Rate Changes in 2025
2024 presented several challenges for McDonough Power, including a few smaller yet destructive storms, soaring inflation, rising interest rates, and a healthy dose of politics. Each of these factors directly impacts McDonough Power, much like they affect our personal lives.
Starting with the billing in February, all members will see a rate increase of 7%-10%. As a member-owned cooperative, this is not the outcome any of us wanted, but it is necessary given the current and future challenges. Due to space limitations, I cannot go into great detail about each of these factors, but I assure you that our board of directors is actively working to keep this increase as minimal as possible.
The cost of power continues to rise as the grid evolves. Older power plants are being retired, and new facilities are being built, requiring utility infrastructure to keep up in order to maintain reliability. These costs are reflected in our bills. Federal and state policies, along with regulatory guidelines, also play a role in decisions that impact our costs. Utility planning, particularly in the generation and transmission sphere, spans decades, not election cycles. What seemed like a prudent decision two election cycles ago may be changed by a new administration or regulatory body.
Inflation is another key factor driving up rates. We’ve all felt it at the grocery store, and it is equally present in the utility industry. The power grid is made up of generation equipment, substations, poles, wires, big trucks, and linemen. In the mix behind the scenes is office staff, engineers, suppliers, and manufacturers who provide the products we use. As the costs of raw materials, assembly, shipping, and labor have risen, these expenses are passed on to us. Despite working with very narrow margins in recent years to keep rates stable, we have now reached a point where a rate increase is necessary.
Interest expense is another significant factor. As a capital-intensive business, we borrow money to build new infrastructure or upgrade older, existing plant, then repay these loans over 35 years while depreciating the assets, which often last longer than that. In years of more modest interest rates, this wasn’t as much of a burden, but as rates have risen, so too has our interest expense.
On a positive note, we remain a member-owned cooperative, managed by directors who live on our lines and pay the same bills as all of us. As a non-profit cooperative, we are owned by those we serve. Despite the challenges we face, our cooperative has stood strong for 86 years, and we look forward to many more years of service.
Mike Smith
President and CEO