Board President’s Message – March 2023
Co-op Faces Financial Pressure
Like many of our members over the past couple of years, Stearns Electric Association has been caught in the economic crosswinds of rising prices and supply chain disruptions. I am proud of the deep commitment of our employees and leadership team to maintain the Cooperative’s high standard of service during these turbulent times.
As Board President, I want to explain some of the financial challenges Stearns Electric is facing, what we are doing to address these challenges and what you can expect from us moving forward. Today, we are feeling the full impact of rising inflation across all our operations − from the cost of wholesale power and labor, to transportation and equipment. For example: The cost of poles, wires, transformers and meters has risen by an average of 60% over the past two years, while general construction costs have risen by 20%. In addition, our wholesale power provider, Great River Energy, will be passing a 6% increase in rates onto Stearns Electric this year. Since about two-thirds of every member dollar goes directly towards purchasing wholesale electricity, this creates additional financial pressures for the Cooperative.
Currently, Stearns Electric is determining what needs to be done to manage rising costs without sacrificing service. As part of this effort, we have commissioned a cost-of-service study that will identify revenue needs for the next several years to support daily operations and long-term investments in the distribution system. The Co-op Board will hear the results of the study during its March 30 meeting.
While we are still doing our due diligence, I want to be honest with you – we expect that some kind of rate increase will be necessary this year. Based on our current projections and needs, we expect a rate increase to become effective as soon as May.
We understand that these are economically challenging times for our communities. We will do everything we can to minimize the impact of any rate adjustment and spread the cost fairly among those we serve. Member service will always be the driving force behind these decisions.
As a not-for-profit electric cooperative, we don’t set our rates to make a profit. Our primary objective is to provide safe and reliable service that our members expect. Not only has it been five years since our last rate increase, but the Cooperative has also performed well enough financially to return Capital Credits to our members over the last several years. This is not the first time Stearns Electric has faced difficult times, nor will it be the last. I am confident in our ability to meet these challenges. After all, the cooperative model was born out of economic hardship and determination, which led the way for electrification of large parts of rural America. We embrace that legacy today.
Looking ahead, we will continue to make investments to modernize equipment and infrastructure and seek to educate members on ways that they can reduce their energy use and get the most value out of their electrical service. This is why we are exploring the construction of a new facility that would better support our operations, mechanic and garage service areas, and administration.
Stearns Electric will be sure to provide you with more information as it is available. In the meantime, I want to thank all our members for their support. I encourage you to let us know how we can serve you better. Please contact the Cooperative office during regular business hours at (800) 962-0655 with any questions.
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