Cooperatives Offer Higher Value

By Matt Hanson

Being a member of a cooperative family offers a much different value than that of a for profit business. In the case of an electric cooperative, such as McKenzie Electric (MEC), the value proposition is simple: to deliver affordable electricity, safely and reliably to the member owners. In today’s world this is easier said than done, however, by belonging to the cooperative network, we increase our probability of being successful significantly.

Let’s begin by talking about costs, as I am sure this is front and center in everyone’s mind as the dollar just doesn’t go as far as it did a year ago. At MEC, we place a top priority on serving our membership while keeping the cost as low as possible. This starts with a very detailed and scrutinized annual budget that is rolled into a comprehensive study that looks specifically at how much it costs to provide our services and what rates are needed to ensure that each member rate class remains financially sound.

MEC’s board sets prudent margins to cover reasonable fluctuations in our business expenses without over-inflating margins as you might find outside of the cooperative model. While the inflationary pressures are felt by the cooperative, we are focused on finding ways to minimize these impacts by keeping our controllable costs to a minimum. 

I would like to take a minute and acknowledge the impact of inflation. Just in the last year, MEC's material prices have increased anywhere from 25% to more than double what they were one to two years prior. Not only has pricing increased, but so have lead times. For example, a standard pole mount transformer that you might find hanging off a pole near your residence has increased in price by more than 30% since 2021 and now has a lead time surpassing 6 months. MEC staff is focused on finding ways to minimize the impact of inflation such as optimizing inventory, broadening suppliers, and strategically purchasing to mitigate as much risk as possible for extended lead times and large price fluctuations. The Engineering Department is also planning much further into the future and finding innovative ways to package work to minimize additional cost. This highlights the nimbleness and flexibility of the Cooperative as the utility landscape is changing at a much greater pace than ever before.

The largest expense of MEC is the cost of power, equating to 90 cents of each dollar on members’ monthly bills. Because of this, we make it a point to provide feedback to our power supplier whenever possible, emphasizing how impactful their cost is and advocating for the membership.

The cost of producing electricity is facing many challenges. Various factors contribute to this pressure, from new environmental regulations, demand outpacing supply, and the cost of building new generation and transmission facilities, all which can result in the potential for increased rates.

Moving to the second important element of the value proposition is reliability. Being self-governed by a Board of Directors elected by our membership gives the Cooperative the flexibility to address issues efficiently. For example, in 2020 the Board of Directors approved an extensive rebuild project replacing nearly 450 miles of aging copper power lines. These lines were at the end of their lifespan with most having been in service since the beginning of the cooperative. The staff at MEC routinely analyzes the distribution system’s performance, making sure the product you all depend on meets the highest industry standards. In certain areas, our engineers go above and beyond these requirements. For example, we’ve increased the vertical height clearance over roadways by seven feet to make it safe for tall loads to pass through our area.

The other value proposition as it relates to reliability is redundancy, having adequate sparing, networked systems, or important cross connections within the system are just some examples of redundancy that MEC utilizes to ensure you receive a reliable service. This is another great part to the cooperative story. 

When we talk about reliability in the context of power supply, it’s important to recognize the historical process of generating and delivering electricity, which has resulted in the reliability that you’ve come to expect. As more renewable energy sources begin to replace dependable, dispatchable generation, nature’s unpredictability adds an additional layer of uncertainty. In addition, the recent proposed EPA rules place significant restraints on dispatchable generation while requiring technology that is unproven and commercially unavailable. A reevaluation of policy and a renewed emphasis on reliable energy is needed. Rest assured, your cooperative is actively involved in advocating for a dependable and responsible supply of electricity through these fluid times.   

In summary, the value of belonging to a cooperative is straightforward: it’s about serving you based on your specific needs. With member-led leadership, we can focus on what is most important - providing safe, dependable, and low-cost energy. I hope, given MEC’s track record, you can witness this commitment every day through the actions of the cooperative’s dedicated employees and your elected Board. Your satisfaction and well-being are at the heart of everything we do at McKenzie Electric, and we look forward to continuing to serve you in the years to come.