Good afternoon North Itasca!

by Brad Dolinski, CEO

Winter showed up in a blaze of glory.  This shift in seasons happens yearly, I just haven’t adjusted to the joys winter brings yet.  Last month I told you my daughter and I were going hunting.  I’m proud to say my daughter harvested a nice spike buck.  I have one weekend left to hunt in the regular season.  My skills as a hunter must be a little rusty, I haven’t had a chance on a buck yet in my zone.  I was fortunate to spend time with friends and family during deer season.  Turns out, this is more of my “hunting” these days than dogging the woods for the big buck.

I presented the budget to our Board of Directors in October.  This was the preliminary budget with a few numbers missing.  Often, I must wait to see what insurance rates are going to do for the next year so I estimate what the increase will be.  With a few check numbers in place, I suggested a five percent rate increase.  This is what the board will be getting more information on in November and December.  There are several pressures that influenced this suggested increase.

Our cost of purchased power from Great River Energy is going up six percent.  GRE shared some information with me to use in this article. 

Strategic decisions to stabilize wholesale electricity rates continue to serve Great River Energy’s member-owners well, but broader economic challenges will impact energy costs in the year ahead.

Great River Energy’s average 2023 wholesale rate is projected to increase by an average of 6.2% from the 2022 budgeted rate; however, many of Great River Energy’s all-requirements member-owners will see smaller increases. This is Great River Energy’s first budgeted increase to its average wholesale rate in five years.

“There are significant external pressures on energy costs around the world, and we worked closely with our members to temper the regional effects of those as much as possible,” said Great River Energy President and Chief Executive Officer David Saggau.

Many of the local distribution cooperatives that purchase wholesale electricity from Great River Energy are facing their own cost pressures due to supply shortages and inflation.

The U.S. Energy Information Administration (EIA), which closely monitors U.S. energy costs, reported that nationwide retail electricity costs increased 8% in 2022 and further increases are expected in 2023. According to EIA’s October Short-Term Energy Outlook: “Higher retail electricity prices largely reflect an increase in wholesale power prices, which are driven by higher natural gas prices.”

Our last rate increase was five years ago, but our rates will need to increase to absorb the six percent increase in cost of power.  Since our cost of power is half of your bill, the increase that you see on your bill would be three percent. Over the last five years, we have done a very good job at controlling the cost of operating the cooperative to maintain the same rates, but unfortunately the pricing pressures we see have won the fight.  I am requesting an additional two percent increase to cover these increases so that we can maintain the financial stability of the cooperative. This means that you can expect your bill to go up a total of five percent.

Over the past year NIECI has also absorbed or collected the PCA (Power Cost Adjustment) charges and credits you may remember seeing on your past bills.  This fall our PCA balance was a very large charge or expense that typically would have been spread to all Member-Owners.  The past few months have been beneficial to the PCA and these credits have been reducing our expenses.  I expect Great River will return a portion of their revenues to us by the end of 2022, essentially clearing out these PCA charges. 

This matters for more than one reason.  If the PCA charges would have continued to grow, I would have suggested collecting them from our Member-Owners in 2023.  I talked about this in articles at the end of last year and the beginning of 2022.  This will not be the case, I foresee the PCA to be close to zero at the end of the year.  This saved all our Member-Owners some money over the course of 2022.  The other reason this matters, the PCA is calculated on the difference between GRE’s budget and actuals.  If the cost of natural gas decreases from the budgeted rates, costs will decrease at GRE in 2023.  This will potentially provide PCA credits in 2023.  As always, I will keep you informed as I get this information.

So, there you have it.  My article feels a little choppy this month because I’m using information directly from GRE.  This information helped me to keep you informed the best I can about the ups and downs we are facing.  As I mentioned last month, we all take a rate increase with the utmost concern.  This rate increase is what I believe is the best for the financial well-being of your cooperative.

By your side! Miigwech

Brad