Capital credits are similar to stock dividends in a private corporation. They represent the equity or margin that is assigned to individual members on an annual basis after the cooperative’s costs are covered and the bills are paid. Quite simply, revenue from rates is used to pay for wholesale power distributed to members, to operate the business, to build electrical facilities to serve the membership, to pay debt and to maintain good and safe financial parameters. Any excess becomes the “equity” or “margin” that may be returned to members if all the financial obligations and provisions for losses have been met. After many years of difficult financial circumstances, your CCEC Board of Directors recently approved distribution of capital credits for 1971 in the amount of $194,122.92. Distribution is scheduled to occur in third quarter 2006. The decision to distribute capital credits for 1972 in the amount of $429,778.78 will be made late 2006, after careful consideration of the current and projected wholesale power costs and the cooperative’s financial health. Credits are based on each member’s contribution to the equity or margin for the period of time in consideration — which currently is 1971 and 1972.

No. And certainly not in the standard sense of profits taken by a company, paid only to shareholders. By definition a cooperative is a private, not-for-profit corporation. Through rates, CCEC collects the revenue it needs to pay for the cost of wholesale power purchased for your use, the cooperative’s fixed costs and the costs to deliver electricity to you. We do, however, collect enough to create a reasonable “margin” which is held to protect the membership from losses, provide the funds to invest in additional plant or electric facilities and to maintain our tax-exempt status. Depending on an electric cooperative’s financial situation, any margin or revenue considered excess may be returned to members in the form of capital credits or, in some cases, rebates, as CCEC was able to do last December.

Our electric cooperative must recover its actual costs of
purchasing electricity and conducting the business of delivering
that electricity to you. Because we are a cooperative, only actual
costs are recovered; any profit becomes equity of the membership and may be returned as capital credits. Two separate charges help
us recover costs. The cost of the actual electricity purchased for
you to use is recovered in a kilowatt-hour charge. Each residential
member pays the same amount for each kilowatt-hour they use
and only for the kilowatt-hours they actually use. In addition,
members also pay a Monthly Minimum Charge (MMC) which
helps pay for the cost the cooperative has incurred to build facilities
that deliver your electricity and for the cost to run the business
every day to make sure the electricity is available to each member
when they need it. Our goal is to deliver power to you in the most
reliable and cost-effective manner, and recover the costs of doing
so in a fair, equitable way for the entire cooperative membership,
whether you live here only a few weeks of the year, live here
year-round, live in Myrtle Point or in downtown Brookings or Port Orford.

The Residential Winter Block Rate is another benefit for the CCEC membership that directly affects any member with a residential account. The Residential Winter Block Rate is a reduced rate per kilowatt-hour (kWh) provided to members on their electricity usage above 1,000 kWh per month during high-usage winter months. The CCEC Board of Directors had shortened the normal Winter Block Rate period in late 2004 to help stabilize the cooperative’s finances and to meet fiscal requirements of CCEC’s lending institution. Recently, the Board of Directors restored the Winter Block Rate for the December 2005 through April 2006 electric billings. When the Winter Block Rate is in effect, residential members pay the standard 6.3 cents per kWh for the first 1,000 kWh of electricity used, but only 5.3 cents per kWh for any additional usage.

Every day, the Cooperative works to control costs — to the greatest extent possible — that are part of running an electric utility and are ultimately passed on to the membership. Obviously, the crews who maintain the system, and staff who work daily to keep the cooperative operating, are significant, highly worthwhile costs. Others, however, are as unfortunate and dangerous as they are costly to members. One example is the cost to members due to vandalism. Over the past 18 months, CCEC has had 3 separate incidents of vandalism that not only created dangerous situations and power outages, but unnecessary costs to repair the facilities and restore power. CCEC is also experiencing a higher rate of meter tampering and theft of electricity, again creating very potentially dangerous situations. Acts such as these are not only dangerous, but they are illegal. They affect all members, and the costs are borne by the entire membership, not just the guilty few. This is a problem we, as a co-op, need to recognize and address together.

