President’s Reports

President's Report

Legislature Addresses Clean Energy, Wildfires

CEO Dave MarkhamA sweltering June Saturday in Salem, where temperatures soared to an all-time high of 103 degrees, seemed a fitting backdrop to conclude an extraordinary state legislative session.

The state capitol’s doors were closed to the general public throughout the session due to the pandemic, leaving legislators to conduct much of their business virtually.

Under these unusual circumstances, the Legislature passed significant bills that will affect the utility industry for years to come.

After a decade of numerous attempts to pass significant clean-energy legislation in various forms, enough votes materialized to pull House Bill 2021—100% Clean Energy for All—over the finish line.

HB 2021 requires investor-owned utilities to transition to a 100% clean energy portfolio by 2040, with intermediate targets of 80% by 2030 and 90% by 2035. Consumer-owned utilities are exempt due to heavy reliance on the Bonneville Power Administration’s hydropower, which is 100% renewable energy.

The goal raises serious questions about long-term resource adequacy needs. Wind and solar should play an instrumental role in an all-of-the-above energy resources strategy, but are insufficient to serve as the backbone to the state’s energy supply. They cannot generate power consistently, often when needed most.

Yet this is where HB 2021 is taking us. One of the bill’s provisions prohibits sitings of any new gas-fired generation. No new future natural gas facilities, combined with efforts to remove the lower Snake River dams—if successful—will create an oncoming energy crisis to meet demand.

Natural gas and the lower Snake River dams play an instrumental role in delivering power in the Northwest when wind and solar aren’t available. Last year’s ice storms in the Willamette Valley and the most recent heatwaves demonstrate the need for these resources to serve as a backstop to intermittent renewable generation to prevent blackouts.

With excessive heat early and drought conditions, Oregon faces a fire season potentially surpassing last year’s historic wildfires. The Legislature took bipartisan action to beef up the state’s response to wildfire mitigation efforts, including requiring investor-owned utilities to submit to the Public Utilities Commission a wildfire mitigation plan by the end of this year. Electric cooperatives must do so by June 2022. CEC updated and formalized its plan in 2020.

The legislation includes $185 million for thinning forests and additional firefighting capacity. It compliments Gov. Kate Brown’s June executive order, which preemptively declared a state of emergency due to the imminent threat of wildfires across the state. It authorizes the Department of Forestry and the Office of Emergency Management to use other state agencies’ personnel, equipment and facilities to respond to wildfire emergencies.

CEC is doing its part, too. We continue to upgrade our system and implement our vegetation management plan, including removing hazardous trees and brush that could ignite a wildfire from a downed power line. We stand prepared to execute a Public Safety Power Shutoff in high-risk fire areas should extreme weather conditions warrant it.

Perhaps collectively, we can take the “extra” out of extraordinary for the remainder of this year.

 

President's Report

CEC Unveils EV Rebate Program

CEO Dave MarkhamDo you own or are you considering the purchase of an electric vehicle? Are you looking to buy and install a Level 2 charger at your home? If so, I have good news for you.

If you own or buy an EV, register it with CEC today and receive $50.

Buy a Level 2 charger from any retailer and you can receive a $150 rebate or $450 to install a Level 2 charger approved by the Bonneville Power Administration.

As Central Oregon’s population grows, so does our members’ interest and demand in EVs. The co-op’s service territory has the sixth-highest numbers of electric and hybrid vehicles in Oregon. Deschutes County ranks seventh-highest in Oregon for registered EVs and HEVs.

This upward trend will likely continue as EV adoption is poised to become mainstream in the decade ahead. Registering your EV with the co-op helps provide essential data to help us manage energy demands efficiently and plan for long-term electric infrastructure expansion.

The EV incentive and rebate program aligns with CEC’s historical commitment to support members’ interests. Throughout the decades, members advocated for the co-op to develop green energy and provide energy-efficiency programs.

CEC listened and took action. As a result, we built a community solar array at our Bend office in 2015. Since 1995, we have owned a portion of the Coffin Butte Landfill Gas Generation Project north of Corvallis. In the 1970s, the cooperative created a conservation and energy-efficiency program ahead of its time. Today, our programs offer members a wide range of energy-efficiency options to conserve energy.

As EVs become more affordable—accompanied by improvements in battery life and driving range—we want to partner with members to integrate EVs into our electric system that benefits everyone.

Please note, the money going to members for these EV and charger rebates does not come at the membership’s expense. The money comes from the state of Oregon’s Clean Fuel Program, funded through the purchase of credits by regulated entities whose fuel sources do not meet the annual average carbon intensity requirements. The state wants utilities to spend the financial proceeds from selling those credits on promoting transportation electrification in their service territories.

