President’s Reports

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

President's Report

Member Involvement Builds Our Political Strength

Photo portrait of Dave MarkhamElection Day this year will be quiet, with voter decisions limited to local issues and candidates. This relatively peaceful period can give the impression not much is hap­pening. However, this is far from true. Multiple issues are continually brewing at both the state and national levels that could affect members of Central Electric and Oregon’s 17 other electric cooperatives.

As we track these issues and try to affect their outcome, there are key times when our members’ influence is critical. This is where your membership in ORECA­-Action comes in. As a member of the Oregon Rural Electric Cooperative Association, we created the grassroots network earlier this year to provide
a structure to keep our members informed and enlist them as allies.

It is my responsibility to work with ORECA to track issues, build and maintain relationships with officials, keep you informed and at decisive moments reach out to ask you to communicate with officials. That final step can sometimes be the most important. As noted in a recent study by the Congressional Management Foundation, 79 percent of the Congressional staff surveyed believe that personal stories from con­stituents related to a bill or issue are helpful in shaping their opinions on issues.

We are asking for your help. Join approximately 700 CEC members and 2,200 members of the other Oregon electric co­ops and enroll in ORECA­-Action by going to www.oreca­-action.org. At 2,900 and growing, we are building the numbers that will ensure rural Oregonians are heard.

Join Now, Get a Free Energy-Efficiency Kit

New ORECA­-Action members get a free kit with six LED lightbulbs and two high­ efficiency showerheads. The signup process is slightly different, but just as easy. Go to www.cec.coop and click on the ORECA­-Action link on the home page. You will receive your kit in four to six weeks.

Not only will you save energy and money, but you will become a true partner in protecting the interests of Central Electric and our members.

With appreciation,

Dave Markham
President and CEO

President's Report

Going Solar With CEC Easier, More Affordable Than Ever

Photo portrait of Dave MarkhamWith new lower­-than-­ever prices and enhanced service through our website, it has never been a better time to join the CEC solar community.

Under the Shared Solar program, members subscribe to whole or partial solar pan­els from CEC’s community solar garden in southeast Bend and receive energy credits on their bill each month. The credits reflect how much solar electricity the subscription generated the prior month. You can easily go solar with no worries about rooftop issues, installation costs, maintenance or upkeep.

Shared Solar means a lower monthly bill. Participating mem­bers save an estimated 17 percent on the cost of their 19-­year subscription. That is based on today’s rates and known future rate changes planned by CEC between now and 2025. If you believe electricity costs will go up over the life of the contract, you can use our shared solar calculator to make your own projections. Any increase you assume will only increase your savings.

The Shared Solar program has benefitted from state and federal grants and tax cred­its. CEC passes these benefits to members through lower subscription costs. A whole panel subscription’s energy production recently was reduced to $517.75, with each panel projected to earn $609 worth of energy credits over the life of the agreement. A half­ panel subscription costs $258.90 and a quarter panel’s cost is $129.45. These are the lowest prices since our community solar project launched in January 2016. If concerned you might move before the subscription period ends, you can take it with you to your next CEC account. If you leave CEC’s service area, you can transfer the subscription to a friend or relative who is also a CEC member, or you can donate it to any of a number of nonprofit organizations that belong to Central Electric Cooperative.

More information is on page 25 in this edition of Ruralite. Full details can be found at www.cec.coop/shared-­solar-signup. You can download a subscription agreement, use the shared solar calculator or learn about our low ­interest financing program. I am sure you will see it has never been a better time to go solar and join the CEC solar community.

Finally, members who bought a subscription at the earlier, higher price soon will receive a check for the difference or an offer to use your refund to increase the size of your subscription. We are committed to having every member of the CEC solar com­munity share equally in its benefits.

Regards,

Dave Markham
President and CEO

President's Report

Bonneville Power Increase Announced, CEC Analysis Underway

Photo portrait of Dave MarkhamIn July, BPA announced rate changes for wholesale electricity and transmission ser­vices for the 2018­–19 rate period beginning October 1. On average, BPA will increase electricity rates 5.4 percent and reduce transmission rates 0.7 percent for its 133 util­ity customers. Although BPA announces these rate changes as “average,” they impact every utility differently due to variables such as customer mix and seasonal energy use. Our management team is working with your board of directors to analyze the impacts to CEC. We will make every effort to minimize any rate change to members. If one is unavoidable, we will communicate that well before implementation.

Historically, any CEC rate increase has either been a lower percentage than BPA’s or we have been able to absorb the increases entirely. Since 2001, CEC has raised rates only three times despite numerous BPA rate increases during that time. We have accomplished this through astute cost management and continually increasing effi­ciencies. However, changes within this latest BPA rate increase impact CEC’s rates dif­ferently than in the past and indicate new challenges ahead.

