News > CEO’s Message – October 2020

CEO’s Message – October 2020

Working the Plan and Preparing for the Future

At Stearns Electric Association, it seems like we are constantly planning. We plan, practice and prepare for extreme weather, emergency response scenarios, wholesale power purchases, and for our electrical system construction and maintenance work. And most importantly, we prepare an annual budget and financial forecast that ensures we remain financially stable.

BUDGET PLANNING

Right now at Stearns Electric, we are planning our budgets for 2021 and beyond. Our annual budget planning process is extensive but necessary. The budget provides a roadmap for the Cooperative to intentionally spend money on the items that are most important to Stearns Electric’s operations. It is guided by the Cooperative’s strategic plan. Employees from all Cooperative departments contribute to the overall proposed budget
in October and November. In November, the Board of Directors extensively reviews the budget and proposes cuts and changes as needed. In December, once the adjustments are made, the Board approves the final budget.

POWER COSTS AND DEMAND SIDE MANAGEMENT

One of the key areas that we budget for is our wholesale power purchases. In 2020, Stearns Electric will spend over $38 million purchasing wholesale power to distribute to our members. The majority of those purchases will be from Great River Energy (GRE). A small portion of our power supply, about 5%, is hydropower produced by the Western Area Power Administration (WAPA).

At Stearns Electric, we are working hard to get the biggest bang for our buck when purchasing wholesale power for you. One way to reduce energy costs is through demand-side management programs. We have over 14,000 accounts signed up for the Cooperative’s demand-side management programs, such as Dual Fuel, Stored Water Heating, ChargeWise, and the Commercial, Industrial and Agricultural Interruptible Program. By signing up for these programs, our members opt-in to let us control electrical demand over peak use (or high cost) time periods. Through these programs, we experience energy savings that we share with the members on the programs.

GREAT RIVER ENERGY STRATEGIC PLANNING

As one of 28 member-owners, we are also very involved in the governance of our wholesale power supplier GRE. Stearns Electric Association Board of Director Greg Blaine serves on the GRE Board of Directors where he participates in discussions and decisions to keep Stearns Electric’s wholesale power costs competitive. A recent example is GRE’s decision to:

• Retire Coal Creek Station in 2022
• Add significant wind energy purchases
• Convert Spiritwood Station’s fuel source from coal to natural gas
• Install a 1-MW long-duration battery

These improvements will provide lasting sustainability and cost containment benefits to Stearns Electric Association for years to come. These changes will also position GRE to be more than 95% carbon-free by 2023.

EQUITY MANAGEMENT

Another important area to plan for at Stearns Electric is our debt and cost of debt. Our business is very capital and cash-intensive. We have over $142 million in assets. The majority of those assets are electrical distribution infrastructure-equipment: poles and wires. Managing the debt we carry for building and maintaining this infrastructure is a critical function of the Cooperative. Stearns Electric has aggressively restructured our debt to take advantage of historically low-interest rates. By doing this, Stearns Electric is planning to save millions of dollars in future interest expenses. This benefits overall business and our member-consumers.

These are just some of the ways that Stearns Electric plans for and executes prudent business practices. Know that we continue to act in the best interests of you, our Stearns Electric members.

Sincerely,

Robin C. Doege
CEO