over 6,000 meters and 1,350 miles of energized line.