Budgets, Buildings and Back Orders
The New Year is upon us, and we have much to look forward to. I’ve told our Board of Directors several times over the past 2 years that I believe our industry will undergo more change in the next decade than it has in the past 80 years. Things like renewable energy, electric vehicles, clean energy legislation and new infrastructure investments will continue to shape our industry in the coming years. Personally, I find it to be an exciting time to lead our Electric Cooperative and help navigate these issues.
While these changes can prove challenging to us, they also can provide us with incredible opportunities. I look at ways we can position the Cooperative to best serve our members and take advantage of the changing dynamics in the electric industry. In the coming year, I will use this column to touch on many of these topics that are changing the landscape of the electric utility industry. But for now, let’s focus on 3 items that are on top of my mind as we head into 2022…budgets, buildings, and back orders.
Budgets: The past couple of years have seen our margins tighten. While many electric utilities saw dramatic decreases in energy needs due to reduced demand and increased costs from the effects of extreme weather and in impact of Covid-19 on our economy, we did not feel this as much. Our Cooperative largely serves residential and small farm loads. These user classes had little impact on their electricity needs from Covid-19.
Additionally, we have not seen dramatic cost shifts due to extreme weather events that have been seen in other parts of the country. Part of this is due to mostly mild weather in our region and because we are owners of a larger generation Cooperative, Basin Electric Power Cooperative, that serves a very diverse region and owns actual generation facilities. This acts as a natural hedge against wild market swings or weather-related impacts.
While we haven’t seen the wild cost swings from the energy market or the impact of declining loads, our margins continue to tighten, and we continue to see upward pressure on our rates. This is largely due to a steady increase in costs and limited load growth within our service territory. Despite all of that, we are fortunate that the budget shows our current rates should still meet our needs and allow us to maintain stable rates for the 6th straight year.
Buildings: We continue moving forward on the planning of our new facility, which will be located 1 mile south of Elk Point on the corner of 477th Ave and 327th Street. I was hoping to be a little farther along in the process at this point, but these things take time. We are moving forward at a steady pace, ensuring we are designing a facility that will serve our members long into the future. As of today, we intend to break ground this Spring and are scheduled to take delivery of the steel structure in March. I still have hopes of being in the new facility by the end of 2022. But I would rather do it right, than do it fast.
Stay tuned, as there will be more to come as we finalize our plans and timelines.
Back Orders: If you have been paying attention to the news, you are likely aware that there are material and product shortages nationwide. Maybe you have noticed some of the items that are normally abundant are now harder to come by. Unfortunately, we started to feel the impacts of the tight supply market as we approached the end of 2021. Several of the materials, such as transformers and wire, that we utilize to build new services or upgrade existing facility are now seeing extremely long lead times. In some cases, we are having to order material now to receive delivery in 2023. Additionally, we have seen dramatic cost increases year over year. For example, the cost of a standard transformer that we use has increased by over 135% in the past year. This makes it extremely difficult for our planning and budgeting.
We continue to monitor this situation and are working to mitigate the impacts on our members as much as possible. You can help us with this. If you are planning any type of expansion or a new service, please let us know as soon as possible. This will help us ensure that we have the materials needed to provide you service in a timely manner, at the lowest possible cost.
Finally, on behalf of the Board of Director and employees, I would like to wish everyone a happy and prosperous New Year. If you have any questions or just want to chat about what is happening at the Cooperative, feel free to stop by and chat. I’ll even get you a cup of coffee or some hot chocolate to warm you up during these frigid months.
Until next month, stay safe and God bless.
Quote of the Month: “Whether you think you can or you think you can't, you're right" – Henry Ford, Inventor, Businessman