BPA is taking a new approach to how it values and recovers the costs of operating its transmission system and the peak power demands placed on that system. Earlier this year, BPA canceled construction of an 80 ­mile, 500,000­ volt transmission line in the I-5 corridor. Its objective was relief of grid congestion in the high­growth area of western Oregon and Washington.

“Bonneville determined it could meet its obligations to provide reliable, robust transmission service with a more innovative, flexible approach,” the agency stated in its announcement. Part of this approach means BPA is valuing and pricing its trans­mission services and peak power demands differently from the past. This has implica­tions for utility costs, including CEC’s.

These costs directly relate to times when a utility requires the most electricity to serve its members. When the timing of that peak demand conflicts with how the entire energy and transmission system operates most efficiently, the utility is charged more for the energy and transmitting that energy during such times. This means Northwest utilities in colder climates, including CEC, must explore ways to ensure demand for electricity better synchronizes with overall BPA system operations.

Until we have fully completed our analysis on the structure of BPA’s rate increase, we cannot speculate on the impact to members’ rates. While we do not yet have the answers, I want you to be aware of the issues and be assured we will do everything possible to find new, efficient and innovative ways to deliver your electricity in the most cost­-effective way possible.

Dave Markham
President and CEO

President's Report

A Critical Time for NW Hydro

Photo portrait of Dave MarkhamOur article on page 4 of this month’s edition of Ruralite highlights the value of the Northwest’s hydroelectric dams. These engineering marvels turn powerful flowing water into renewable, emission­-free, low-­cost electricity. They propelled our economy from the pioneer days to modern times. Yet this supplier of 90 percent of the region’s renewable energy faces ongoing threats to its future.

Public support for hydro started eroding in the early 1990s when several runs of salmon and steelhead were designated threatened or endangered species. An unbalanced focus on them as the cause of the fish runs’ decline demonized the dams. No doubt, they play a significant role. However, major changes to operations and dam design have greatly improved fish survival rates, made possible by the nearly $16 bil­lion spent by the Bonneville Power Administration since 1978 on fish and wildlife programs. Annual expenditures rose sharply following the Endangered Species Act designations. In 2016 alone, BPA spent $621 million. These fish and wildlife programs are funded through the rates BPA charges its customer utilities such as CEC. Today, such costs account for more than one­-third of CEC’s annual power costs.

This makes hydro less economically competitive with other energy sources, aggra­vated by a continued excessive focus on the dams’ effects while downplaying the impacts of ocean conditions, harvest rates, habitat degradation and hatchery opera­tions. Additionally, a court-­ordered spill test next year will cost BPA an extra $40 mil­lion when electricity production is reduced by cutting flows through dams’ power­ houses and sending them over spillways to help fish migrate. CEC’s share of this cost is an estimated $500,000. All of this when spill programs are already in place, devel­oped through regional consensus and sound biological science.

Along with a court ­ordered suspension of physical improvements to the dams, these actions amount to death­-by-­a-­thousand­-cuts inflicted by dam­-removal advocates—including the state of Oregon. This make the dams less valuable and, thus, eas­ier to remove. Fortunately, some elected officials are fighting to protect hydro.

Oregon legislators have appealed to Gov. Kate Brown to consider the spill test’s economic impacts on rural Oregonians. Separate federal legislative proposals would make federal dam removal dependent on congressional approval and restore hydro’s classification as renewable energy. Lawmakers oppose a costly Trump administration proposal to sell BPA’s transmission assets.

We need your help protecting these invaluable assets. Join the ORECA­-Action net work at www.oreca­-action.org, or if you join by going to www.cec.coop/energy­-kit­-signup-­form we will send you a free energy­-efficiency kit with two high­-efficiency showerheads and six LED bulbs. I hope you will join and help support elected offi­cials’ efforts to ensure hydroelectricity remains a bright part of our future.

Dave Markham
President & Chief Executive Officer

President's Report

Elected Officials Stand Up for Oregon’s Co-ops

Photo portrait of Dave MarkhamBipartisan political action is all but unheard of these days. Thankfully, that is not the case with two issues threatening to increase rural Oregonians’ electricity costs.

One issue originates at the federal level. State actions prompt the other. Both are linked by their potential to drive up the cost of the electricity the Bonneville Power Administration provides Oregon’s elec­tric co­ops—including Central Electric. Elected officials from both parties have stepped up in opposition.