To take advantage of our valuable rebates and incentives programs, visit us at www.cec.coop/customer-service/electric-vehicles. Here, you can quickly register your vehicle, review eligible charger models and complete the online rebate application

President's Report

Preparing for Wildfire Season

CEO Dave MarkhamAs Central Oregon enters fire season, I urge you to explore this month’s Ruralite dedicated to wildfire and Public Safety Power Shutoff preparedness. You will find information to help you prepare for a possible PSPS event, and how to protect and safely
evacuate your home should the need arise.

Last year’s Labor Day wildfires are a sober reminder of how high-wind events can quickly contribute to the spread of wildfires in wildland-urban interface areas. Combined with ongoing droughts; long, hot summers; and disruptive weather events; we must
remain vigilant in our awareness and preparation.

One only has to drive through the Cascades on Highway 126 along the McKenzie River or Highway 22 through Detroit to witness the almost instantaneous devastation incurred by the high winds and subsequent fires that ripped through those areas, tragically taking human life.

Foundations lay bare as adjacent tents and trailers serve as temporary housing. Along the winding highways, the noises of chainsaws, tree pickers and chippers fill the air.

Hope is in the air, too. Skeleton framing shapes new homes, and restrung power lines provide energy for the rebuilding. The occasional “McKenzie Strong” or “Detroit Strong” signs greet drivers, inspiring you to believe those who chose to remain will pull through.

Anyone living in Central Oregon long enough knows what happened on the west side of the Cascades can happen here. CEC’s service territory—which covers 5,300 square miles, including multiple national forests—has several high-risk areas susceptible to wildfires.

We can’t predict the next lightning strike or extreme weather event. But we are making every effort to minimize our system’s assets as a contributing factor in a wildfire’s ignition.

CEC’s wildfire mitigation plan takes an active and comprehensive approach toward that end. Goals and metrics measure their effectiveness while allowing for retooling and improving practices as they evolve, including adopting new technologies when available and feasible.

The plan also includes Public Safety Power Shutoffs as a potential tool. Turning off electricity is not a decision taken lightly. Many factors can influence a decision: the
National Weather Service’s red flag warnings, sustained high winds and low humidity, public safety concerns and live boots-on-the-ground reports.

CEC’s electric system follows the National Electrical Safety Code’s specifications to resist high winds. However, it is the threat of foreign objects contacting our power lines during a high-wind event that heightens concerns—such as trees outside of rights-of-way, tarps and canopies that can bring down poles and power lines and ignite fires. To prevent this from happening during a high-wind event, executing a PSPS can be an effective tool to protect members, homes and local communities.

Preparing for wildfire season must be a collective effort. We must be ready for the worst and hope for the best. To learn more about what CEC is doing and what you can
do, visit www.cec.coop/safety-education/wildfire-preparedness.

President's Report

CEC Sells its Telecom Subsidiary

Central Electric Cooperative (CEC) announces that it has sold its ownership interest in LS Networks (LSN). The transaction closed on March 31 with CEC receiving approximately $50 million as its share of the sale proceeds.

CEC helped create LS Networks 15 years ago with a mission to bring top-tier bandwidth and fiber-optic network connectivity services throughout the Pacific Northwest. LS Networks was owned by CEC’s subsidiary, CEC Resources, and three other cooperative shareholders. The carrier-grade network has grown to 7,800 fiber miles serving large and small commercial and individual customers in rural and urban communities, including schools, governments, healthcare organizations and businesses.

“I am incredibly pleased to see the investment CEC made over the last 15 years in LSN prove financially rewarding for the co-op,” said CEC’s President and CEO Dave Markham, former chair of the LSN Board of Directors. “Timing is everything, and now was the opportunity for the co-op to monetize its investment after all these years,” he added.

In 2000, CEC formed CEC Resources consisting of for-profit companies offering propane and telecommunication products and services. Born out of necessity due to energy deregulation, which threatened to up-end the electric utility business model and create financial uncertainty, the subsidiaries allowed CEC to diversify and generate additional income streams.

William B. Keeton, CEC’s board chairman, recalls those early days. Keeton and fellow CEC board member Tom Strand, both board members at that time, stated, “The CEC board made the challenging but right decision for the co-op to invest in LSN.”

Fifteen years later, having stayed the course through some tumultuous times, the board’s foresight and intuition proved correct.

