We Will Get Through This Together
We Will Get Through This Together
By Steve Foss, CEO
We have all become experts in change over the past two months.
The routine of life we were comfortable with has completely changed. What we consider normal has shifted. That old saying of “the only thing that stays the same is change,” comes to mind. And, we have all made adjustments to get through these uncertain times because life requires it. We do what we have to do to make it all work. Our ability to adjust helps us all in the long run. We are undoubtedly stronger, we are better at reacting, and are ready to handle whatever comes next.
The cooperative is no different. The global COVID-19 pandemic has forced us out of our comfort zone.
This issue of The Outlet is going to address financial transparency and where we are, and how uncertain everything is moving forward. We are not presenting doom and gloom content by any means, but we feel it is right to let our members know that we are seeing some trends that have caused us concern about our finances, and that we are realizing that action needs to be taken sooner than later.
There are many factors that have driven a decline in revenue, and we’ll discuss that more in this issue, but it seems as though the global pandemic has caused commercial closures that have amplified already low kilowatt hour sales due to warmer weather patterns and changes in how our members use energy. We expect this trend to continue.
In the past four years, we have maintained the promise to our members that the consolidation would not change your standard of service or the cost per kilowatt-hour. Members have not seen any adjustment to service charges or rates since 2010 (East District, prior LJEC) and 2012 (West District, previous Kaw Valley). For the past decade, we have worked tirelessly to maintain affordability. No changes in at least a decade is an accomplishment, considering how everything changes much more frequently. For example, the nearby investor-owned utility has increased rates on their consumers 39 times in the past 10 years. FreeState has made zero changes in that same amount of time.
Costs are rising all around us. In the past five years, we have seen a significant increase in operating expenses. The cooperative’s operating costs increased by 10% from 2015 to 2019. As I write this, we’ve had a very mild start to 2020, and an early warm up this spring means the co-op’s revenue from kilowatt hour sales has fallen 5% below our projections for this time of year putting even more pressure on our finances.
We have seen increases in the cost of materials like poles, wire, transformers, and other infrastructure items. Labor costs, transportation, escalating environmental compliance costs have all impacted the cooperative.
Please know that we here at the cooperative know the timing is never good. We understand that members are facing much uncertainty at this time. An adjustment is immanent, and we know we have to do something sooner rather than later, but FreeState is committed to making those adjustments when the outlook has improved. The last thing we want to do is put anymore financial burden on our members.
Our financial goals are important, but our members are more important. You are all the reason we are here. We work for you, and we will continue to do so no matter what lies ahead.
We have taken measures at the cooperative to mitigate costs. We’re cutting back on all expenditures, and we’ve worked to evaluate all of our expenses. We are working on reducing the costs we can control because many of our costs and other factors in distributing electricity are outside of our control.
We live by the cooperative difference – as a cooperative, we are member and service-driven and operate as close to cost as possible. We do not make a profit, and we do not make a profit for shareholders. We return overages to our members in the form of capital credits. In the past three years we have returned over $2.25 million in capital credits, including a consolidation credit of $800,000 to all members. We have also returned $750,000 in margin stabilization to our east district members. We focus on keeping the business financially secure on behalf of all our members so we can provide the safest, most reliable service at the lowest practical cost.