President’s Reports

President's Report

Hydroelectricity Kept Northwest Cool

Photo portrait of Dave Markham
Do you remember our late July heat wave in Central Oregon? If you have air conditioning you were happy to have it. If you don’t, I am willing to bet you wish you had.

Along with Central Oregon, temperatures were scorching hot – flirting with and often passing the 100-degree mark — around the Pacific Northwest. The Bonneville Power Administration’s energy demand figures showed once again how critical hydroelectricity was to keeping everyone cool and crops watered. This incredibly valuable resource not only forms the backbone of the region’s energy supply, it makes the whole system work thanks to what is called its load following capability.

The hotter it is, the more electricity we use. BPA tracks the region’s use every five minutes. Its graphs show a daily pattern that looks like a steady rollercoaster. The line tracking use starts climbing in the morning when we start our day, peaks in late afternoon and early evening when most of us get home before ramping back down during the nighttime hours. While this consumer cycle is consistent – with peaks reaching record levels during heat waves – not all energy resources’ production patterns matches it.

Wind has grown increasingly important in the Northwest, but it produces power intermittently. When the wind is blowing wind generation increases and the hydroelectricity balances the system by reducing production. Conversely, when the wind stops hydro production is boosted to fill the gap.

Hydro’s load balancing ability is of incredible value to the regional system, but its benefits go further. The sheer volume of energy the system produced during the summer’s heat waves dwarfs others’ production. At times in late July, when wind production was at its lowest, hydro was producing 30 times as much power. Even when the wind farms reached peak output, hydroelectric production doubled their production levels.

Yet, society often takes hydro for granted. Some even demonize it, seeing dam removal as the magical solution to restoring the region’s salmon runs. At times hydro has become a political football. This spring a court order required more water to be passed around the dams to help salmon migrate, cutting back hydro production. This created the added cost of buying power to replace the lost hydro production. Then, in early summer, costs were assessed on utilities because hydroelectricity production was high enough to require wind generators to go off-line to avoid overloading the system. By law, utilities have to compensate wind farms for their lost energy production.

Bottom line, we are incredibly fortunate to have this renewable source of energy that emits no carbon and keeps our air clean. We should protect its legacy every chance we get.

Dave Markham
President & CEO

President's Report

BPA Offsets Most Experimental Columbia River Spill Costs, Full Costs Likely to Hit Consumers Later

The final financial impact of increasing the amount of water spilled past Columbia Photo portrait of Dave Markham River hydroelectric dams this spring and summer will be $38.6 million, slightly less than the Bonneville Power Administration’s projected cost of $40 million. Because BPA reduced programs in other areas to buffer its Northwest utility customers from the full rate impact, the agency announced in June the spill-related surcharge was reduced by $28.4 million to $10.2 million. BPA’s actions combined with austerity steps taken by CEC will enable Central Electric to avoid adding the spill costs to members’ bills.

Based on BPA’s early $40 million projection, made before the court-ordered program began in April, we originally estimated the surcharge would cost Central Electric nearly $500,000. With the dramatic reduction in near-term spill costs, CEC’s actual costs will be $150,684.

This significantly lower total made it possible for CEC to cover these costs with existing revenues.

The spill increases costs by reducing the amount of water passing through the hydro plants’ turbines to leave more water in the river to help salmon migrate downstream. BPA must purchase electricity from the regional market to replace the lost power production.  While I am pleased with the work done by BPA to reduce the financial impacts of this program, which we fought in both the courts and the U.S. Congress to keep from taking place, the costs will eventually make their way into BPA’s rates.

The largest spending cuts came from BPA’s fish and wildlife protection programs. About a third of our wholesale power costs are dedicated to these programs, something all of us CEC members pay into through our rates. Now there will be a little less done in this area during the current BPA rate period. It could be argued we are paying for something we’re not getting, and BPA may need to play some catchup with its fish and wildlife program activities.

If this is the case, BPA may have robbed Peter to pay Paul. I believe all of us agree, that rarely works out without some pain in the end.

Sincerely,

Dave Markham
President and CEO

 

President's Report

Tune In to Safety Messages

Just about a year ago, there was a tragic news story about a 14-year-old New Mexico girl electrocuted when her cell phone fell into the bathtub with her while the phone was plugged into a charger. According to reports, this girl was a conscientious teenager. Yet, she either ignored or wasn’t aware of the dangers of mixing water and electricity. This reinforced my belief it is impossible for us to over emphasize the importance of communicating safety to our members.

