September 2021

Dustin Tripp

82nd Annual Meeting of Members Report

SouthEastern Illinois Electric Cooperative held a Special Meeting and the 82nd Annual Meeting on Tuesday, August 3, 2021 with approximately 970 members registered and approximately 1,400 in total attendance.  The 2021 Annual Reports covered both years 2019 and 2020.  For those of you who were unable to attend your Cooperative’s annual meeting, this article will summarize the report members received at the annual meeting.

In 2019, your Cooperative delivered 904 million kwh and experienced a reduction in 2020 by delivering 740 million kwh to your homes, farms and businesses.  This decrease in kilowatt hours sold was due to significantly lower industrial load sales and a slight reduction in residential and small commercial sales.  However, your cooperative continues to lead the way in the State of Illinois by delivering more energy on an annual basis than any cooperative in Illinois.

The Cooperative ended both years 2019 and 2020 in sound financial condition.  Your Cooperative’s Board of Trustees approved the retirement and return of $1.7 million of capital credits in 2019 and another $1.8 million of capital credits in 2020.  These capital credit checks were mailed to members in December of each year.  This means that over the past ten years, your Cooperative has retired and returned approximately $18 million of capital credits to all of you as Cooperative member-owners.

Every year, your Cooperative reviews the rates paid by the members and compares that to the other 24 electric cooperatives around the state.  Your Cooperative’s electric rate consistently ranks among the lowest electric rates in the state.  In January of this year, your Cooperative announced that your Board of Trustees approved a retail rate decrease for every Cooperative member that began in January, 2021.  Collectively, this rate decrease will save Cooperative members approximately $7.4 million per year.  The amount of the actual rate decrease will vary based upon the amount of energy consumed but the average residential member will experience an 8.8% retail rate reduction.    This rate decrease was possible due to lower wholesale power costs from the Cooperative’s supplier, Southern Illinois Power Cooperative, and other deferrals and credits.  With this rate decrease, your Cooperative’s average residential rates are the 2nd lowest of all Cooperatives in the state.

Cooperative members learned that in just a little over the past decade, the United States discovered new sources of shale oil and natural gas and developed technological advances in oil and natural gas drilling techniques that we know today as hydraulic fracturing and horizontal drilling.  These developments led to more economical extraction methods and created an abundance of supply in these resources.  In 2009, the United States became the world’s largest producer of natural gas and in 2018, the United States became the world’s largest producer of oil.  Natural gas has become a low-cost fuel for electricity generation and for the past five years, natural gas has surpassed coal as the leading fuel source for electricity generation.  Just a little over a decade ago, coal was the leading fuel source for power generation delivering 48% (almost ½) of our nation’s energy.  Coal has declined over the past decade and just last year in 2020, coal fell to third place by providing 19% of our nation’s electric generation while natural gas provided 40% and nuclear provided 20%.

In 2019, SIPC began the process of reviewing the long-range economics of the coal generation assets due to sustained low energy prices (primarily driven by low natural gas prices) and increasing environmental compliance costs.  SIPC’s Unit 4 was constructed in 1978, which is a cyclone boiler technology utilizing a wet scrubber, was facing significant capital investments to continue operating to comply with the new EPA Effluent Limit Guideline regulation.  Due to the technologies of this unit, SIPC was faced with future capital investments in the range of $15-$20 million just to comply with this new rule.  The final economic evaluation process revealed that retiring SIPC’s Unit 4 would save SIPC members approximately $125 million over a 10-year period.  SIPC ultimately made the decision to retire Unit 4 which occurred in September 2020 after 42 years of operation.

As the United States is now the world’s largest producer of oil and natural gas and the world’s second largest coal producer, there has been a significant and transformational shift in social and public policy to move our nation’s electricity generation industry away from carbon-based fuels to renewable energy.  The public policies that are moving the industry in this direction include federal and state tax incentives, credits, subsidies and government mandates.  Just to provide one example of the shift in public policy, a study regarding federal tax incentives per unit of energy produced for various forms of electricity generation indicated that solar tax incentives are 71 times higher than coal or natural gas while wind federal tax incentives per unit of energy produced are 44 times higher than coal or natural gas.

There were several major energy legislation proposals introduced during the Illinois 2021 Spring Congressional Session.  The general theme of the recent energy proposals in Illinois is to decrease and close carbon related generation facilities, including coal and natural gas baseload generation facilities, and rely on nuclear, solar and wind.

While there was no substantive action on these proposals during the 2021 Spring Session, there are on-going negotiations in Springfield and we may see further legislative action in the Fall Veto Session.  As we look to the future, Illinois should not attempt to set pre-determined dates for the closure of all remaining coal and natural gas baseload generation facilities.  The industry will take some time to further develop economical solutions to resolve the intermittent nature of renewable energy resources.  Illinois must keep the remaining generation resources to operate when the sun doesn’t shine and the wind doesn’t blow.  If alternate, economical solutions are not put in place before closing the remaining baseload generation facilities, Illinois will be forced to import the needed energy from surrounding states.  In essence, Illinois would import energy and export downstate Illinois jobs, tax base and economic activity to surrounding states.  This is clearly a case of putting public policy ahead of technological and economical solutions and would not be good energy policy for Illinois.

Your Cooperative was formed 83 years ago to bring electricity to rural areas of southeastern Illinois.  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.    Your Cooperative is governed by local people that live and work in your very own communities.  Your Cooperative is also managed and operated by a group of local employees that also live and work in your very own communities.  Your Cooperative is owned by the people it serves and will continue to be an electric cooperative that is truly operated “for the people and by the people.