Rate Adjustment
Frequently Asked Questions (FAQ) – Electric Rate Adjustment
What are the new rates?
The basic customer service charge will increase from $20 to $22 for full-time, regular residential customers, and the kWh rate will increase from $0.0706 to $0.0887. The PCA, which is currently $0.019 will be reset to a reduced rate of $0.005 per kWh. The commercial and industrial electric rates can be found on our website at www.bereautilities.com/rates/.
What will this mean for my bill?
The amount of the increase will vary based on the monthly electric consumption. The average residential customer using 1,000 kWh a month will see an estimated $5.76 per month increase before taxes.
When will the rate increase take effect?
The rate increase will be effective for the bills that are mailed at the end of August, and which will be due on September 10. This bill will include the electricity you use between July 8th and August 8th.
When was the last time rates were increased?
The last formal cost of service study took place in 2012. Rates have not increased since that time. However, slight increases in the cost of purchased power were absorbed into the Power Cost Adjustment (PCA) between 2012 and 2019. After 2019, the PCA remained mostly consistent and no additional rate adjustments have been made.
How were the rates determined?
We consulted a 3rd party expert service, Utility Financial Solutions, LLC, to ensure our current rates will protect the long-term health of the utility. We were advised that an adjustment was needed to cover our increasing fixed costs, ensure our rates were fair, and cover the actual cost of providing power.
Are commercial and industrial rates also increasing?
Commercial and industrial rates classifications are also changing with this rate increase. Commercial and industrial customers should look for additional information coming to them via mail to help them understand how they will be affected. This change will not result in an across-the-board rate increase. Some customers may see modest adjustments in their monthly bills, while others may see a decrease depending on their usage patterns and demand characteristics. Most of the decreases will be customers currently in the Industrial Class 3 and 4 rates being transferred into the Small General Service rate class due to less than 25kW demand. The utility is committed to working closely with all commercial and industrial customers to help them understand the changes and manage their energy use effectively.
Are BMU Water or Wastewater rates increasing as well?
While similar cost pressures to those driving our electric rate increase exist in the water and wastewater utilities that BMU operates, at this time BMU believes increasing rates for these services can wait. However, it is possible that rates for these services will need to go up in the next 12-18 months.
Why is the city-owned utility raising electric rates?
We are raising rates to reflect increased costs in providing reliable electric service. Since our last base rate increase, the cost of purchased power—which makes up the largest portion of our expenses—has risen significantly due to fuel price volatility, inflation, and changes in regional energy markets. Additionally, we are investing in system improvements and modern technology to better serve our customers and ensure long-term reliability.
Does the utility make a profit from these rate increases?
No. As a city-owned utility, we are a nonprofit public service. Our rates are set to cover the actual cost of operating the electric system—nothing more. We do not have shareholders and we do not generate profits. Every dollar we collect goes directly into maintaining infrastructure, buying electricity, and serving the needs of our community.
What’s the difference between the customer service charge and the energy charge?
- The customer service charge is a fixed monthly fee that covers the cost of maintaining your service connection, billing, meters, and customer service—regardless of how much electricity you use.
- The energy charge is based on your actual electricity usage (kWh) and covers the cost of purchasing and delivering that energy.
Both components are necessary to support utility operations fairly and sustainably.
What’s the difference between “energy” and “transmission”?
- Energy refers to the actual electricity you use, measured in kilowatt-hours (kWh).
- Transmission refers to the high-voltage delivery of electricity over long distances from the power plants to our local distribution system.
We do not generate electricity ourselves. Instead, we purchase power from regional suppliers, including both energy and transmission services, and deliver it to you.
What is a Power Cost Adjustment (PCA), and why do we need it?
The PCA is a line item on your bill that reflects changes in the cost of purchased power. Since power prices can change monthly due to fuel costs, weather, and market conditions, the PCA helps us adjust rates more quickly and fairly without needing a full rate change each time. It ensures we recover our costs without overcharging when prices fall.
Why does the utility use purchased power?
As a purchased-power-only utility, we do not own or operate our own power plants. Instead, we buy electricity on the wholesale market or through long-term contracts. This approach helps us keep capital costs low and allows flexibility in sourcing cleaner or more affordable power—but it also exposes us to fluctuations in market prices.
What are the main cost pressures driving this rate change?
- Rising wholesale power costs
- Higher transmission charges
- Inflationary increases in materials, equipment, and labor
- Technology upgrades, including smart meters, cybersecurity, and system automation
- Routine maintenance and infrastructure replacement to keep the system safe and reliable
How often are rates reviewed?
We review rates periodically through a cost-of-service study to ensure fairness, transparency, and alignment with actual expenses. These studies are conducted by experts and reviewed by city leadership and the city council. Rate adjustments are only made when necessary.
What is a cost-of-service study, and why is it important?
A cost-of-service study (COSS) is a detailed financial and engineering analysis that examines how much it truly costs the utility to serve each type of customer—residential, commercial, industrial, etc. It considers factors like electricity usage patterns, peak demand, infrastructure costs, and operational expenses.
The goal of the study is to ensure that rates are fair, equitable, and based on actual usage and demand on the system. For example, a large industrial customer with high demand during peak hours may place more strain on the grid than a small retail shop and, therefore, should pay a different rate that reflects their impact.
What would happen if we didn’t increase rates?
The primary result is that we would stop investing in electric reliability. Many of our maintenance and system reliability programs would have to be scaled back. We would have more frequent and longer lasting outages. We would also have to increase our debt and loan borrowings. We would incur more outstanding debt from our lenders, increasing interest expenses and reducing our financial flexibility.
Will more increases be coming in the future?
Our goal is always to minimize rate increases. However, costs for power, labor, and equipment are likely to continue rising. Going forward we will be making smaller rate adjustments each year so we can avoid sudden, larger increases.
How do BMU’s rates compare to other rates?
As of the most recent data from the U.S. Energy Information Administration (EIA), the average residential electric rate in the United States is approximately 16 cents per kilowatt-hour (kWh). In comparison, Kentucky consistently ranks among the states with the lowest electric rates, with an average residential rate of about 11 cents per kWh. Berea’s new rate of 8.87 cents per kilowatt-hour is well below both the state and national averages.
What can I do to lower my electric bill?
Here are some easy tips to reduce electric use and manage your costs:
- Set your thermostat to 78°F in summer and 68°F in winter.
- Use LED bulbs, which use 75% less energy than incandescent ones.
- Turn off lights and electronics when not in use.
- Use power strips to eliminate phantom loads from devices in standby mode.
- Run dishwashers and washing machines during off-peak hours when possible.
- Keep HVAC systems serviced and replace air filters regularly.
- Consider installing smart thermostats for better control.
What assistance is available if I can’t pay my bill?
BMU recognizes that financial hardships happen to everyone, and sometimes you need a little extra support paying your bill. We have many options available to do things like give more time to pay, set up payment plans, and provide you with outside resources that may be able to help reduce your payment. Let’s work together to find the right option for you. Visit our website, https://www.bereautilities.com/billing-and-payments/payment-assistance/ to see what option is best for your situation. We are also available to help you decide by calling our office and speaking with a customer service representative at 859-986-4391.
Where can I learn more or share feedback?
We welcome your input and want to help you understand your bill. You can:
- Visit www.bereautilities.com
- Call us at 859-986-4391
- Email bereautilities@bereaky.gov
Final Note
As your community-owned utility, we are committed to providing affordable, reliable electricity while keeping rates fair and transparent. Thank you for your understanding and continued support as we work to serve Berea now and into the future.
