NHEC Explains “Member Service Charge”

Same charge for every member

By Fred Anderson, President/CEO, NHEC

If you get your electricity from New Hampshire Electric Cooperative, you’ve no doubt noticed the Member Service Charge portion of your bill. It’s a fixed monthly charge that is paid by all Co-op members, regardless of whether you use one kilowatt-hour (kWh) per month or 1,000.

No single charge on your monthly electric bill attracts more attention than the Member Service Charge, so allow me to explain its intent and clear up some common misconceptions, some of which have been expressed recently in the local media.

Every business has operating costs, and the Co-op is no different. The Co-op recovers the large majority of its costs with two charges that appear on your monthly bill – the Member Service Charge and the Delivery Charge. While the Member Service Charge is fixed and equal among all residential members, the Delivery Charge is a per kWh charge that varies depending on how much electricity you use.

Every four years, NHEC conducts or updates a Cost of Service Study (COSS), which we use to evaluate our rates and fees. Our 2013 COSS calculated it costs a little under $50 per metered account, per month to serve all our residential members. This is our cost to provide service to your meter. It covers expenses related to the maintenance of our electric distribution system so that we may have an infrastructure that is available to serve you 24 hours a day, 365 days a year, no matter how much power you use.

At present, the monthly Member Service Charge is $26.06. In the past, the Member Service Charge was lower than it is now – about $9 per month – but the Delivery Charge was about twice what it is now. In 2004, the Co-op’s Board of Directors made the decision to increase the Member Service Charge and lower the Delivery Charge.

When the Member Service Charge was increased in 2004 and the Delivery Charge decreased, it resulted in an overall bill decrease for about two-thirds of Co-op members. Similarly, if the Member Service Charge were decreased today, it would result in a bill increase for two-thirds of our members.

Another important reason for the current rate structure is its impact on the Co-op’s energy efficiency efforts. With a lower Delivery Charge, there is less incentive for the Co-op to sell more electricity to make more money. While this effort by an electric company to sell less of its product can seem counter-intuitive, our current rate structure means we can fully support our members’ energy efficiency efforts and maintain financial strength.

Bottom line: NHEC is a non-profit cooperative, and our rates and charges are designed to more equitably allocate costs. Your NHEC Board has determined that the best way to recover our actual costs is by appropriately balancing the fixed monthly cost (Member Service Charge) with the kWh charge (Delivery Charge). We believe we have developed a rate and fee structure that is fair to all members and will continue to review that rate structure to ensure it is appropriate.

Fred Anderson
NHEC President/CEO