This month’s edition of Ruralite features several articles about electrical safety. Topics range from our crews’ disciplined training and use of the latest safety equipment and practices, to important personal electrical safety tips for consumers. When you have been in the electric utility business for 34 years like I have, you have read and heard all of the safety messages many times over. This cannot help but make me sometimes worry that people are tuning out this important information. I become concerned that people overlook our safety messages because they have heard these same messages before.

Everyone at Central Electric has learned repeated and frequent safety reminders are important.  Our employees attend monthly safety meetings with each session driving home the importance of staying aware. This helps break down any tendency to think accidents happen to others, not me. Frequent reminders, when given just a little bit of thought, can make you more aware of what can go wrong if you’re not careful around electricity. That short pause, that extra thought, can keep someone from raising an aluminum ladder into a power line, rushing heedlessly to help someone who has been shocked and risk becoming a second victim, or sticking a shovel into an underground power line.

Our safety messages involve repetition by necessity. Hopefully, one warning skipped over last time is read the next. It only takes a second to remind yourself to be safe, because it only takes a blink of an eye for things to go wrong.

I suspect you have seen many of the safety messages in this issue before, but I hope you will appreciate the importance of reading them again.

Let’s all have a safe summer and remain that way throughout the year.

Sincerely,

Dave Markham
President and CEO

President's Report

CEC and Energy Trust of Oregon Approaches Differ

Photo portrait of Dave Markham

CEC has a long history of helping homeowners, businesses, and the agricultural sector conserve energy and save money. We have been doing this since 1978, whether supporting weatherization improvements, incentivizing purchases of high-efficiency appliances and lighting systems, promoting more efficient irrigation practices, or helping reduce the costs of custom industrial efficiency projects.

Today, we offer 16 different programs covering the full span of our consumer groups: residential, commercial, industrial and agricultural.  The programs are designed and chosen to fit the most in-demand needs among our members, while getting the greatest energy savings per dollar spent.  Because Central Electric’s and Pacific Power’s service areas are side-by-side, some CEC members are aware of the investor-owned utility’s programs. They sometimes question why we offer a program Pacific Power doesn’t and vice versa. The consumer’s question often comes down to, “why don’t you do what they do?”

The major reason is how differently our programs are funded and managed. Pacific Power’s programs are marketed and managed through the Energy Trust of Oregon, an independent entity established in 1999 by the Oregon Legislature. ETO is funded by a consumer tax, called a public purpose charge, on Pacific Power’s and Portland General Electric’s customers’ bill required by law to be 3 percent.

This is one of the costs contributing to Pacific Power’s residential bills averaging 42 percent more than CEC’s, based on the average CEC residential member’s monthly use of 1,480 kilowatt-hours.

We point to this and other factors when discussing the differences between Central Electric’s energy efficiency program management and Pacific Power’s. By choosing from among all the programs designed by the Bonneville Power Administration and qualified for use by their 124 public utility customers, CEC is able to tailor its 16 program offerings to best meet the needs of our members. This has worked exceedingly well for the past 40 years. This is supported by the fact that every year the amount of energy and money saved by our members is greater than the year before.

If you are looking at upgrading your heating and cooling system, lighting for your business, or installing a variable frequency drive for irrigation, reach out to our energy specialists by calling 541-548-2144. Our team can help you find the solutions for your energy efficiency needs. I am confident they have the best solution to meet your needs.

Sincerely,

Dave Markham

President and CEO

 

President's Report

Oregon’s Co-ops Land Congressional Victory

Photo portrait of Dave MarkhamA rare event took place last month in Washington D.C.  A bipartisan agreement was reached in a strongly divided U.S. Congress. It was the direct result of tremendous effort by America’s electric cooperatives successfully making the case that their member/citizens deserved better service from the federal government.

The new law was included in the omnibus bill signed by the president. It requires better cooperation from federal land management agencies when electric utilities care for their existing power lines crossing public lands. This is critical to providing safe and reliable electricity service in rural areas. It is particularly important for electric cooperatives whose service areas include large expanses of federal land. In CEC’s case, 56 percent of the land in our 5,300-square-mile service area is federally managed.

To understand the new law’s benefits we need to review past circumstances. Electric utilities must keep lines clear of tree and branch growth into and near our power lines in defined rights-of-way. This promotes service reliability and reduces wildfire risk. We also must make repairs and proactively replace equipment such as aged power poles or cracked insulators. This is necessary to meet safety and reliability standards required by state and federal law. In the past, receiving permission from the Forest Service or Bureau of Land Management could take an unreasonably long period — five years or more in some cases. At one point, CEC had submitted 32 permits for renewal, paid $45,000 in fees and was still waiting after four years.

Simply stated, government people, systems and processes were not responsive to or concerned with our needs.