Dave Markham and CEC’s Chief Financial Officer Rawleigh White, who joined the LSN board in 2008, helped guide LSN through its challenging years and, eventually, on the path towards long-term growth and economic viability. They advocated for LSN to reconfigure its business model to aggressively fund and build out a “last mile” network to generate greater market penetration and stability. Over time, the investment and expansion into commercial, government, education, medical and wireless carrier business propelled LSN’s revenue upward over the last three years.

CEC Board Director Bill Rainey, who chairs CEC Resources, lent his 35 years of business and legal acumen to help navigate the sale’s complexities and deliver this significant achievement.

“The CEC Board of Directors’ prudent decision to sell LSN has enhanced the co-op’s long-term financial well-being,” said Rainey. “It was a privilege to take part in this effort.”

 

President's Report

State Legislative Priorities for Co-Op Members

CEO Dave MarkhamThe 81st Oregon Legislative Assembly is underway. Significant bill proposals could financially affect Central Electric Cooperative and the state’s consumer-owned utilities. We will try to work effectively within the legislative process to educate and serve as a solution-oriented leader to provide safe, reliable and affordable service to our members.

Wildfire Mitigation Plans

Senate Bill 287 takes an essential step toward protecting Oregonians against catastrophic wildfires. The legislation’s primary provision requires electric utilities to file a wildfire mitigation plan with the Oregon Public Utilities Commission. CEC believes developing a thorough plan and submitting it to OPUC is prudent and responsible.

Last year, we updated and formalized our existing plan, which will undergo a biennial internal review and revision accordingly. CEC also participated in OPUC’s wildfire workshops to highlight ongoing challenges and the wildfire assessment tools CEC deploys to mitigate wildfire risk.

Clean Fuels Program

House Bill 2188 would undermine local control by imposing a 20% transfer of consumer-owned utilities’ energy credit dollars from the state’s Clean Fuels Program to its Public Purpose Fund, where it would be spent in metropolitan areas to promote transportation electrification.

The Clean Fuels Program requires regulated entities’ fuel sources to comply with an annual average carbon intensity. If they meet or come under the average, the utility receives credits with a financial value.

A consumer-owned utility such as CEC may participate. Since the co-op relies almost 100% on carbon-free hydropower from the federal Columbia River power system, CEC generates credits, which may be sold to private parties looking to offset their carbon-intense energy portfolio. However, the entirety of the financial proceeds should remain in CEC’s service territory to promote transportation electrification and not be redistributed to urban areas at rural communities’ expense.

100% Clean Energy

Environmental and special interest groups are pursuing a 100% clean energy goal by 2050. Proposals in circulation lack specifics. One aims for 100% by 2035 and defers to state agencies to define renewables. The other calls for 100% by 2045.

The paramount concern for consumer owned utilities is how the bills will treat hydropower. CEC can claim an almost 100% carbon emission-free energy portfolio due to this resource.

Yet Oregon’s renewable portfolio standard only considers hydropower renewable under limited circumstances. If the 100% clean energy proposals do the same, CEC would be significantly disadvantaged and out of compliance, forcing us to buy more expensive alternative renewables, such as wind or solar. As these legislative proposals evolve, they must recognize hydropower as a carbon-free and critical resource to reach a 100% clean energy future.

You Can Help

We need your help as the legislative year unfolds. I urge you to join the ORECAAction Network, where we will keep you informed and may occasionally call on you when decision-makers need to hear your voice. Sign up at www.oreca-action.org.

Working together, we can best protect your interests as a co-op member.

President and CEO Dave Markham

President's Report

CEC Formalizes Wildfire Mitigation Plan

CEO Dave MarkhamLast year, Central Electric Cooperative undertook a comprehensive effort to update and formalize its existing wildfire mitigation plan. The plan will undergo a biennial review and be updated as needed or required.

More than 5 million acres burned in California, Oregon and Washington in 2020, marking it the most active fire year on record for the West Coast. In Oregon, extreme windstorms instigated catastrophic wildfires, which burned more than 1.5 million acres, taking human life and thousands of homes. Last year’s wildfires put an exclamation point on a decade in which the West experienced its deadliest and most extensive wildfires in history.

In California, investor-owned utilities came under intense public scrutiny and state legislative oversight. Pacific Gas & Electric—the state’s largest IOU—was proved responsible for igniting the Camp Fire in Paradise and other wildfires.

As a result, California’s governor signed a bill into law in 2018, requiring every electric utility to prepare a wildfire mitigation plan. This was one of many legislative attempts to promote wildfire safety and accountability.

