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President's column

Dustin Tripp

Like many of you, I’m certainly glad to see Spring finally arrive.  The cold winter months resulted in most residential services consuming record energy consumption resulting in higher electric bills.  I would like to take this opportunity to help explain why many residential and business services experienced higher than average energy consumption and subsequent higher electric bills in the first few months of 2014.

Utilities consistently monitor temperatures to help determine the necessary demand for energy and heating degree days is an index that quantifies the demand for energy needed to heat a specific structure, such as a home or business, during the winter months.  A similar index, cooling degree days, is used to help determine the demand for energy to cool a structure in the summer.

Heating degree days is calculated by taking the average base temperature that a specific structure is normally heated to minus the average outside ambient temperature for each day of the month and then adding all days in that specific month.   Many would think that the base temperature would be around 70°F but for historical reasons and the availability to compare this index over a long period of time, the base temperature is normally defined as 65°F.  In order to calculate this index, assume the average outside ambient temperature for the 1st day of the month is 20°F.  The number of heating degree days for the 1st day of the month would be calculated as 65°F - 20°F = 45 heating degree days.  You would continue this process for each day of the month and then add all the respective heating degree days for the entire month.  The following is a table that shows historical values for the heating degree index in Southern Illinois for the winter months of December 2013, January 2014 and February 2014.

Dustin TrippRegulatory Update

On January 8, 2014 the U.S. Environmental Protection Agency (EPA) published proposed rules on carbon emissions in the Federal Register that would, as a practical matter, eliminate coal as a fuel source for new power plants.  More importantly, these rules on new power plants trigger a legal requirement under the Clean Air Act to set new standards for existing power plants which will have a direct economic impact on cooperatives and their members.  These rules could result in substantially higher generation costs which will lead to significantly higher energy bills.

The proposed rule would require any new coal-fired generating facility to implement a technology known as carbon capture and storage (CCS).  Unfortunately, this technology is not proven on a utility scale plant and is certainly not cost effective.  Numerous studies reveal that the cost of the CCS technology will be prohibitive.  Cost estimates vary widely depending upon the type of power plant, the stage of carbon capture, the type of transport system and storage type.  Given these variables, studies have revealed that the implementation of CCS technology would increase the cost of energy from a coal-fired power plant in the range of 60 to 85%.  In addition, the additional equipment required to perform the CCS technology would decrease the plants efficiency by as much as 20 to 40%.  The EPA did not follow the historical standard that requires a technology to be cost-effective which will certainly lead to a court challenge that may take years to complete.

Dustin TrippVegetation Management

One of the many advantages of living in Southern Illinois is the beauty of this area including the Shawnee National Forrest and the great variety of trees and vegetation that grow throughout the region. Although your Cooperative realizes the significance of this important natural resource and are advocates for retaining as many local trees as possible, we must implement a sound vegetation management program to ensure you with reliable energy solutions.

SouthEastern’s current vegetation management program sets the goal of trimming on a four to five-year cycle. This means that what is trimmed or cut today will be trimmed again in four to five years. Your Cooperative feels that if this goal can be achieved, you as Cooperative members will experience less momentary blinks, less outages and faster restoration times which will increase the quality and reliability of your electric service. Over the past few years, your Cooperative has experienced extreme storms resulting in devastating damages which reminds all of us of the importance of a sound vegetation management program.

Dustin TrippCapital Credit Refund and Smarthub Introduction

Capital Credits

The most profound and distinct difference between electric cooperatives and other utility business structures is that electric cooperatives are not-for-profit organizations that are member-owned and member-controlled. Your Cooperative sets the electric rates high enough to cover the costs of providing service and at the end of the year, any funds that were collected above the cost of service are allocated to you, our members, in the form of capital credits.

These capital credits are retained by the Cooperative and used to build and maintain the infrastructure necessary to serve the members and service the long-term debt of the Cooperative. When the financial condition and cash position of the Cooperative permits, the capital credits are then retired and paid back to you, as members and owners.

I am pleased to inform you, as Cooperative members and owners, that your Cooperative's Board of Trustees approved the retirement and return of $1 million of Capital Credits to the members. The capital credits that were returned were from the years 1979 and 2011. This means that if you were a Cooperative member in either or both of these years, you should have received a check in mid-December for those capital credits.

Dustin TrippRegulatory Update

Over the past several years, your Cooperative has been informing you of pending legislation and new environmental regulations that if enacted would impact the cost of generating electricity.  The most recent development occurred in September with a new proposed regulation by the U.S. EPA.

On September 20, 2013, the U.S. Environmental Protection Agency (EPA) announced proposed carbon pollution standards for coal and natural gas power plants built in the future.  In addition, the EPA announced that it is in the process of engaging with states, stakeholders, and the public to establish carbon pollution standards for currently operating power plants.

The proposed standard would require any new coal-fired generating facility to implement a technology known as carbon capture and storage (CCS).  This technology would require capturing the carbon formed during the generation process, compress it into a liquid form, and transport it via pipeline to a site suitable for injecting it underground permanently without leakage.

Dustin TrippNational Cooperative Month

Since 1964, October has been designated as National Cooperative Month, providing cooperatives with an opportunity to explain the cooperative difference to their members.  In this month’s article, I would like to explain some of the cooperative differences and how it benefits all of us as cooperative members.

As the electric utility industry continues to evolve and face continual change, we can all be proud that we are part of the electric cooperative program.  Electric cooperatives have a very unique business model that provides many benefits for its members and has proven the test of time for over 75 years.  Your electric cooperative is a not-for-profit, member-owned business and exists for the sole reason of serving members.  Your electric cooperative sets the rates just high enough to cover the cost of doing business unlike investor-owned utilities that strive to maximize profits for investors or shareholders.  Any money that is collected by the cooperative above the cost of operations is allocated back to you as capital credits.  This allocation becomes your equity ownership in the cooperative and when the financial condition of the cooperative permits, the capital credits are returned to you in the form of cash.  Over the past three years, your cooperative has paid back over $4.8 million in capital credits as cash to members.