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2020 Vision for the Future - Updates from EnerStar CFO David Clinton

 

For the past year, long before the word COVID-19 had entered our vocabulary, extensive planning has been completed to prepare EnerStar Electric Cooperative for 2020 and beyond. Since our annual meeting has been postponed, we felt it important to share these plans in our monthly magazine. There is one thing you can be sure of and that is your cooperative board and management are thinking about the long-term health and stability of our electric cooperative.

We believe there are four key areas that are the cornerstones to success: Service Reliability, Financial Stability, Fairness with Rates and Fees, and finally, Integrity and Accountability.

Planning for long-term Service Reliability.

The co-op’s Construction Work Plan was updated for maintaining and upgrading our electric power lines. This plan looks 10 years into the future. Plans were also updated for long-term equipment needs, trucks, heavy equipment, etc. Of course, long-term staffing plans were developed to match.

Planning for long-term financial stability.

Long-term financial plans were developed with a 10-year projection. Incorporated into these financial projections are plans for all key areas. These include wholesale power costs, investment needed to maintain and upgrade our system, plans for borrowing, and plans for capital credit retirements.

Some of the specifics included in this effort was the proposed 2020 electric rate increase, the first in 7 years! Once implemented, it will raise monthly bills $5/month by increasing the “Grid Access Fee,” formerly the “Facilities Charge.” Additionally, we increased the fees charged for member-requested construction work. Purpose of change was to restore fees to be as close as possible to actual cost.

Before closing this section on financial stability, it is important to recognize how fortunate we are, as a small electric utility, to have a long-term and stable whole power supplier, Wabash Valley Power. They too are a not-for-profit organization. As wholesale power costs account for 55 cents of each dollar you pay, they are obviously very important! Our contract is long-term and requires them to meet 100 percent of our needs. In today’s uncertain world, this certainty provides comfort.

Planning for long-term fairness in rate design.

A professional study by an outside firm was conducted to make sure our electric rate design is fair and equitable. That is, commercial customers are paying their fair share. But just as important, small users of electricity and large users of electricity are equally paying their fair share of operating costs. The study showed are current rate structure is good. Only recommended change was to increase our monthly Grid Access Fee.

Planning for long-term corporate integrity.

Often overlooked, but very important is the organization’s controls used to protect the integrity and reputation of our organization and to protect your assets. We are pleased to report we had an excellent report!

Some of the specifics covered with our ongoing efforts include having appropriate internal controls, maintaining full compliance with environmental and wildlife rules and regulations, and being a strong advocate of safety on behalf of our employees and the public.

Further Financial Information

Numerous critical statistics are monitored by co-op leadership to measure performance and long-term health of the cooperative. One such statistic that is especially important measures the extent of debt the cooperative is adding to its balance sheet. One way to measure this statistic is using “debt-per-member.”

As the following graph shows, debt has increased somewhat. Unchecked, this growth will become a serious problem for the future. To mitigate this growth a small rate increase was planned for 2020 ($5/member per month). This rate increase is currently delayed as our members deal with the COVID-19 situation. However, once implemented, it will help to mitigate this growth in debt.

In conclusion, if I have communicated anything, I hope you will think of 2019 as the year of “Planning for the Future,” your future. It was a year where we identified the critical issues impacting our future and took action on the same. As a member-owned cooperative, we don’t serve investors or taxpayers, we only serve you; our member-owners.

 

 

 

 


This Balance Sheet shows audited results for 2019 and 2018. The vast majority of our assets are invested in plant; basically, power lines, substations and equipment to provide electric service.

The funding for these assets come primarily from two sources: Members’ Equity and Debt. Member’s Equity is the portion of EnerStar that is owned by those we serve, our members. Think of it like the equity in your home.

It takes $7,440/member to maintain all the assets necessary to operate EnerStar. This investment is funded with Members’ Equity at the rate of $3,570/member. The remainder is funded through Debt and Other Liabilities.

BALANCE SHEET

ASSETS

2019

2018

Property, Plant And Equipment

$28,951,053

$28,680,848

Ownership In Associated Organizations

4,055,630

3,763,653

Notes Receivable And Other Investments

3,555,073

2,901,682

Accounts Receivable, Materials & Other Curr. Assets

2,365,221

2,530,981

Cash

164,116

237,476

TOTAL ASSETS AT COST

$39,091,093

$38,114,640

 

MEMBERS’ EQUITY AND LIABILITIES

2019

2018

Members’ Equity

$18,743,478

$17,758,573

Long-Term And Short-Term Debt

14,465,927

14,079,878

Provision For Future Retirement Obligations

3,353,434

3,513,278

Accounts Payable & Other Curr. Liabilities

2,528,256

2,762,911

TOTAL MEMBERS’ EQUITY & LIABILITIES

$39,091,093

$38,114,640

 

This Income Statement shows audited results for 2019 and 2018. To help put these numbers in perspective, we have included how they translate into revenues and costs per a typical residential bill (1000 kWhs).

What you may find interesting is how close our Operating Income is to Operating Expenses. In our budgeting and planning, our 2019 monthly costs came within $4.51 of what we charged. A small margin indeed! This small amount left over for Operating Income will then be added to Members’ Equity and used to help offset the need for debt.

Total Margins are higher due largely to Non-Operating Margins. These are largely non-cash capital credit allocations from our affiliated organizations.

INCOME STATEMENT

REVENUES

2019

2018

Operating Income

$12,545,362

$12,396,348

EXPENSES

2019

2018

Cost Of Purchased Power

6,878,434

6,835,473

Operations & Maintenace

1,540,898

1,645,605

Customer Service & Information

637,782

646,290

Administrative & General

1,024,022

1,068,444

Taxes, Interest & Depreciation

2,079,922

1,977,791

TOTAL OPERATING EXPENSES

$12,161,058

$12,173,603

TOTAL OPERATING MARGINS

$384,304

$222,745

Non-Operating Margins (Net)

724,288

517,755

TOTAL MARGINS

$1,108,592

$740,500

 

MONTHLY AMOUNTS PER AVERAGE RESIDENTIAL BILL

OPERATING INCOME

$147.11

$144.96

TOTAL OPERATING EXPENSES

$142.60

$142.36

OPERATING MARGINS

$4.51

$2.60

TOTAL MARGINS

$13.00

$8.66

 

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