Special Meeting and 83nd Annual Meeting of Members Report
SouthEastern Illinois Electric Cooperative held its’ 83rd Annual Meeting on Tuesday, August 2, 2022 with approximately 782 members registered and approximately 1,100 in total attendance. 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.
The Cooperative sold approximately 771.8 million kwh in 2021 resulting in an increase of 3.6% from 2020. This slight increase in kilowatt hours sold was primarily due to an increase in large industrial load. Due to the economic conditions, growth in number of consumers was basically flat.
Your Cooperative ended the year 2021 in sound financial condition. 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. In 2021, your Cooperative’s Board of Trustees approved the retirement and return of $2.0 million of Capital Credits and the capital credit checks were mailed to members in December of 2021. Over the past eleven years, your Cooperative has retired and returned approximately $19.7 million to Cooperative members.
Cooperative members learned that the Midwest is now at great risk of being short on generation capacity to serve energy consumers. Over the past several years, the electric generation industry in the United States has been transitioning to construct more renewable energy resources and retiring fossil fuel generation (primarily coal). There have been many driving forces that have led to coal plant retirements including shifting public and social policy, increasing environment regulations, the aging coal generation fleet and newly discovered shale gas reserves that led to an abundance of low-priced natural gas.
Your Cooperative is part owner of the Generation and Transmission Cooperative named Southern Illinois Power Cooperative (SIPC). SIPC is part of a regional transmission organization here in the Midwest called the Mid-Continent Independent System Operator or MISO for short. MISO is an independent organization, regulated by the Federal Electric Reliability Council, that is responsible for the coordination and control of the transmission network in all or part of 15 states. Although SIPC and other utilities throughout these 15 states own the transmission network, MISO is responsible for the control of this transmission network that delivers energy from generation plants throughout the Midwest.
MISO conducts a generation capacity auction every year in which utilities can purchase additional generation capacity or utilities can sell any excess generation capacity into the market. Over the past 5 years, the price of capacity has ranged from $1.50 up to $10.00 with the price being at $5.00 in the past two years. The most recent generation capacity auction, which captures generation capacity requirements for June 1, 2022 thru May 31, 2023, cleared at a price of $236.66 per MW-Day which equates to a price increase of 4,633%. This drastic increase was due to insufficient generation capacity in the auction needed to meet overall regional load requirements. Fossil fuel generation plants (primarily coal) are retiring without sufficient generation capacity to replace them. This puts the Midwest at an increased risk of running short of needed generation capacity in the summer during peak demand.
Fortunately, your Cooperative power supplier (SIPC) did not have to purchase any generation capacity in this auction due to having sufficient generation capacity that is either owned or under contract. This is just one incredible value that comes with owning your own generation assets. Therefore, your Cooperative will not be incurring any additional generation capacity costs due the most recent auction. Some utilities and organizations that had to purchase additional generation capacity in the auction are announcing significant rate increases beginning this summer.
Cooperative members also learned of the significant increase in cost of fuels to generate electricity. Natural gas surpassed coal as the leading fuel source for energy generation in the United States back in 2016. Over the past few years, the United States has been the world’s second largest exporter of natural gas supplying other countries with LNG. With the increased demand for domestic natural gas used to generate electricity, the increased exports of natural gas which has certainly been exacerbated by Russia’s invasion of Ukraine, the domestic supply of natural gas in not keeping up with demand and the price is increasing to 14-year highs. The use of coal is decreasing domestically but the global demand for coal is still very strong. Countries like China, India and now Germany are either constructing new coal plants or returning to coal generation. This strong global demand for coal is also increasing the price of coal. Therefore, the price of fuels to generate electricity are increasing which is also increasing the price of electricity.
Fortunately, SIPC had contracts in place for coal used to power the Lake of Egypt unit and is currently not paying these higher prices for coal. However, these contracts will expire mid next year and we will be paying higher prices for coal in the future. SIPC’s ownership share in the coal plant at Prairie State also includes all the coal required to operate that plant into the foreseeable future in a mine located adjacent to the generation plant. Therefore, this coal plant will not be subject to the increasing market price of coal in the future
In summary, it is extremely important to have reliable fossil fuel generation to meet the demand of energy consumers. During a MISO summer peak hour which occurred on June 21st between 4-5 pm., coal and natural gas delivered 73% of the needed energy to serve consumers while wind and solar only provided 14%. The MISO central region includes parts of Illinois, Missouri, Indiana and Kentucky. During this same peak hour, coal and natural gas delivered 77.3% of the needed energy capacity to the central region while wind and solar combined only provided 9.8%. The vast majority, approximately 75%, of the MISO summer peak demand is supplied by fossil fuel generation plants and it is crucial that these generation plants continue operations in order for energy consumers to have reliable energy capacity.
Lastly, the members were informed that your Cooperative’s Board of Trustees approved a retail rate decrease for every Cooperative member that began in January 2021 of approximately 10%. Your Cooperative has continued that rate decrease and currently has no plans to implement a retail rate increase. As we look to the future, SIPC will encounter some increases in the cost of fuels and other commodities to generate electricity but SIPC is committed to do everything possible to limit the increases in the cost to generate your electricity. Your Cooperative was formed 84 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.”
See you next month and as always, “We’ll keep the lights on for you.”