Oregon public utilities and cooperatives are not yet legislatively mandated to file a plan with the Oregon Public Utilities Commission. However, that could change this year because there is a wildfire legislative proposal with such a provision. Gov. Kate Brown supports such a measure and will likely sign it into law should the state Legislature approve.

CEC believes developing a thorough plan and submitting it to the OPUC is prudent and responsible. To ensure the highest standards, CEC worked with a long-established firm in the Pacific Northwest that provides services to consumer-owned utilities throughout the region, including assessments, reviews or the development of wildfire mitigation plans.

The plan takes an active and comprehensive approach tailored for CEC’s service territory with the ultimate objective to minimize CEC’s assets as the origin or contributing factor in a wildfire’s ignition. Goals and metrics measure effectiveness while allowing for retooling and improving it as practices evolve to adopt new technologies when available and feasible.

The plan also includes public safety power shut-offs as a tool to reduce wildfire threats. A PSPS may occur when the National Weather Service issues severe weather warnings for events such as extremely high winds. A recent example occurred on Labor Day when the NWS warned of winds reaching 70 mph on the Cascades’ west side. Thankfully, those winds topped out at 35 mph in CEC’s service territory and did not require the co-op to turn off power to any of its communities. However, there may come a time when such action is required. If so, CEC’s plan lays out general guidelines to follow.

Upcoming Ruralite issues will include information on protecting your home from wildfires, equipping you with emergency preparedness tips and sharing how the co-op will communicate with members should a PSPS scenario occur. For now, go to www.cec.coop/safety-education/wildfire-preparedness/ to read our wildfire mitigation plan and find other helpful materials.

We can anticipate, plan and prepare for the unexpected. With safety as our highest priority, CEC continues to take constructive steps toward mitigating the threat of wildfires in the communities where we live and serve.

President's Report

Governor Should Reconsider

CEO Dave MarkhamUpon hearing Gov. Kate Brown’s intent to sue the federal government over how it manages the federal Columbia River system, I was disappointed but not surprised at her decision. I encourage her to reconsider.

In October, the governor committed to participating with Washington, Idaho and Montana—known as the four-state process—to define a collaborative framework to find common ground to restore a healthy salmon population without adversely impacting affordable electricity and local economies.

Yet right before Thanksgiving, Brown directed the state of Oregon to file a 60-day notice of intent to sue the federal government over the National Oceanic and Atmospheric Administration’s 2020 environmental impact statement. The scientific study examined the potential impacts on fish and wildlife from proposed hydroelectric operations and found the recommended operations were consistent with the Endangered Species Act.

At issue is the governor’s unwillingness to accept the EIS’s recommendations. The three-year study, produced by multiple federal agencies, did not include breaching or removing the lower Snake River dams in Eastern Washington, a critical component of the Bonneville Power Administration’s hydroelectric Columbia River system. The dams produce 1,000 average megawatts of reliable, carbon-free energy annually—enough to power more than 800,000 Northwest homes, including 500,000 in Oregon.

Instead, through her actions, the governor dismissed the EIS before its completion as she publicly released a letter early last year calling for the removal or breaching of the four lower Snake River dams.

Brown claimed removing the dams would “simultaneously address both the orca and salmon recovery dilemma” in the region. However, she chooses to ignore that successful fish-passage technology at the lower Snake River dams achieved a juvenile dam passage survival objective of 96% to Chinook salmon and steelhead, according to a 2017 NOAA Fisheries study.

I have shared in this space before that removing the dams would create the need to replace lost energy at an estimated cost of $860 million to ratepayers. Ironically, the loss of available energy would need to be offset by energy sources with higher carbon content, undermining the governor’s long-term carbon reduction goals.

All parties involved come to the discussions with different perspectives but are committed to finding a consensus on a viable solution. What is so disappointing in the latest turn of events is how the governor’s litigation threatens to undermine the four-state process before it has earnestly begun and stalls momentum for any collaborative dialogue. As a result, the legitimacy of the process may be dead on arrival.

Rather than resort to litigation, I respectfully urge the governor to reconsider and come back to the table for the good of Oregon and the region.

President's Report

A Year Unlike Any Other

CEO Dave MarkhamCOVID-19 unleashed a tidal wave of epic proportions this year, inflicting human suffering and economic hardships, and disrupting social norms. As Oregonians dealt with the ebb and flow of the corona-virus, extreme high winds instigated catastrophic wildfires that took human life and burned homes and 1.5 million acres. The accumulative aftermath will be felt for years, leaving 2020 a year many would like to forget but will always remember.