The Monthly Minimum Charge (MMC) or Basic Charge is a fixed charge for a portion of the costs of delivering electrical service that occur regardless of the amount of energy used by each member. It includes the average cost for meter reading, billing, maintenance on the electric system facilities, administrative costs and repayment of long-term debt. Separating the delivery service costs from the cost of electricity provides a better way to accurately track costs.

Electricity rates are very dynamic and can change often and, unfortunately, more dramatically than the steady rate of inflation and cost of other goods and services we have to buy. The region experienced that during the 2001 energy crisis when the cost of wholesale power skyrocketed.

At CCEC, approximately $16.4 million in revenue is needed
every year to provide services and electricity to residential members. Any combination of a MMC and kilowatt hour charge provides that revenue. The monthly CCEC charge for services was reduced to $22.75 for bills rendered on and after January 2007.

The true cost of delivering services according to our Cost of Service Study is over $50, which means a portion of the cost of delivering electricity is recovered in the kilowatt-hour charge.

No matter how much electricity you personally use in your home
or business — a cost you can help control by wise and efficient
electricity use — it costs the same amount to provide and maintain
the infrastructure needed to get that electricity to you. That includes
the cost of poles, wires, meters, equipment, and employees. You can help control your electricity costs through conservation; and we work very hard to control what it costs to provide service to you.

CCEC has weathered difficult financial times the past couple of years and is now in a place financially that members can benefit directly. That’s what a cooperative is all about — all members sharing in the responsibilities of running the electric utility and all members sharing in the benefits. The December credit is one of those benefits and is a direct result of CCEC being able to obtain power to meet the electric needs of the membership at a better, lower cost than projected at the beginning of the fiscal year.

Every year, CCEC prepares a budget that is intended to set financial parameters and guidelines for the operations of the utility. Using the most realistic, yet conservative numbers, CCEC budgets for the “actual” cost of power based on history of previous budget years. Our cost of power currently represents approximately 55 percent of the cooperative’s total annual budget. Since 2001, CCEC and other BPA customers, have suffered from a 61 percent increase in power costs. Drought and poor water years in the region, plus steep increases in costs for BPAwildlife conservation programs for salmon have been major factors in these substantial increases for the cost of BPApower. Over these same years, surcharges, or “True Up” charges have been assessed to PNGC Power members like CCEC to make up for the higher BPApower costs. The 2005 CCEC budget was prepared according to that history. However, the latest information indicates that no added “True Up” cost is necessary or forthcoming for 2005 — which means that our projected budget has a surplus.

The CCEC Board of Directors unanimously decided to return that surplus as a benefit to the membership in the form of a one-time billing credit. The billing credit, or rebate, of $.0038 (38/100ths of a cent) per kilowatt hour will be applied to members with active electric accounts in the month of December — based on January 2005 through October 2005 billings. An active residential user of 1,000 kWh per month — the average residential usage — will see a kWh rebate of about $38 as a credit on their December bill. The projected value of this benefit is $1,007,000 for the membership as a whole.

CCEC uses industry-standard utility practices and Oregon Public Utilities Commission mandated guidelines to systematically survey the condition of our electric system — including the utility poles. That means between 10 and 12 percent of the 24,000 poles in our 2,343 sq. mile service territory are tested every year. Any problems identified are scheduled for maintenance or replacement, giving first priority to those poles and geographic areas of the electric system needing the most urgent attention, and within the available budgeted funds and work load. The bottom line is to maintain a safe and reliable electric system. As a cooperative, the costs associated with building and maintaining an electric system are shared by all members through the basic or monthly service charge. It’s true, in recent years, budget constraints affected our pole replacement progress for a time, but the Basic Service Charge which pays for this has been adjusted and we are now fully underway with this important job — one that is never done. It is a constant activity of a utility to be monitoring and replacing worn equipment like utility poles, especially with the geography and climate we have on the south coast.

Yes. CCEC’s utility pole replacement program manages the safety and integrity of the entire system — from our members living in the surrounding areas of Powers and Myrtle Point in the north — to those living in the Brookings/Harbor area in the south. For example, over 100 poles were identified for replacement in the Port Orford and Coquille areas, over half have been replaced and, weather permitting, the remainder will be replaced before the end of the year. Within the past 2 years, approximately 80 poles have been replaced in the northern division. Not surprisingly, these numbers are consistent with the percentages of poles replaced in other areas of the CCEC service territory and also consistent with replacement programs at other utilities. Again, it’s a job that is never completely done; if you think you’re finished — it’s time to start over. And the integrity and reliability of the entire system is our guiding principle.

