By Ken Schlimgen, General Manager
It is hard to believe, but this year marks the 20th anniversary of when two cooperatives merged and formed Central Electric. On behalf of your Board of Directors and employees, we would like to express our sincere thanks for the support we continue to receive from our members and friends.
I am pleased to report that your cooperative ended 2019 in a strong financial position. Your board of directors approved a budget that does not include a change in electric rates for 2020. This announcement was made at our District meetings as I shared goals for the coming year. Two of those goals are to be financially responsible and to provide stable and affordable rates.
The U.S. Energy Administration recently released an electric rate comparison for the United States. The information showed the average price per Kwh paid by residential consumers in 2018 was 12.9 cents. It also showed the average price paid in South Dakota by a residential consumer to be 11.6 cents. If you are wondering how your cooperative compares, Central Electric’s residential/farm accounts paid an average of 11.2 cents per Kwh.
Central Electric will pay more for electric energy in 2020, but we do not plan to change our electric rates. As a result, we expect our margins to be very thin. We will monitor our financial condition closely throughout the year and adjust our plans if needed.
One step we have taken to get through the year is end our program for complimentary repairs to security lights. This complimentary service has an annual expense of $130,000 to Central Electric. We will continue to look for additional ways to be more efficient in our operations in an effort to keep rates stable and provide reliable electric service.
During the legislative session, we will join the cooperatives of SD in an effort to protect our service territory. My column in the December newsletter explained the issue and the likely need for legislation in 2020. I would encourage you as a member-owner to stay informed on this topic as your support will be critical to our success.
Your board of directors and employees are scheduled to go through a strategic planning session this summer. We go through this process every two years to identify issues that can adversely affect your cooperative and set goals to improve our operations.
After the planning session, we will complete a cost of service study. The study will be undertaken by an outside entity and will focus on the electric rates your cooperative is utilizing. The study will evaluate if the current rate structure is fair to our rate classes and recovers all our expenses. We will also consider other rate structures that may be used in the future. For example, a “time of use” rate could offer different rates for electricity based upon the time of day each Kwh is used.
The employees have another very busy year ahead of them. We are entering year two of a more aggressive line and meter replacement plan. In addition to our normal maintenance and work, we will replace 55 miles of distribution line, remove 75 miles of line as a result of last year’s work, make improvements to two substations, replace 3,000 meters and build additional line as needed. This represents about $5 million of improvements.
Our power supplier, East River Electric Power Cooperative, will also replace transmission line from Mt. Vernon to Pukwana in the coming year. This is part of $24 million in system improvements to be completed in our area from 2019–22.
All of this work is helping your cooperative to provide a reliable source of electric energy and excellent customer service to our membership.