Clark Electric Cooperative Annual Meeting
was held on Wednesday April 8, 2009
At the Loyal American Legion Hall
72nd Annual Meeting Highlights
April is always a busy month at Clark Electric Cooperative, culminating with the annual meeting of the members. This year marked the 72nd annual meeting of the cooperative. This year’s meeting was once again held at the Loyal American Legion Hall, with more than 350 members and guests in attendance. The following is an excerpt from CEO/GM Stewart’s report to the members.
Financial Report
The year ended December 2008, was a positive yet challenging year. Clark Electric Cooperative continues to report solid financial performance. Total electric sales increased 4.29% in 2008 driving total revenue to over $ 17.2 million. This increase in revenue is primarily due to the increase in kWh sales and the price adjustment that occurred in November 2007. The wholesale power rate increased 1.51% over the 2007 level. This increase, coupled with increase in kWh purchased increased Cost of Power 5.62% to $ 11.29 million. A continued aggressive cost containment program helped to offset ever increasing cost and resulted in a positive operating margin of $ 1.15 million. The total cost of providing electric service LESS power cost actually decreased 2.3% from the 2007 level. This cost component is significant as this primarily measurers the distribution cost component (local costs).
Total Utility Plant grew 4.95% over last year’s level. The Cooperative invested in excess of $ 1,596,000 in new distribution plant last year. This represents new construction and replacement of electric lines. Total Assets increased a net of $ 867,697. Total Equity increased from 74.63% of total assets to 75.49% of total assets. Our equity position remains one of the strongest in the state and one of the strongest in the nation. This slight increase in equity occurred while we experienced asset growth, and continued capital credit retirements. Long Term Debt decreased $ 233,160 as compared to last year. The continued amortization of debt service resulted with a year end debt to total asset ratio of 16.48% as compared to 17.59% in 2007. The Cooperative will continue to rely on internally generated funds and short term/long term financing to fund operations in a manner that helps keep the price of electricity as low as possible while meeting our capital needs.
I then reviewed the results of benchmarking analysis that we do annually that compares Clark Electric Cooperative to state and national medians in the Cooperative segment of the electric utility industry. I examined blended cost of capital, operating & maintenance expense per kWh sold, purchased power cost trends, how the average dollar collected was spent, total cost of providing electric service per kWh sold, and various revenue measurements such as revenue per kWh sold, and residential revenue per kWh sold as it relates to others in the industry. Overall, our costs are very comparable – lower in many cases – with others electric providers.
Managers Report
Looking back we can say that 2008 was another positive and eventful year. I would like to review a few of the significant events that occurred last year. Specifically, in terms of system reliability, capital credit retirements, subsidiary operations, future power supply costs, rate competitiveness, and mitigation strategies.
Subsidiary Operations
Clark Electric Appliance and Satellite, Inc. completed its 14th year as a subsidiary of Clark Electric Cooperative. We continue to be a leader in the HVAC, Satellite TV, and High Speed Satellite internet marketplace by offering quality products and services to our customers. We continue to experience growth in our electro-technologies solutions. Customers demand for geothermal heating and cooling systems, storage heat systems, and mini-boiler systems remain positive as consumers strive to eliminate a dependency on fossil fuel heating. Homeowners are turning to safe, energy efficient sources of electric heat, coupled with off peak rates, to provide an economic solution to high heating costs. With the increasing costs of fossil fuels, the interest in the renewable aspect of ground source heat pumps, the associated tax incentives of geothermal systems in 2009, 2009 shows promise for future growth in the heating area.
Wildblue, (a high speed internet access via satellite system) was first introduced to the marketplace in 2005. Since the initial offering, response has beet strong. Clark Electric Appliance and Satellite, Inc. remains one of the largest providers of the Wildblue platform in Wisconsin.
As stated in our annual report, Appliance sales and repairs have experienced a negative trend for several years. Increasing competition, a slowing economy, and increasing costs will continue to put pressure on this particular product line.
Future Power Supply Costs
Dairyland Power Cooperative (DPC) is facing a period of tremendous challenges and upward cost pressures. There are several key areas that are having a significant impact on our wholesale power costs. Individually, each of these factors is significant, but collectively they present substantial challenges.
First, DPC is making major investments in environmental controls and renewable energy resources. DPC is in the midst of a $ 350 million plan to meet new regulations. In addition, DPC is also aggressively expanding its renewable facilities. While renewable energy resources are positive additions relating to the environment, the energy from these projects often costs more than traditional fuels, causing immediate upward rate pressures.
Another significant challenge is the general tightening of coal markets with increases in prices for both the fuel and its shipping, coinciding with larger global demand for U.S. coal exports. In addition to increased costs relative to barge freight shipping, there continues to be issues relative to captive rail shipping. In addition, scheduled major periodic maintenance outages at two large generators in 2009 will also put upward pressure on costs. These items taken together, we are anticipating an increase in wholesale power costs of approximately 10% over the 2008 wholesale rate that Clark Electric Cooperative paid to provide your electric needs.
In addition to capital projects in generation, transmission, renewables, and environmental improvements, there will be new legislation that attempts to deal with climate change and carbon emissions. This discussion could have a dramatic effect on the cost of electricity resulting in further increases on the monthly power bill of our members. Historically, prices increased at a slower rate than inflation. Going forward, this is probably not the case.
Rate Competitiveness
I reviewed a number of slides that illustrate the rate competitiveness of Clark Electric Cooperative as compared to the other electric cooperatives in the state of Wisconsin as well as an Investor Owned Utility (IOU). Overall, Clark Electric Cooperative compares favorably to these other electric utilities.
In Conclusion
With fuel costs rising, transportation costs escalating, climate change around the corner, and increasing need for capital programs, it all seems pretty daunting. The question is what can we do about cost? In addition to the legislative solutions, we continue to invest in our Load Management System. Our load management program enhances reliability for all members during extraordinary times. Load management helps reduce costs for all cooperative members with additional savings for participating members. DPC and its members achieved a total savings of over $ 10 million last year through this program.
Clark Electric Cooperative will initiate a new load management program in 2008 that targets summer seasonal demand reduction through central air conditioning. The program will provide an incentive of $ 8.00 per month for the months of June, July, and August to all allow cycling of your air conditioning unit. In addition, a one time $ 25.00 payment will also be provide this year. Some restrictions do apply so contact our business office for more details. The Cooperative also offers Time of Use rates that may save your money.
The Cooperative initiated a compact fluorescent lighting. (CFL) program entitled Do the Bright Thing whereby the Cooperative encourages the use of CFL’s. Here is an example of replacing 2 - 100watt light bulbs with 2 – 23watt CFL’s. Assuming these lights were on 3 hours per day, you would save approximately $ 15.54 per year. The annual savings of 20 CFL’s would be approximately $ 154.00. The benefits to Dairyland Power Cooperative on a system wide basis over the lifetime of the bulbs enough energy would be saved to power more than 1,200 homes for a year, save more than $20 million in energy costs, reduce demand by almost 8 mega-watts, prevent greenhouse gases equivalent to the emissions of over 21,800 cars in one year. Please consider changing to compact fluorescent bulbs.
Finally, I would like to report on our partnership with Focus on Energy. Effective January 1, 2009, Clark Electric Cooperative members now have access to all the electric programs that Focus on Energy provides. In addition, the cooperative is still offering additional efficiency incentives mainly targeted to our loan management program. Our members truly have the best of both programs. I would also add that the Focus on Energy and Clark Electric Cooperative website offer great information on energy efficiency and energy saving tips.
Foggy 