The Board of Directors is responsible for developing Cooperative policies that provide direction for the Board, management and employees — it’s a big part of what the Board does and they do it annually. Reviewing and updating the CCEC policies is a job each Director takes very seriously. Since October 2003 when the Board began the process of getting the co-op’s fiscal house in order, approximately eighty policies have been reviewed in an effort to make the structural changes necessary to ensure the long-term financial stability for the membership. Led by a Policy and By-Laws Committee, the Board set out to determine specific directives — in the form of policies. Some obsolete policies were rescinded and some were determined to be operational procedures rather than directives. In addition, 18 new ones were adopted to address governance, the true costs involved in operating a utility with a very rural service territory, determine appropriate operations; and not only put the co-op back on the right track but strengthen it for the long-term. All Board members have had input, and voted on, all proposed policies. As you can imagine, not all these votes were unanimous, but the Directors know they are working as a group, and for the collective good.

The Board of Directors made a commitment to substantially improve communications nearly two years ago after recognizing the sweeping changes that were essenessential for CCEC. That is a two-way commitment: keeping members informed and also listening to their concerns. The Board of Directors has wrestled with issues of getting the co-op’s fiscal house in order, matching up rates and fees with true cost of service and operation, developing a strategy for managing and responding to continued growth in our area, and providing appropriate management and operational structures for long-term success. Very difficult decisions were imperative, in the best interests of the membership. The Board increased its outreach to inform members on major decisions through letters, direct communication, special meetings in many areas, newspapers, radio, the Annual Meeting, and in regular discussions with employees and members on a daily basis. Taking the necessary steps to put the co-op back on the right track was crucial. Providing more information — more often — on a local level about everything from rates and emerging industry issues to outage and pole maintenance is equally important. That’s a commitment the Board made, and is fulfilling, even through tools like this column.

Two recent actions will likely have a big impact on BPA’s wholesale power rates to electricity consumers in the Northwest. One involved a court decision and the other involved a BPAmanagement decision. Both will likely cause rates to CCEC members to go up.

First, the 9th Circuit Court of Appeals last week upheld a lower court order requiring large volumes of “spill” at Snake River and Lower Columbia River hydroelectric dams this summer. Unfortunately, this spill program not only has little proven biological benefit for the salmon which the region has spent more than $700 million to protect each year — through power rates — but also leaves less water available for generating electricity. That bottom line cost is an additional $60–$70 million, possibly leading to a four-to-five percent increase in wholesale power rates.

Second, at the same time the region’s generation capacity is being reduced, BPAannounced that it would offer preferential power benefits to three Northwest aluminum companies and one paper mill for five additional years. Continuing to give the 577 average megawatts of power benefits directly to these four companies means BPA’s other customers, including Coos-Curry Electric, will be forced to pay higher wholesale power costs.

To deal with rising wholesale power more effectively, it’s important to work on it both from the demand (usage) side as well as the supply side. CCEC is doing both. In partnership with our members, through conservation programs, we have installed in excess of 2500 heat pumps in an effort to reduce use and utilize electricity more efficiently. On the generation side, CCEC participates in a very successful renewable electric generation project, Coffin Butte, and is investigating participation in a pilot “wave power” project off the Oregon coast near Reedsport, which would compliment the renewable hydropower generation we buy from the Bonneville Power Administration. We know more changes in the electric industry are ahead and to prepare for those, we recently began an Integrated Resource Planning effort that will to assess our load requirements for the future and explore options for providing affordable power to our members for decades to come.

Drastically rising fuel prices have slammed people in every corner of the nation — whether they are using it to travel, play or work. Fuel costs to maintain and operate our fleet of vehicles that transport line crews, meter readers and others to serve members throughout our very rural service territory were on the rise even before the tragic events caused by Hurricane Katrina. As of July, our fuel costs — included in the retail rate paid by members — has increased 21 percent.