Cherryland Electric Cooperative’s 38,000 members could soon find themselves paying a little bit more for electricity, pending a board of directors vote later this month on a proposed 6 percent rate hike. Cherryland CEO Rachel Johnson laid out the reasoning for the increase in a blog post published earlier this week, citing “increasing cost pressures for wage and benefits, supply chain costs, and interest expense.” But while Cherryland assures the price jump will be minimal, equating to just $6.80 on the average customer’s monthly bill, the change does mark the latest cost-of-living increase for northern Michigan residents – an issue multiple Cherryland members raised in response to the news.

In the March installment of Cherryland’s “manager’s column” blog series, Johnson explained that Cherryland has recently found itself facing “a growing tension between continuing to invest in system reliability and managing our costs for our members.”

“We ended 2023 in the red,” Johnson wrote. “In response to that, we have frozen hiring and decreased some of our maintenance and tree trimming programs in 2024. But we can’t cut those things forever without negatively impacting our ability to keep your lights on. That’s why we are moving forward with a rate increase proposal that your board will vote on this month.”

The rate hike would include both a flat $4-per-month escalation of Cherryland’s “availability charge” and a $0.004-per-kilowatt-hour (kWh) increase in the utility’s monthly energy charge. Per Johnson, the average Cherryland member would see a $6.80 increase on their monthly bill – about a 6 percent jump.

In explaining the rate hike, Johnson pointed to three fast-growing expenses for Cherryland: labor, materials costs, and interest. Labor, she wrote, is the utility’s “second largest expense behind power supply.” While Johnson stressed that Cherryland runs “a really lean ship” and serves “the most meters per employee amongst our co-op peer group across the country,” she also noted that the cooperative’s employees possess “very technical and in high demand” skillsets, and that Cherryland has had to increase its pay to “keep up with market wages.”

Cherryland’s inflation burden has also been significant. According to Johnson, the utility’s overall supply chain costs have skyrocketed by over 40 percent since 2021, including price surges of 111 percent for overhead transformers, 57 percent for underground wire, and 30 percent for electric poles.

Finally, Johnson wrote that Cherryland “will have over $3.7 million in total interest expense” in 2024 alone, constituting “a 38 percent increase in our borrowing costs over the last three years.”

“Implementing a rate increase is not something we take lightly at Cherryland,” Johnson concluded. “As we continue to navigate high utility inflation into the future, we anticipate the need for more frequent rate increases than we’ve had during the low inflationary environment of the last 10 years.”

Utility price jumps have certainly become more common in recent years. According to the United States Energy Information Administration (EIA), “the average monthly electricity bill increased 13 percent from 2021 to 2022, rising from $121 a month to $137 a month.” 2022 marked “the largest annual increase in average residential electricity spending” since the EIA started tracking in 1984.

Prices are only continuing to rise. On March 1, the Michigan Public Service Commission “approved a more than $92 million increase in rates for electric customers of Consumers Energy.” The change, which will manifest as a 1.6 percent rate increase for the average residential customer in Michigan, is intended to fund “investments needed to improve reliability.”

At Traverse City Light & Power (TCLP), meanwhile, CFO Karla Myers-Beman tells The Ticker there have already been two rate increases this decade: an “overall base rate increase” of 2.5 percent in 2021, and another 2.5 percent hike the following year. In addition, Myers-Beman says TCLP staff recently “presented with the utility’s rate consultant a five-year rate plan which provided for a modest rate increase for fiscal year 2024-25.” If that plan is approved, the first of the proposed rate escalations will kick in with TCLP’s new fiscal year in July, and will help pay for “environmental sustainability initiatives,” “resiliency of the utility’s energy and telecom operations,” and more.

Of course, utility spending is just one area where cost of living has been on the rise for the average American. According to the Bureau of Labor Statistics and its 2023 consumer price index report, last year saw an overall price increase of 3.4 percent across all consumer goods and services, including 20.3 percent for motor vehicle insurance, 6.2 percent for shelter, 2.7 percent for food, and 2.4 percent for education.

Numerous Cherryland members raised cost-of-living concerns in response to Johnson’s column, with many pointing out that senior citizens, retirees, people living with disabilities, and others with fixed incomes are especially vulnerable to recent inflation.

“Those of us on a fixed-rate income have to [pay] more and more to cover all the rate increases that everybody is implementing,” one member noted. “I would like to think that Cherryland will keep that in mind, and try to come up with a price for the senior citizens like myself who can no longer work due to age and disability.”

Other members urged Cherryland to look for opportunities to cut cost elsewhere, such as with executive salaries.

In response to the pushback, Johnson acknowledged that news of rate increases is “hard to hear when there are so many other cost pressures today.”

“All of us are feeling that pressure on our pocketbooks,” Johnson wrote. “I honestly don’t think it is possible for any employer in our area to keep wages at pace with inflation right now, especially with housing costs so high. Everyone’s dollar is getting stretched thinner.”

The Cherryland Electric board of directors will vote on the proposed rate increase at its monthly meeting on March 18. If approved, the new rates will go into effect in June. Johnson encouraged Cherryland members to make their voices heard on the matter by attending a member meeting scheduled for 5:30pm this Tuesday, March 12 at the Cherryland offices in Grawn.