July 2024 Editorial: Paul Matthys

The first quarter of 2024 has been challenging, but several positive things exist.

We are very fortunate to be considered a growth cooperative. Our annual member account growth ranks in the top 10% amongst our peers nationwide. Growth brings challenges and opportunities, but it is essential to maintaining the financial health of your cooperative.

The business of an electric distribution cooperative is very weather dependent, especially in the prairie we call home. When the weather is cold or hot, the cooperative sells more energy, which helps achieve the required revenue to operate and do business.

The heating degree days, a formula used to calculate heating energy needs, are down 23% since the beginning of the year. This affected our energy sales, which are down 3% - or 15 million kWh - compared to 2023. Similarly, our off-peak (electric heat, water heating, etc.) sales are down 18.2%.

The financial part of the cooperative business is somewhat different from most companies, especially compared to the for-profit kind. The cooperative gives back a portion of its excess revenues, called margins, each year in the form of capital credits, which are decided by your board of directors. Excess revenues or margins are also used to invest back into the cooperative for new load growth, system improvements, and upgrades.

The cooperative's year-to-date revenue is down 1.3%, or approximately $654,000, relative to 2023. On the other side of the financials are fixed, operating, and power costs. Wholesale power, our most significant cost, is up by 6.5%. Operating costs are up 16.8%, or $990,000 (primarily a result of this past winter's ice storm), and fixed costs are 2.7% higher than last year at the same time. As a result of these costs being up and revenue down, our year-to-date operating margins are down nearly $1.7 million, or 57%.

Let's talk about the bright side of things. Our member account growth continues, and we have added 458 new accounts compared to 321 in 2023 (YTD). Our distribution adder has remained flat and stable at $0.0231/kWh, 40% below our peer group (cooperatives of similar size nationwide). The distribution adder is the cost of running our cooperative and doing business.

The cooperative's ability to manage the distribution adder has allowed for flat and stable rates since 2017, which puts us in the top 7% of our peer group in this category. We attribute to this success to our employees managing expenses, maximizing technology, and working efficiently, and to our board of directors for effectively and responsibly managing the cooperative's finances.

As mentioned, we are positioned well financially and for future load growth. In the words of our chief financial officer, Chad T. Sapa, "It is okay to have a bad year." He says this because we strategically plan for reduced energy sales, ice storms, and other unexpected things that can and will happen at any given time. During my 23 years, the cooperative has never had to raise electricity rates due to the cost of running the cooperative (the distribution adder), and we do not intend to in the future.

Enough numbers talk; it's summer! This is the time of year for family vacations, spending time at the lake, playing baseball, or hanging outdoors. We also spend more time in our vehicles, and traffic is usually more significant, so please slow down, drive safely, and pay attention to the road. One of my favorite sayings is, "Haste makes waste." We will make fewer mistakes if we take a few extra seconds and focus on the task at hand. Have a good summer, and be safe.

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