Energy bills will increase 23 percent next year for customers of the Southern Maryland Electric Cooperative, the utility announced this week.
The utility attributed the rate increase, which takes effect Jan. 1, to the skyrocketing cost of the fossil fuels needed to generate electricity.
"We don't have any control over that cost," said Ann Knott, a spokeswoman for the utility. "It is controlled by the market."
Unlike some electric utilities, the nonprofit cooperative does not generate its energy. SMECO purchases the electricity and then distributes it to 120,000 customers in an area covering all of Charles and St. Mary's counties, southern Prince George's County and most of Calvert County.
The cooperative's current rates are among the lowest of any utility in Maryland because it has been able to cheaply purchase power from a subsidiary of Pepco since 2001, Knott said.
But the four-year contract expires Dec. 31, and the new cost to purchase power from Pepco is significantly higher than it was in 2001.
"We thought there must be a better way to secure a lower cost," Knott said.
So, instead of purchasing power from a single supplier, SMECO decided to buy energy from eight to 20 suppliers. The utility joined ACES Power Marketing, a cooperative of energy cooperatives, which will supply power starting with the new year.
Even with the higher rates, Knott said SMECO's costs will be 15 percent to 20 percent lower than they would be if the cooperative continued purchasing power from a single energy provider.
SMECO must seek approval of the new rate structure from the Maryland Public Service Commission. However, the increase may be implemented before the agency has taken final action.
The utility's energy bill has two components: the cost of purchasing the electricity and SMECO's cost to distribute the electricity to customers. Roughly 60 percent of a customer's electricity bill is from power costs, with the remainder coming from distribution costs.
SMECO has not raised its distribution rates in more than a decade, Knott said.
Starting Jan. 1, the energy component of the bill will increase from 3.98 cents a kilowatt-hour to 5.57 cents for the winter and 5.70 cents for the summer.
The total monthly bill will increase from $89.16 to $110.40 for the average SMECO residential customer, who uses 1,200 kilowatt-hours of electricity each month, Knott said.
She said the increase will vary from home to home, depending on the type of heating and cooling systems used, the size of the household and whether energy conservation methods are employed.