AUGUST 13, 2010

The U.S. Department of Energy (DOE) approved a $33.9 million matching grant to NRECA last week, essentially firing the starter pistol for a nationwide smart grid demonstration project. The project involves 19 electric cooperatives that will deploy more than 153,000 smart grid components and test their value to cooperative members.

The smart grid research grant is part of $3.4 billion in awards made available by the American Recovery and Reinvestment Act of 2009, representing a potential joint public-private investment of more than $8 billion in smart grid technology.

The Electric Power Research Institute estimates the widespread implementation of smart grid technologies could reduce electricity use by more than 4 percent by 2030. That would save U.S. businesses and consumers roughly $20.4 billion, according to DOE.

The cooperatives’ demonstration project will serve as an unprecedented nationwide pilot, testing end-to-end connectivity from power plants to homes. A portion of the project will expand MultiSpeak®—a utility software standard developed by NRECA to facilitate system interoperability—and address cyber security.

Funds will go to cooperatives in 10 states: Illinois, Wisconsin, Iowa, New York, Georgia, Hawaii, Kentucky, Indiana, Louisiana and New Hampshire (see “Stimulus Grants to NHEC Fund Smart Grid Technology, Demonstration Program,” Solutions News Bulletin, May 14, 2010).

JULY 23, 2010

Better service reliability and lower monthly bills led to an increase in the satisfaction level of residential electric utility customers this year, according to J.D. Power & Associates’ annual satisfaction study, released last week. Several electric cooperatives scored strongly in the study and received high satisfaction rankings.

Overall customer satisfaction averaged 630 on a 1,000-point scale in this year’s study, increasing from 618 in 2009. Customer-reported bill amounts decreased by 5 percent from 2009, and power reliability improved, with service interruptions falling by 8 percent.

“Utility companies are continuing to improve when it comes to managing customer expectations around power outages and restoration of service,” said Jeff Conklin, senior director of the Energy and Utility Practice at J.D. Power. “Even though outages can have a negative impact on satisfaction, utility providers who manage these incidents properly—by providing sufficiently detailed information about the outage and restoring power when they say they will—may be able to mitigate declines, or even improve satisfaction.”

Read More »

JULY 2, 2010

By John Grant, Senior Consultant, CFC Financial Advisory Services

Consumer growth rates for electric cooperatives have steadily declined since early 2007, although recent data from the U.S. Energy Information Administration (EIA) show the rate of decline may be slowing.

Electric cooperatives’ average growth (representing the number of meters added) has historically hovered between 2 percent and 2.5 percent per year, according to EIA data, typically around 1 percentage point higher than investor-owned and municipal utilities (see “Co-op Growth Rate Exceeds Industry,” Solutions News Bulletin, June 5, 2009). EIA data (taken from a sample of 104 electric cooperatives) show growth slightly higher than figures from the more reliable CFC Key Ratio Trend Analysis (KRTA), although EIA data are an important leading indicator nonetheless. Recent data point to two emerging patterns:

Read More »

APRIL 23, 2010

Earlier this week, CFC reported preliminary findings from its annual Key Ratio Trend Analysis (KRTA), based on the 2009 operational results of a sample of 630 electric distribution cooperatives compared to results for the same 630 cooperatives from last year’s KRTA. The final KRTA report, which is expected to include data from approximately 820 distribution cooperatives, will be available in August.

“Although 2009 was a tough year for the U.S. economy, the preliminary KRTA numbers show that co-ops once again performed very well. The median financial ratios all showed an improvement over the prior year,” Claudia Phillips, CFC vice president of Programs and Planning Analysis and KRTA manager, said. “While these are not final KRTA results, this preliminary report of more than 600 systems is a significant sample.”

The median results for three ratios in particular indicate that cooperatives have maintained their financial strength during the economic downturn, Phillips said:

• The Times Interest Earned Ratio (TIER) rose to 2.29 in 2009 from 2.25 in 2008 (see Chart 1).
• Equity as a percentage of assets increased to 41 percent from 40.5 percent.
• Modified debt service coverage increased to 1.82 from 1.81.

CHART 1: Times Interest Earned Ratio (TIER)

Read More »

APRIL 16, 2010

The U.S. wind industry installed more than 10,000 mw of new wind power capacity in 2009—the largest amount in history—according to a report issued last week by the American Wind Energy Association (AWEA). But developers are struggling to find buyers for the electricity, Dow Jones reports. This will translate into a decline in installations this year, even with an influx of economic stimulus cash from the federal government.

AWEA’s annual market report showed there are now 36 states with utility-scale wind projects and 14 states that are in the “Gigawatt Club,” with more than 1,000 mw of installed wind capacity. Balancing this good news, Dow Jones reported that a big drop in U.S. power demand due to the recession, expectations that wind turbine prices will continue to fall and uncertainty over federal policy are making utilities hesitant to sign multiyear power-purchase agreements to supply their customers. These same forces are increasingly making wind farm developers and their financial backers less willing to bet on future power prices and so they are increasingly looking to ink long-term sales contracts. Read More »

MARCH 19, 2010

CFC announced this week that, for the second consecutive year, it will not seek member contributions to the Cooperative System Integrity Fund.

“The CFC Integrity Fund provides substantial support to electric cooperatives to defend their territorial integrity and their right to provide energy services to consumers,” said Rich Larochelle, CFC senior vice president, Corporate Relations, in a memo sent to managers and CFOs of all CFC member systems.

The decision not to seek contributions this year was based on the strong balance of nearly $7 million in the Integrity Fund, relative to annual outlays of about $1 million, and the fact that many electric cooperatives are experiencing slower or negative growth combined with cost pressures.

“CFC continues to strongly support the Integrity Fund and recognizes its enormous value,” Larochelle said. The CFC Board of Directors will evaluate the adequacy of the available balance of the Integrity Fund on an annual basis and requests for contributions will resume when necessary to ensure that the Integrity Fund has sufficient resources to continue to assist member cooperatives.

JANUARY 29, 2010

Cletus Carter, a longtime trustee at Tri-County Electric Cooperative in Hooker, Okla., and former president of the CFC Board of Directors, has been appointed by the Obama administration to serve on the Oklahoma Farm Service Agency State Committee. Carter was appointed to serve as chairman of the committee.

State committee members oversee the activities of the agency, including carrying out the state agricultural conservation programs, resolving appeals from the agriculture community and keeping producers informed about FSA programs.

Read More »

JANUARY 15, 2010

Last week, the Rural Utilities Service (RUS) issued guidance to its borrowers and staff on accounting for the receipt of government grants. This guidance does not supersede any existing regulations such as those pertaining to storm damage and the Rural Economic Development Loan and Grant Program.

Read More »