The new law simplifies approval processes, minimizes the need to receive approvals when utilities’ activities are addressed by submitted plans, and requires the use of schedules and timelines for approvals when needed. We will see considerable cost reductions and efficiency improvements as a result.

Our push for these changes began in 2014. Although I testified twice before a Congressional committee, credit for this successful outcome goes to a number of Oregon’s electric cooperatives, the Oregon Rural Electric Cooperative Association and Kiel Weaver, a long-time Washington D.C. natural resources staff member who worked closely with us crafting the legislation. Collectively, we pursued the issue throughout the years and focused on it during each of our annual legislative conference trips to Washington, D.C.   Major credit goes to Rep. Kurt Schrader, a Democrat representing Oregon’s 5th District, for sponsoring the bill and teaming up with Rep. Greg Walden, a Republican representing Oregon’s 2nd District, to garner bipartisan support.

Pursuing legislative remedies takes a long time, involving a lot of people. I am pleased to report our work on this issue paid off as well as it did.

Sincerely,

Dave Markham
President and CEO

President's Report

The Cooperative Difference Spelled Out

Photo portrait of Dave MarkhamCentral Electric has added a lot of new members in the past few years. In 2017 alone, our membership rolls increased by 654. That was the sixth straight year the annual number increased. Many of these new members are coming from elsewhere and may never have had their electricity service provided by an electric co-op such as CEC. They may begin our service and see us as “just another power company.”

An important article on pages 4 and 5 of this month’s edition goes a long way toward helping everyone understand how wrong that perception is. The article explains the difference between the various business models under which electric utilities provide service. Electric cooperatives such as Central Electric—along with public utility districts and municipal utilities— are sometimes referred to as public power because they “exist to serve, not to profit from serving,” as stated in the article. The vast majority of Americans and Oregonians are served by investor-owned utilities: Pacific Power and Portland General Electric, in Oregon’s case.

Speaking for electric cooperatives, I believe one of the most distinguishing properties of our business model is our No. 1 goal, member satisfaction. This is different from the investor-owned model, which makes shareholder satisfaction the top goal. True, these utilities care about customer satisfaction, but it is a means to the end of keeping their ownership happy. In our case, and that of other electric cooperatives, you are the owner. Achieving your satisfaction is our priority when making decisions about rates, infrastructure planning and construction, financial management and business services.

Another important property of your co-op is local governance. Through your ability to elect a board member from your geographical area to our nine-member board of directors, you have a direct voice in how your cooperative is governed.

Please take the time to read this educational article. I am confident you will come to appreciate the degree to which Central Electric is NOT “just another power company.”

Sincerely,

Dave Markham
President and CEO

President's Report

Energy-Efficiency Programs Save Members Money

Photo portrait of Dave MarkhamSince the late 1970s, Central Electric Cooperative has led the charge for energy conservation and efficiency programs. Initially, CEC offered a weatherization program that would help qualified homeowners better insulate their houses. Our slate of programs soon grew so members could save money by making home improvements, smart appliance choices, incorporating quick-fix ideas and following energy-saving tips. I am proud to say this invaluable program still thrives today.

CEC offers 16 energy-efficiency programs targeting residential, commercial, irrigation and industrial members. Programs range widely—from new construction standards, high-efficiency heat pumps and water heaters to irrigation equipment and pump testing to commercial and industrial lighting projects. I encourage members to visit www.cec.coop and check out our offerings. Our energy specialists can also help members walk through a project and select the right one for their needs.

Central Electric members have consistently shown their commitment to saving money and energy by participating in our energy-efficiency programs. In 2017, 724 members engaged in our program offerings, implementing energy-efficiency measures that will save 4,205,746 kilowatt-hours annually. This is equivalent to offsetting the average annual energy use of 261 homes, based on CEC’s latest available five-year average. I am pleased to see so many of our members working with the cooperative and seeking ways to be more energy efficient.

Central Electric also collaborated with the Environmental Center in Bend on the National Energy Challenge, where 624 co-op members received direct-home installation of 16 LED bulbs and two high-efficiency showerheads. There was no cost to CEC members due to 100 percent incentive funding through the Bonneville Power Administration.

In 2017, we also combined our political grassroots recruitment efforts with our members’ desire for energy efficiency with the mailing of energy-efficiency kits to 608 members who joined ORECA-Action, our political action network. These kits also were funded by the Bonneville Power Administration and contained six LED bulbs and two high-efficiency showerheads.

CEC helped create the ORECA-Action network as a member of the Oregon Rural Electric Cooperative Association. The program keeps our members informed and enlists them as allies as we work with policymakers on energy-related issues, including conservation. Please join today by going to www.oreca-action.org. Together, we can ensure the safety, reliability and economic benefits of your electricity, including viable and robust energy-efficiency programs that help you save money and energy.

