March 1998 Minutes News & Views from Your Elected Representatives Deregulation - A National, State and Local Perspective We recently attended a national conference of the National Rural Electric Cooperative Association (NRECA). This was a meeting expressly designed for directors of electric cooperatives from across the country. Although many issues confronting the electrical industry were discussed, from generation to transmission and distribution, certainly a major focus was the aspect of deregulation of the electrical industry being addressed by most states and congress. Electric utilities are, for the most part, state regulated monopolies that are allowed certain geographic areas as exclusive service areas. Deregulation, or "choice" as it is frequently referenced, would allow utilities to sell to any customer and for consumers to pick their provider, similar to choosing your long distance carrier. ("Haven't we been through this before?") At the federal level, strong lobbying efforts on both sides of the deregulation issue is ongoing. In the Senate, a bi-partisan bill introduced by Senator Bumpers, D-Arkansas, and Senator Gorton, R-Washington, would mandate nationwide deregulation of the industry by January 1, 2002 (only four years away). Large industrial customers and states with high power costs are lobbying hard for deregulation. Those groups representing smaller business and residential, plus those states with traditionally lower electrical costs are much more reserved, hesitant, or even opposed to such nationally mandated legislation. States such as New York, New Hampshire and Rhode Island have some of the costliest power rates across the country. Conversely, states like Oregon, Washington, Idaho, and Kentucky enjoy some of the cheapest power. ``One of the major fears facing the Northwest over deregulation is that our relatively low rates might disappear..." One of the major fears facing the Northwest over deregulation is that our relatively low rates might disappear as our low-cost power is diverted and sold elsewhere. Enron Corporation, which recently acquired our local PGE, is a strong supporter of a federal mandate for federal deregulation. They envision within 5-10 years, a nationwide system of 10-15 generating companies, a similar number of marketing companies, and a varied system of small companies offering transmission and distribution. Salem Electric's fear is that such a federal or state mandated monopoly would eventually raise rates, and weaken our excellent record for continuity and reliability of service. Locally, the Oregon Rural Electric Cooperative Association (ORECA) has formed a seventeen-member task force representing each of the electric cooperatives across Oregon. The purpose is to closely examine all the issues that will be confronting the 1999 Oregon legislature in regard to our industry's possible restructuring and/or deregulation. Our General Manager, Bob Speckman, is representing Salem Electric on that statewide group. Most believe the Oregon Legislature will likely take some action in 1999, which will alter the way we currently do business. Our purpose is to hopefully come forth with a mutually acceptable plan, so that we can approach the legislative body with a unified position which will be in the best interest of you, our valued customers. --Curt Culver, Director   We were most impressed by the knowledge and dedication of the panelists from NRECA who represent America's largest electric cooperative utility network. 488 of us were director delegates from throughout the United States, all pulling together to maintain our quality and reliability of customer service, keeping rates down, and meeting the needs of our members as we face the changes and challenges that deregulation will bring. Salem Electric is a unique cooperative. We are really not rural in the real sense of the word.  We, as members, are part of the business community of downtown Salem, most of West Salem and a large portion of Keizer. Our roots stem from the time when Salem was, indeed, a small community of residential consumers, much like the smaller communities that were represented by most of the delegates at our convention. Salem Electric has served this area since 1941. Cooperatives in the electrical industry have been around for 65 years, and they number over 1000 in our nation. Changes are coming. We were told at the convention to be prepared to spend more money, to be willing to change, to be open-minded and not fearful. Your board of directors does have a policy and a position regarding deregulation. Our panelists at the convention stressed this priority. Salem Electric's General Manager, staff and board are well educated about the changing environment that is upon us. A quote we heard at the convention: "Don't predict the future; create it!" Your board plans to do just that. --Alicia Bonesteele, Director TOP Minutes of the Meeting Held on: January 27, 1998 The Salem Electric Board of Directors met on January 27, 1998 at 7:00 p.m. All directors were present. The first meeting of the year is traditionally the time for staff to give their year-end reports to the board. Financial Report The financial report was given by Administrative Services Manager, Jack Belleque. Salem Electric remains in a strong financial position. The Statement of Operations shows that the year-end margin is $2,282,974, which is $1,012,274 above budget. There were several reasons for this. More kilowatt hours were sold this year than were budgeted for.  