Published for the members of North Itasca Electric Cooperative
VOL. 21 NO. 1 - January 2018
Board Chair Messagecontinued
I find the charts very interesting. The charts show that the electricity consumption growth patterns are very similar for the state and the nation; and I think they point out some issues for us.
Iíll try to be very careful to describe what I see here. First, we did not explore the year-by-year ups and downs. We discussed the slowing rates of growth over the entire time period covered by the charts. It is interesting that both lines can fit on the same chart. Obviously the total consumption in the nation is far, far higher than any single state. But the nationís rate of growth is in a range that fits most states including Minnesota. There is some up and down in both patterns, but the overall trends are declining slightly over the time period here.
There are two faint straight lines that show the declining growth rates, both very similar for Minnesota and the nation. As the charts print in the newspaper, we may not be able to see the very slight difference in the national and Minnesota trend lines. If the patterns continue, then both trend lines will cross the zero line near the middle of the chart. If that happens, it would mean that electricity consumption is not growing at all, but actually shrinking. To me, that is very remarkable. I would never have imagined that electricity consumption would shrink in our nation.
There are several possible reasons for these patterns. I personally believe that the usage of more efficient devices is probably the single most important reason. Another possibility is the economy. We would expect that a recession, especially the severe recession back around mid-2007 through 2009, might result in lower electricity consumption. The newspapers and television reports say that the economy is quite strong right now. The nation has seen a slow and steady period of growth since about 2010, but the growth in the consumption of electricity is slowing. In fact the trend lines appear that they will cross over the zero line soon.
Will this trend continue? Or will something come along to cause long-term growth again? Maybe electric cars with rechargeable batteries? Apparently theyíre coming, but I donít expect to see very many here in this cold weather region for a long time.
Last summer I wrote a brief article in the WATTS News for the members about the financial challenges faced by your electric co-op. One of these challenges is the reduced consumption of electric energy resulting from multiple years of many members taking advantage of opportunities for greater energy efficiency. The state of Minnesota requires every electric energy supplier to provide programs to help its customers achieve greater energy efficiency. These programs are very helpful for consumers. To me itís obvious that people want to save money by getting more bang for every buck spent on electricity. The electric co-ops across Minnesota are noticing the effects of greater energy efficiency on a very broad scale.
Your co-op directors try to learn and understand the challenges we have in common with other co-ops and the challenges that might be particular in certain states or regions of the country. We utilize opportunities provided by interacting with electric co-op directors across the state, the region and sometimes from across the nation. The state and national electric co-op organizations publish educational and technical articles which help us to understand whatís happening elsewhere.
One example of an interaction is the conversation I had by chance at the regional meeting in September of the National Rural Electric Cooperative Association. I met a director of a co-op serving a region on the outer fringes of the Twin Cities metropolitan area. This co-op has been experiencing growth in its membership as more people are building homes in traditionally farming areas. Retail businesses are following the population as it builds out in new areas. The Twin Cities area continues its outward expansion. He told me that his co-op added several hundred new members in 2016, but the sales of electricity had not grown. Wow, I thought, how is that possible? The likely answer is the efforts by residential and business consumers to reduce consumption by improving efficiency.
These factors are considered carefully by the board as we consider the rate structure. Should the rates be more or less dependent on the consumption of electricity? Our experience is that a severe winter will bring in lots of revenue. But we can get into trouble with much less income during mild winters such as the last two. How can we predict whether we will have a milder or a colder winter?
We must pay our bills. We must repay our loans from our bankers. The variations in the severity of the winters make financial forecasting more challenging. The long-term movement toward energy efficient devices makes the prospect of repaying our loans from consumption revenue less dependable. These factors cause the board to take a more conservative approach as we seek stable income.
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