It is clear that the pandemic has changed our perception of normal. As concepts such as “social distancing” first circulated among health officials, electric cooperatives looked ahead to identify and confront the possible impacts of COVID-19.
As our South Dakota co-ops responded to local concerns and circumstances, co-ops across the nation all worked together to present a unified front to our political leaders in Washington and urged them to address the specific needs of our members. In collaboration with the National Rural Electric Cooperative Association (NRECA) in Washington, D.C., we informed policymakers about the challenges being faced on the ground by electric cooperatives across the country.
One of the first things NRECA looked at was the projected economic impact of COVID-19 on individual co-ops and their consumer-members. NRECA projected that lost electric sales and unpaid bills would total a staggering $10 billion through 2022. Central Electric’s sales through the end of June are $1.8 million below budget expectations. However, expenses are also below budget resulting in a positive bottom line through the end of June.
Despite the challenges, electric cooperatives are keeping the lights on, working with members on payment plans, accelerating capital credit retirements, and some are even expanding broadband access. But we feel the federal government has a role to play, as well.
Representative Dusty Johnson and General Manager Ken Schlimgen visit prior to an Ag Panel at the Sioux Empire Fair
Despite the challenges, electric cooperatives are keeping the lights on, working with members on payment plans, accelerating capital credit retirements, and some are even expanding broadband access. But we feel the federal government has a role to play, as well.
Among the policy responses sought by NRECA and their member electric cooperatives is the ability to refinance loans from the Rural Utilities Service (RUS). Central Electric and many other electric cooperatives deliver essential services in the most rural and impoverished parts of the country. Many electric cooperatives meet that challenge, in part, with low-cost financing from the RUS.
However, the RUS does not permit borrowers to adjust or refinance existing loans simply to take advantage of lower rates, and penalties are significant in the narrow circumstances that allow for refinancing.
NRECA and its members are pressing for federal legislation that would allow electric co-ops to adjust RUS debt to current market rates, providing greater cash-flow flexibility to meet the needs of rural consumers in these challenging economic times and allowing co-ops to be part of the long-term recovery.
Electric co-ops nationally could realize $10.1 billion in net present value savings from the repricing of $42 billion in RUS loans. If Central Electric could refinance its current debt at today’s interest rate, we estimate it would save the cooperative approximately $450,000 annually.
One of the Seven Cooperative Principles—Concern for Community—is looming large right now in our minds and the minds of America’s electric cooperatives. It has guided our response to the pandemic, and will continue serving as our primary focus as we navigate through these uncertain times.
One of the Seven Cooperative Principles—Concern for Community—is looming large right now in our minds and the minds of America’s electric cooperatives. It has guided our response to the pandemic, and will continue serving as our primary focus as we navigate through these uncertain times.
Please remember to mark September 29th on your calendar to attend your cooperative’s annual meeting. Watch your mail and next month’s newsletter for more details on the time and location for the meeting.
