No one wants to be the bearer of bad news but that is my task in this month’s update. Midwest will be raising our rates effective January 1, 2026. The vast majority of the rate increase is due to a rate increase from Tri-State Generation and Transmission, Midwest’s power supplier. As our cost to purchase power is usually 65-70% of our total cost to provide electric service to you in any given year, wholesale power rate increases have a significant impact on retail rates.
To be fair to Tri-State, they have been able to hold rates in check for most of the last decade. Their rates were basically flat from 2016 to 2023, and Midwest did not have to increase our retail rates at all over that time. They did increase our rate by 6.3% in 2024 and Midwest took the same rate increase. But there was no rate increase for 2025. So, there was only one increase over that 10-year period, which makes the average increase over that time less than 1% per year.
There are two main components of Tri-State’s rate increase, which is set to be 7.5%. First is inflation, which everyone is probably tired of hearing about but is still raising the costs of the hardware we need to build and maintain our system. The second major factor is the growing need for more electricity across the entire country. The demand for energy runs in cycles where there will be years of slow growth followed by years when demand increases quickly. Most of the country is moving into a fast-growth cycle and Tri-State is looking to add generation capacity of all types – natural gas, wind, solar and batteries – and needs funding to make those investments.
In addition to their rate increase, Tri-State made another change that affects Midwest’s financial ratios. Like Midwest, Tri-State is a cooperative that returns their margins (profits) to their members. Tri-State has traditionally made an annual payment that contributes to Midwest’s margins. And Midwest has to maintain a certain level of margins to remain financially strong and meet our loan requirements. As Tri-State looks to build generation resources, they have decided not to pay back any Capital Credits for at least the next year and probably longer. So, Midwest has to make up for that loss by increasing our rates. That adds about another 1% of a rate increase for us. And the inflationary factors alluded to earlier added an additional 1%. So that all adds up to about a 9.5% rate increase overall.
I wish I had some better news to go with it. But I will promise you that the Board and employees of Midwest will continue to do what we can to keep costs as low as possible while still providing reliable power and high-quality service.
Jayson Bishop
*Midwest Electric is an equal opportunity provider and employer.*