The Consumer Cost Adjustment (CCA) is an adjustment intended to match the cooperative’s basic financial requirements to revenue.
Its purpose is to minimize the impact of future rate changes on members. Like all businesses, East Central’s operating expenses increase over time until new revenue is required.
With the CCA, cooperative members have seen smaller, more gradual increases as opposed to fewer and larger increases.
East Central’s CCA is intended to maintain its key financial ratio – as identified by its primary banker. This ratio is called the “Times Interest Earned Ratio” or “TIER” and is a measure of the cooperative’s ability to take on additional interest expense as it borrows money.
Over time, as East Central adds plant in order to be able to continue to maintain excellent service, its financial objectives change. As a result, East Central requires this small 2.86% increase above revenue that existing rates and the existing CCA will generate if the cooperative makes no changes to its rates and CCA.