comtech

March 2015

Dustin Tripp

Generation Needs

Since 1963 Southern Illinois Power Cooperative (SIPC) at the Lake of Egypt has provided the generation and transmission service to your Cooperative. In fact, your Cooperative was one of the three original distribution cooperatives that formed SIPC. Today, SIPC is owned and controlled by seven distribution cooperatives located in Southern Illinois. In 2014, approximately 81 percent of your Cooperative's total expenses were spent on purchased power.

As reported over the past several years, SIPC was facing significant load growth and in order to meet future power needs SIPC made the decision in 2007 to acquire 125 MW of the Prairie State Energy Campus located near Lively Grove in Washington County.  Prairie State is a two unit, 1,600 megawatt supercritical coal-fueled power plant featuring advanced technology resulting in high efficiencies, low fuel costs and achieving emissions that are far superior to America’s current coal-fired generating fleet.  

However, the costs to construct these facilities were much higher than the costs to construct the generation facilities at SIPC that were built over three decades ago.  Therefore, the wholesale costs increased by approximately 24% beginning in January of 2012 when the Prairie State Energy Campus began operations.  Your Cooperative’s Board of Trustees and management carefully reviewed the wholesale rate increases and took steps to minimize the rate increase to you as Cooperative members.  This plan, which was put in place in 2011, included spreading the necessary wholesale rate increase over a period of time to minimize the impact of the cost increases.  The Cooperative’s plan to implement a 2.5% retail rate increase in May of 2015 should complete the Cooperative’s phase-in retail rate increase due to wholesale rate increases experienced since January 2012.  The Cooperative will increase retail rates another 1% to reflect increases in the cost of distribution operations.  After this 3.5% retail rate increase is implemented in May of 2015, the Cooperative’s forecast does not indicate the need for another retail rate increase until the year 2018.

As a not-for-profit organization, your Cooperative does not strive to produce profits for shareholders and investors but must maintain a sound financial position for the membership. Your Cooperative sets electric rates high enough to cover the costs of providing service and at the end of the year, any funds collected above the costs of service are allocated to you in the form of capital credits. When the financial condition of the Cooperative permits, the capital credits are then retired and paid back to you, as members and owners. In 2014, your Cooperative's Board of Trustees approved the retirement and return of $1.1 million of Capital Credits and the capital credit checks were mailed to members in December of 2014.  Over the past five years, your Cooperative has retired and returned almost $7 million of Capital Credits to the members.

I would like to close by stating that all of us can be proud to be a part of the Electric Cooperative program. The founders of the electric cooperative program developed a unique business structure that by its very nature, makes electric cooperatives very accountable to the members it serves. This unique structure has contributed to the success of your cooperative over the years and remains unchanged even today, some 76 years later. Your cooperative is governed by local people that live and work in your very own communities. Your cooperative is operated by a group of local employees that also live and work in your very own communities. Your cooperative's sole purpose is to provide you, as cooperative member-owners, with reliable and quality service at equitable rates.

 

See you next month and as always, "We'll keep the lights on for you."