This increased both the operating revenue and the power purchases accounts, resulting in an additional $325,0000 in net margin. The conservation program was below budget for the year due to activity in various programs being less than anticipated, specifically the commercial conservation program. This resulted in a $379,0000 positive effect upon the net margin. The non-operating revenue account was above budget for the year due to higher than anticipated investment interest rates and cash balances resulting in a $112,000 addition to the net margin. Other factors increasing the margin were the administrative expenses being below budget and a reduction in write-offs for bad debt. This was a good write-off year at only .210%. This is a very low number and can be attributed to the good work of Paul Nelson in the credit department. Operations Report In his opening remarks to the board, Roger Kuhlman quipped that the savings realized from Belleque's budget were lost to his. Capital expenditures for 1997 totaled $1,798,061 which represents 107% of budget. This was due mainly to the early start of the Cherry Avenue underground project and a large number of new residential subdivisions that were built in late 1997. In response to questions from the board, Kuhlman indicated that 70% of the conduit is installed on the Cherry Avenue underground project. Salem Electric will start when conduit is completed. Also, he indicated that the Wallace Road project is coming in on budget. Customer Contact Summary Cecelia Darby, the Information Services Coordinator, summarized the Customer Contact Report for 1997. The number of complaints were down 25% from last year, with high bill complaints predominating. She also noted that 88 of the general comments received were compliments. Conservation Report Member Services Manager, Terry Kelly, reported that the low-income weatherization program was inactive in 1997 with only 11 homes weatherized. Part of the reason for this may be over-saturation of the program; that its past success has resulted in few qualifying homes left to be weatherized. He is looking for ways to increase the activity. Helen Findley, who coordinates the Salem Electric Member Assistance Program, is assisting by qualifying her clients for the weatherization program when possible. Manager's Report General Manager, Bob Speckman, reported on several issues. He and board president, Jim Dyer, co-wrote an opinion article that was published in the Statesman Journal in regard to the PGE rate increase. Speckman said five petition packets have gone out to date for the two board positions to be voted on in May. One of these positions was vacated due to Dennis Koho moving out of the service area. Speckman also noted that Salem Electric is now, officially a member of the National Rural Electric Cooperative Association (NRECA). A motion was made and carried unanimously to designate Bob Speckman as the voting delegate with Jim Dyer as the alternate. Purchase of BPA Substations The board received a report from TriAxis, a private engineering consulting firm retained by Salem Electric, regarding the purchase of the Salem Alumina, Brush College and Salem substations. Salem Electric currently pays over $500,000 per year to BPA for delivery charges. At a previous board meeting, staff was authorized to hire outside consultants to investigate whether it would be cost effective for Salem Electric to own these substations. Maintenance and operation costs must be factored in along with the purchase price. Kuhlman hopes that a recommendation will be presented to the board at next month's meeting. Annual Meeting Preparation Speckman reminded the board that the annual meeting will be held May 12. This is the time to consider any bylaw changes to be placed on the ballot. The board previously discussed an amendment that would allow the board to declare an election when there is no contest. There have been times in the past when incumbent directors ran unopposed and yet a ballot was still sent out to all members. This prompted queries by some members as to the reason for this expense. Anderson mentioned he felt that part of being in a cooperative organization was to be able to vote and be involved in the process. Speckman related he felt that it would not be good to have the members get out of the habit of voting. All board members agreed that member participation should be encouraged through voting. No action was taken. -- Bill Wolf, Secretary/Treasurer TOP  | Board Reports |