The cost of energy
Inflation has impacted nearly every aspect of our lives over the past year. We are paying more at the grocery store, at the pump and for fuel to heat our homes. Electricity is no different. As a not-for-profit electric cooperative, SMECO’s rates for Standard Offer Service (SOS) fluctuate based on the market price for electricity. What we pay for electricity is what we charge—there is no markup. As the chart demonstrates below, the price for natural gas is a major driver on the cost of electricity. Through September 2022 the price of natural gas has increased 290 percent since January 2020.
The chart below shows how the monthly average cost has changed for each of the following: SMECO’s residential energy rate, PJM’s wholesale price of electricity, crude oil, and natural gas. In January 2020, SMECO’s rate was 6.95 cents per kWh, the PJM price was $25.55 per MWh, crude oil was $57.52 per barrel, and natural gas was $2.02 per mmBTU. As of September 2022, SMECO’s rate was up to 10.59 cents per kWh, while the other commodities were higher by 46% to 290% at $89.07 per MWh, $83.80 per barrel, and $7.88 per mmBTU.
|Date||Indexed SMECO Residential SOS & PPCA Jan 2020 =1||Henry Hub Natural Gas Spot Price Jan 2020 =1||PJM Pepco/SMECO LMP Price Jan 2020 =1||WTI Crude Oi Spot Price Jan 2020 =1|
Yes, electricity rates are up. But they are not unprecedented. Our Standard Offer Service rate today is nearly the same as it was pre-pandemic in 2017, and it is much lower than what it was in 2009.
SMECO’s Standard Offer Service (SOS) rate for energy is made up of an energy charge and a Power Cost Adjustment (PCA). The total is the SOS rate members pay on their monthly bill. The SOS rate reflects the price that SMECO pays on the wholesale market. There is no mark-up. SMECO makes no profit on the SOS rate.
SMECO’s PCA is in place to even out the impact of fluctuating energy prices. When SMECO’s PCA is more than five percent (up or down) of the residential energy charge for three months in a row, SMECO files for a rate adjustment with the PSC. The adjustment shifts the energy charge to absorb the overage reflected in the elevated PCA. The new rate goes into effect three months after the filing date.
SMECO’s SOS residential summer energy rate, in effect May through September, is 8.17 cents per kilowatt-hour (kWh). SMECO’s winter rates, which went into effect October 1, are currently 8.89 cents per kWh. On October 31, 2022, SMECO submitted a request to the Maryland Public Service Commission (PSC) to allow SMECO to adjust the rates for 2023. The filing was approved, so the winter rate will move to 9.31 cents per kWh effective with the January 2023 bills.
Energy use changes seasonally
When it’s cold in the winter and your heating system runs, or when it’s hot in the summer and your air conditioning runs, your bill will be higher. Your bill is at its lowest in May and October, because you typically use less energy in those months. The chart below shows the average monthly temperature from December 2020 to October 2022.
Control your cooling costs:
- Have your cooling system serviced annually.
- Insulate your attic, walls, and crawlspace.
- Ensure duct work is sealed and insulated.
- Find the coolest comfortable setting. (We recommend 78 degrees F in summer.)
- Install a smart thermostat. You can purchase one from our online store.
- Clean or replace filters monthly.
- Use ceiling fans and portable fans to circulate air in your home.
- Keep window blinds and curtains closed during the day to block sunlight.
- Sign up for a Home Energy Improvement Program analysis of your home.
- Use a timer for your pool pump so it doesn’t run 24 hours a day.
- Cooking outdoors will keep your home cool and save electricity.
- Turn off lights in unoccupied rooms.
Control your water heating costs:
- Set your water heater thermostat between 120 to 125 degrees.
- Use cold water whenever possible, such as when washing clothes and only run full loads.
- Insulate your water heater (check manufacturer recommendations).
During peak times, energy costs are higher for SMECO, and during off-peak times, costs are lower. On SMECO’s SOS rate, the per-kWh cost doesn’t fluctuate. But, for customers who choose SMECO’s Time-of-Use (TOU) rate, energy charges will reflect the peak and off-peak price difference.
TOU rates can help customers save money if they use less energy during peak times. To shift energy use, residential customers can run kitchen and laundry appliances, pool pumps, and other equipment during off-peak hours. Find out more.