Cost changes
Forecasts show continued increase in electric service costs
Environmental objectives, the need for diversity of fuel mix and resources, and long-term growth in customer demand for energy contribute to increasing costs. Financing costs as well as costs associated with maintaining, upgrading, and expanding our electric system are increasing as well. And while we are active in the processes that shape environmental laws and utility industry changes, we don't know what future laws or changes may do to our cost of providing electricity. Similarly, while we work to minimize plant outages, unforeseen or extraordinary plant outages may impact our cost of providing electricity.
To meet our customers' needs and ensure we have all the competitively priced electricity necessary, many utilities like Otter Tail Power Company will need to increase rates to pay for new lines and energy resources while continuing to maintain their current electric systems.
As utilities work through this period of change, cost recovery for necessary projects may be sought through rate cases and other approved adjustments sometimes referred to as riders. All methods of cost recovery require regulatory approval and include opportunities for public input.
Rate cases, while more expensive than the regulatory approval process for riders, are appropriate mechanisms when overall costs are increasing rather than in one specific area, such as an investment in wind energy.
After decades of no formal rate increases, 2009 likely was the last time Otter Tail Power Company will have long spans between rate cases. To help secure a bright future, we promise to remain diligent about finding the most efficient, responsible, and cost-effective ways to provide exceptional service, as we have for more than 100 years.
Riders allow Otter Tail Power Company to recover costs associated with individual projects. An example is the completion of a renewable energy facility that we own. Associated costs include operating and maintenance expenses, depreciation, income and property taxes, and a return on our investment.
Riders benefit customers by reducing the overall cost of financing a project by allowing for more timely cost recovery than rate cases. Riders also are trued up every year so customers don't pay too much or too little.
