President’s Reports

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

President's Report

CEC Shows Concern for Community

Photo portrait of Dave MarkhamAt last month’s Central Electric Cooperative annual meeting (see story beginning on page 4), I had the pleasure of acknowledging our board of directors for its support of one of the Seven Cooperative principles, Concern for Community. I told the members attending that our board does not get enough credit for making our communi­ties stronger by assisting those in need or encouraging those who show an exceptional desire to work hard and excel in life.

While many causes benefit from the board’s wisdom and CEC’s support, I was able to cite but a few:

  • The 4­H and FFA livestock auctions at the Crook, Jefferson and Deschutes county fairs.
  • An educational scholarship for a qualified Central Oregon Community College student who is a CEC member.
  • A unique kind of educational assistance awarded to a CEC member through the Soroptimists’ Live Your Dream Scholarship.
  • The Oregon National Guard Youth Challenge program, which gives academically at-­risk youth a second chance at pull­ing themselves together and earning a high school diploma.
  • A number of food banks, including the St. Vincent De Paul operations in Bend, Redmond and Prineville, along with the Jefferson County and Sisters food banks.
  • The Washington, D.C., Youth Tour Program, which sends two CEC member high school students in their junior years to the nation’s capital each year and gives them invaluable exposure to our nation’s history, the workings of our system of gov­ernment, and the importance of public service. More than 1,700 high school students from across the country make this annual trip.

I hope each of you is pleased with how the board applies this important principle of concern for community. These causes and organizations make life better for all of our communities and I encourage each of you to learn more about them. The support your co­op provides to our communities should make all of us proud to be members of Central Electric Cooperative.

Sincerely,

Dave Markham
President and CEO

President's Report

Legislative Issues Concern Co-op Members

Photo portrait of Dave MarkhamWe must constantly monitor the rules, regulations and laws affecting Central Electric to protect the affordability and reliability of your electric service. With the Oregon Legislature now in session, it is peak season for CEC and the rest of Oregon’s electric co­ops tracking changes that impact electric co­op members.

The following bills are of key concern at this point of the session:

Senate Bill 301 would eliminate employers’ ability to disci­pline employees—or screen prospective employees—for mari­juana use during nonwork hours. This puts us at odds with fed­eral law that treats marijuana as a Schedule 1 drug. As holders of commercial driver licenses, our crews must comply with federal drug use regulations. We also have concerns about safety—extremely important for a workforce with everyday exposure to high ­voltage electricity and heavy equipment.

Franchise fees, levied by local governments on utilities for the use of transpor­tation corridors, are always a hot topic. We strongly support Senate Bill 840 capping city franchise fees at 5 percent—a level some cities have worked to exceed. The cap prevents municipalities from increasingly turning to utility consumers as a revenue source. A different franchise fee-­related bill demanding our opposition is House Bill 2362. It would allow counties to also charge franchise fees. We believe this is an unjus­tified attempt to reach into our members’ wallets to fund local government.

Oregon strongly promotes renewable energy development. To make it more affordable for our members who agree, CEC supports an effort to make community solar participants eligible for state tax incentives. Currently, community solar partici­pants have no access to tax incentives. State and federal tax incentives are available to people who own their own solar energy systems, and for­-profit community solar developers receive federal tax incentives. This lowers prices for their participants, but the benefit is not available to CEC because we and other cooperatives are not­for­-profit businesses. We want to make our community solar members eligible for Oregon tax incentives under the Residential Energy Tax Credit program—the same program that flows incentives to rooftop solar system owners.

These are the most prominent of a number of legislative actions that could affect electric co­op members. If you join the ORECA­-Action Network, we will keep you apprised of these and other key issues. By signing up at www.oreca­-action.org, we will not only keep you informed, we may on occasion call on you for help when we need decision-­makers to hear your voice. It is through our unified efforts we can best pro­tect your interests as a co­op member.

Respectfully,

Dave Markham
President and CEO

President's Report

Dam Removal Maneuver is Mind-Boggling

Photo portrait of Dave Markham“Foolishness” is the nicest word I can use to describe a recent legal maneuver that could someday make your bills increase. In early January, environmental groups filed an injunction in federal court to require that the U.S. Army Corp of Engineers sus­pend improvements at four federally owned dams on the lower Snake River. They want to halt 11 infrastructure projects, including new turbine blades at one dam, so the dams don’t become more valuable and therefore harder to remove. That action could result from an adverse judge’s ruling following an active environmental impact study that’s at least five years from completion.

“Cynical” is another word that comes to mind. That’s how I view such attempts to end­-run the recently launched environ­mental impact study process, itself undertaken by court order. Dam­removal advocates are willing to compromise dam safety and reliability so they can boost their legal position.

At the same time, the state of Oregon is seeking a court order requiring the fed­eral government to spill more water at eight dams—bypassing the turbines—to aid young fish migrating to the ocean. This senseless request ignores scientific evidence that more spill could actually harm fish. During the past 15 ­plus years, changes to flow regimens and improvements to other fish ­passage technologies have produced fish survival rates approaching those of undammed rivers. None of the eight federally owned main stem Columbia hydroelectric projects has a yearly survival rate for chinook salmon below 95.9 percent.

I hope you will join our political grassroots network at www.oreca­action.org so we can keep you informed of related developments, along with other issues affecting the reliability and cost of our service to you. ORECA ­Action membership also gives us a way to seek your help in speaking out on issues. Every day, your voice becomes more important to our ability to protect co­op membership’s best interests.

Respectfully,

Dave Markham
President and CEO

President's Report

New Rate Redesign Affects Each Rate Class Differently

Photo portrait of Dave MarkhamAs addressed in the story on page four in this month’s Ruralite, Central Electric is embarking on a historic change to the design of our rates. Often, when CEC adjusted rates, we applied a uniform percentage change across all rate categories, rates and facili­ties charges. The new rate design going into effect this month and first appearing on February’s bills will ensure greater fairness and balance in light of the significant changes confronting our industry driven by renewable energy growth, increasingly unpredictable weather patterns, and growth in energy­ efficiency technologies. The changes vary by rate class and member. For most members, cost increases in some areas are offset by decreases in others. The overall rate design will have no impact on revenues to CEC.

The fundamental purpose of the change allows us to distin­guish how we recover our energy costs from our fixed costs. However, the rate redesign also was adopted to bring greater balance and equity to our cost recovery among the various rate classes. This means each rate category has its own set of changes to its billing. Our article beginning on page four explains why the change was made and how it is structured, but its primary emphasis is on our residential members’ ser­vice. After all, about 87 percent of our membership accounts are residential.

To see details of how the other rate categories are affected, I recommend you visit the News and Information section of our website, www.cec.coop. While every rate class had its energy charges reduced to offset higher facilities charges, each class’s new design has other noteworthy changes. For those other than the residential class, they include:

  • Commercial. This rate class also sees increases to demand charges, which mea­sure peak energy use within a given month.
  • Domestic Irrigation. The facilities charge increase is more significant than for the other categories on a percentage basis due to the highly seasonal nature of this rate class’s annual activity.
  • Agricultural Irrigation. The redesign introduces facilities charges for the first time for this rate category, along with reduced energy charges.
  • Industrial. The facilities charge for these 18 members remains stable because our cost of service analysis determined no change was required.

The rate redesign was developed with the goal of ensuring that each member is billed fairly while at the same time planning for the long ­term financial stability of the co­op. This is particularly important now because of the historic changes the electric utility industry is experiencing.

Respectfully,

Dave Markham
President and Chief Executive Officer