Sale of the BPA Transmission Assets

Detailed on pages 4 and 5, a Trump administration budget proposal would sell BPA’s transmission system, along with that of two other federal power marketing administrations. Twenty-­one U.S. senators signed a letter to U.S. Energy Secretary Rick Perry opposing the proposal and touting its inconsistency with the president’s budgetary objectives.

“Federal power marketing is one of the few federal programs that not only fully pays its way, but actually provides benefits to the federal government’s balance sheet,” wrote the 14 Democrats—including Oregon’s Ron Wyden and Jeff Merkley— and seven Republicans.

The 15 members of the U.S. House of Representatives from Oregon and Washington echoed that position in their letter to Perry and the U.S. Director of the Office of Management and Budget Mick Mulvaney. Oregon’s sole Republican Congressman, Greg Walden, joined Democratic representa­tives Suzanne Bonamici, Kurt Schrader, Earl Blumenauer and Peter DeFazio, and Washington’s six Democrats and four Republicans to urge the administration to work with the delegation to protect BPA.

Oregon Spill Lawsuit

A group of Oregon legislators put aside party considerations to urge Gov. Kate Brown to take a more collaborative stance when tackling Columbia River salmon restoration challenges. Prompted by a judge’s ruling, in the spring of 2018 there will be an expensive spill test at the river system’s federal dams. It will increase fish migration stream flows above previously agreed­ upon levels and decrease power production—an action that may harm fish by increasing their exposure to dissolved gasses produced by water turbulence.

Oregon is a party to the lawsuit that triggered the ruling. It challenges a recov­ery plan formed by consensus among
the federal agencies responsible for river operations, the other Northwest states and most of the region’s tribes. Oregon has consistently opposed the outcomes of this collaborative process.

A letter to the governor by Rep. Sherrie Sprenger of Salem was co­signed by five Democratic representatives and 22 of her fellow Republicans, including Central Oregon representatives Knute Buehler, Gene Whisnant and Mike McLane. The letter urges the governor to consider the economic and environmental impacts of a test that each year is estimated to cost BPA customers $40 million and increase car­bon emissions 840,000 metric tons.

I am encouraged to see elected officials put partisanship aside and work together to protect the interests of those they serve.

Respectfully,

Dave Markham
President and CEO

President's Report

Indicators Point to Rising Rates

Photo portrait of Dave MarkhamAlthough specifics will not be available until summer, I feel it important to keep you, our members, advised of developments at the Bonneville Power Administration likely to affect your elec­tricity rates.

Several issues at BPA, the provider of Central Electric’s electricity, make it clear wholesale rates will go up. This inevita­bly means Central Electric Cooperative’s rates to members also will likely increase.

BPA Rate Case

Every two years, BPA adjusts its rates due to increased operating costs and capital spending. BPA’s preliminary announce­ment late last year called for an average increase to BPA’s utility customers— including CEC—of 3.5 percent for elec­tricity and 1.1 percent for transmission services.

Final numbers will be determined in July following hearings. CEC representa­tives will actively work to keep the BPA rate increase as low as possible.

A recent federal court ruling will add to any resulting rate increase. Judge Michael Simon ordered BPA and two other federal agencies to conduct a spring spill test in 2018 at the Columbia River system’s feder­ally operated hydroelectric projects. This increases the amount of water bypass­ing the turbines and flowing through
the dams to test impacts on salmon and steelhead migration. The resulting three months of lost energy production will cost BPA $40 million. This will have a $500,000 negative impact on Central Electric, and is equivalent to an additional 2 percent rate increase for the co­op.

Financial Reserves

Also likely to impact CEC’s electric rates another 1 percent is a BPA charge to util­ity customers to generate $180 million over the next nine years to build BPA’s financial reserves. BPA says this will lower the agency’s exposure to financial risk, strengthen its balance sheet and support debt repayment.

Cost Recovery Adjustment Clause

BPA is alerting the region it may need to exercise this contractual clause and implement a one­-year upward rate adjustment due to reduced revenues from surplus power sales. BPA counts on mak­ing significant power sales to other states and using the revenue to lower rates for Northwest customers.

Low natural gas prices’ influence on electricity markets combined with reduced demand for energy is creating the revenue shortfall.

The size of the increase is unknown and it is not certain to happen, but is a distinct possibility.

All of these moving parts will impact CEC beginning October 1—the start of the next two ­year BPA rate period. Once we learn specifics in July, we will conduct a full review with your board of directors to determine when and how the costs will affect CEC rates.

The news of these rate increases from BPA is disappointing because CEC employees work hard to keep your elec­tric rates low. I will keep you informed of developments as we learn more.

Sincerely,

Dave Markham
President and CEO