In unchartered waters, Central Electric took decisive action. Our offices closed in mid-March to walk-in business for our members’ and employees’ safety and health. More than 60% of our employees began working remotely. We postponed the annual membership meeting—the first time in our 79-year history—but con-ducted it via teleconference in early June.

In March, Gov. Kate Brown’s “Stay home, save lives” executive order created a financial hardship for many of our members due to business closures, lost jobs and the resulting economic downturn. CEC was one of the first utilities in the state to suspend service disconnections.

We immediately ramped up our efforts to help members receive financial assistance to pay their electric bills. Thanks to federal aid through the CARES Act and Energy Assistance Stability Coronavirus Relief program combined with a regional organization, NeighborImpact, and CEC’s Project Helping Hand, we helped members receive $215,000 in financial assistance by October’s end. I am proud to report our membership also stepped up to help financially, with a 7% increase in the number of members donating to PHH.

Central Oregon escaped the wildfires mostly unscathed. However, the events further reaffirmed CEC’s ongoing commitment to reduce wildfire threats in its service territory. Those efforts included removing encroaching vegetation and replacing older poles along a 13-mile overhead power line route in heavily forested Camp Sherman.

CEC formalized its comprehensive wildfire mitigation plan, which extensively details programs to adapt our system to evolving fire-related conditions, implementing new technology to detect issues before they arise and enhancing operational practices to mitigation the potential for ignitions.

CEC lent its expertise as a participant in Oregon Public Utilities Commission work-shops to develop and share best practices to reduce wildfire risk. Six years of federal advocacy came to fruition when the U.S. Forest Service issued a new rule to streamline and expedite the permitting process to allow utilities to conduct maintenance and remove vegetation along its rights-of-way on federal land.

While CEC’s office personnel continued to provide quality service while working remotely, the line crews’ fieldwork did not slow down. The region’s significant growth carried over to CEC, and we connected the highest number of new services since 2007.

Implementation of CEC’s Strategic Investment Initiative continued, replacing aged underground cable and power poles, completing upgrades to substations and the transmission system to meet current and future energy needs, and ensuring long-term reliability and safety.

We all have been tested and challenged this year to various degrees. Throughout, CEC and its employees appreciate the privilege of serving you. We wish you happy holidays and best wishes in the new year.

President's Report

Balancing Differences Among Rate Categories

CEO Dave MarkhamIn January 2021, Phase III of Central Electric Cooperative’s gradual rate redesign goes into effect. Residential members will see a slight decrease in the kilowatt-hour energy charge offset by a slight increase in the monthly facilities charge on their February bills. On average, the typical residential bill should remain largely the same.

The transitional rate redesign, which began in 2017 and ends in 2025, addresses an imbalance in the rate structure. Phase III marks the third of five phases—every odd year over eight years.

Historically, the utility industry blended all of its costs into a customer’s energy use charge. The cooperative did too. Born out of convenience, the practice entailed lumping a utility’s fixed costs—such as operations, inventory, maintenance, repair and administration overhead—with the kilowatt-hour charge. This approach created an inaccurate perception among members that the co-op’s services were defined solely by how much electricity they used. While a utility’s expense to buy
energy for its members fluctuates based on weather and the energy markets, its fixed costs
remain constant.

CEC began to address the issue in 1978 when it added a customer charge—later named the facilities charge—to add some stability to revenues. It started with gradual increases—initially, $6.25 a month, climbing to $12.77 before the launch of the redesign in January 2017. However, the charge did not keep pace. CEC’s fixed costs significantly exceeded revenues received and put the co-op’s rate design out of balance.

Various factors contributed to this imbalance. The chief driver of electricity demand is weather. It has become more unpredictable and extreme, creating strong fluctuations in revenue and making business management more challenging. The electric industry has rapidly evolved, with emerging technologies affording customers multiple ways to reduce their energy use through efficiency and rooftop solar. CEC applauds and encourages members’ efforts to reduce their energy use. Nevertheless, the unintended consequences resulted in fewer members contributing toward helping the co-op recover its fixed costs, leaving other members to pick up the balance.

Consequently, it became necessary to separate or decouple fixed costs from electricity use because fixed costs began to exceed revenues. Ten volunteer co-op members representing all customer classes served on a rate design advisory committee in 2016 to create a balanced solution. After studying various options, the board of directors adopted their recommendations.

The committee’s efforts achieved a revenue-neutral redesigned rate structure to bring fairness and balance among the different rate categories. In the end, members will pay for the energy they use and their fair share to operate the utility.