DEMCO CEO addresses rising costs, challenges

Staff Report

DEMCO CEO and General Manager Randy Pierce addressed challenges that have affected members over the past several months.

In a Dec. 2 news release, Pierce stated wholesale power costs rose 60 percent beginning over the past summer.

“One reason for this increase is DEMCO spread the costs of Winter Storm Uri over a year to prevent a shocking increase in one month. Spreading these costs over a year has increased rates by about five percent per month," Pierce said in the statement.

The Louisiana Public Service Commission encouraged all state utilities to spread costs over time to help all ratepayers.

“The main driver, though, of higher wholesale power costs since the summer are the extraordinary closing costs related to our power supplier permanently shutting down the Dolet Hills Power Station in Mansfield, LA. These closing costs have been pushed into the rates of all CLECO consumers including wholesale customers like DEMCO,” said Pierce. “The Dolet Hills closing costs have increased retail rates to our members by about 25 percent over the past six months. All of this is exacerbated by higher fuel costs over the same period.”

Pierce added that DEMCO is close to paying off the winter storm costs and will soon see the end of higher costs tied to the plant closing.

“As a result, the monthly kilowatt-hour price from DEMCO to our members will decrease by about 25 percent beginning in early 2022,” Pierce said.

Further, DEMCO has negotiated and submitted new wholesale power contracts to the Louisiana Public Service Commission for review and approval.

If approval is received, the contracts will take effect in April 2024 and will save DEMCO members $160 million over the ten-year life of the contracts, according to the release.

“In an economic impact study, Dr. James Richardson, Professor Emeritus of Louisiana State University, projects the economic outcomes of lower electricity prices and the results are staggering.” Pierce said. “Because of DEMCO members spending less on electricity, they will likely spend these savings in other areas of the economy resulting in almost $270 million in increased economic transactions which will lead to about $90 million in additional personal earnings, almost 3,000 new jobs and over $12 million in additional state and local tax receipts.”

Over the next several months, DEMCO expects to "boldly and aggressively advocate" for adoption of contracts to benefit the seven-parish service area.

Pierce also addressed estimated bills over the past few months.

“The number of estimated bills increased beginning this summer in part due to our inability to obtain new meters to replace older, failing meters. Today’s electric meters utilize similar digital chips required for vehicles and as we all know, we are experiencing a shortage of these chips,” Pierce said. “As a result of Hurricane Ida, DEMCO also experienced damage to our automatic meter reading infrastructure. DEMCO has been working hard to resolve these problems and is deploying employees to read meters until our automated system can be fullyfully repaired and implemented. Our members will begin to see improvement immediately.”