Dave Markham
President and CEO

President's Report

Members Receive Record Payout of Capital Credits

Photo portrait of Dave MarkhamIn mid-December, the Central Electric Cooperative Board of Directors returned $2.1 million in capital credits to current and former cooperative members from the years 1993 to 1995. This is the largest amount of capital credits ever returned at CEC. It is due to CEC’s financial strength—a direct reflection of efforts by the board of directors and employees to manage your cooperative efficiently.

Capital credits are one of the many benefits of being a CEC member. Electric margins in excess of operating costs and expenses are returned to members based on a percentage of your electricity billed during a given year. The term for these margins is capital credits. The board operates under a policy that capital credits be returned within 25 years, and now the board is returning capital credits within 23 years. Central Electric has returned capital credits every year since 2001 and in 33 of the past 36 years, totaling more than $24.4 million returned to members since 1958.

As a not-for-profit electric utility, CEC is limited to two options for funding capital projects, such as replacing or upgrading poles, overhead and underground wire, transformers and substations. The two options are to either borrow money from a bank and pay interest, or borrow from members through any excess electric margins and then return the excess margins to members as capital credits in the future. CEC uses a combination of both options, melding borrowed money with excess electric margins to fund our construction and infrastructure needs.

Our capital credit payout comes just two months after the Bonneville Power Administration increased wholesale electricity rates an average of 5.4 percent to their 136 utility customers, which includes CEC. While many BPA utility customers were forced to increase their retail rates, CEC was able to hold its rates stable.

Payment of capital credits at this time of year certainly helps make the holiday season more enjoyable for members, along with emphasizing the fact we had a successful 2017. We will make sure you can read more about our many accomplishments during the past year in an upcoming Ruralite article. I want to thank the employees for their daily efforts to manage costs and seek ways to operate more efficiently. I also want to thank the board of directors for its vision and guidance that ensures CEC’s members are the top priority.

If you would like more information or have any questions about capital credits, you can talk with one of our customer service representatives by calling (541) 548-2144, or visit www.cec.coop, where we discuss capital credits in the Customer Service section.

Sincerely,

Dave Markham
President and CEO

President's Report

BPA Rates Increase, CEC Rates Remain Stable

Photo portrait of Dave MarkhamI am pleased to tell you that despite an average 5.4 percent increase in the Bonneville Power Administration’s wholesale electricity rates effective October 1, we are keeping Central Electric’s rates at current levels.

Our board of directors in November approved a management recommendation to absorb the BPA cost increase in the coming year and defer any adjustment to CEC rates. The decision was based on an internal analysis that shows BPA’s increased power costs will not impair the co­op’s financial strength through proper planning.

We will achieve this by constraining spending and reprioritizing our strategic initiatives in 2018. We are emphasizing projects that increase savings and efficiencies in both the short and long term. Chief among them are our ongoing pole and underground cable replacement programs and expansion of the Bend Substation, which increases reli­ability and serves growth on the east side of our 5,300­-square-­mile service area.

Our actions fall sharply in line with our dedication to efficiency. We have a workforce with approximately 15 percent fewer people than electric co­ops across the country the same size as CEC. In national ratings of cooperatives’ reliability and cost management performances, we consistently rank among the top performers. My point is, that we always run a tight ship and are able to hold off on a rate increase with just a little extra belt tightening and continually focusing on efficiency.

BPA’s October 1 increase affects our power costs through September 30, 2019. We will closely track our finances and report to our board, and ultimately our members, any rate changes that may become necessary due to changes in our outlook or further rate actions by BPA. The agency’s recent increase is due mainly to lower demand for power; low market prices, which means fewer outside dollars coming in to BPA to help reduce everyone’s power costs; and growing costs for programs driven by legal requirements. The agency also is dedicating 1 percent of the 5.4 percent increase to replenish a financial reserves account.

Spill, Financial Reserves Issues Outstanding

One of BPA’s legally driven requirements will happen this spring. Under a federal court order, hydroelectric production will be reduced to leave more water in the river to help fish migration. This could cost BPA customers about $40 million and CEC alone $500,000. BPA also indicates the likelihood of another increase in October 2018 under its Cost Recovery Adjustment Clause if its financial reserves are exhausted dur­ing the agency’s fiscal year. That could cost CEC another $580,000.

While I am pleased we could hold the line on CEC rates this time, the issues BPA faces in 2018 cause concern whether I can deliver the same good news a year from now.

Sincerely,

Dave Markham
President and CEO