Manager’s Message – April 2023
PrintDear Members:
We have received questions on the recent rate increases and wanted to share more information about it.
What Is the WPCA?
It stands for wholesale power cost adjustment (WPCA). When the cooperative has to raise rates due to a temporary situation on our wholesale power supply costs, we can use the WPCA to recoup our costs. In the past 15 months, wholesale natural gas and power prices have gone up dramatically, and we must recover these costs.
We raised the base rates (referred to as the facilities charge on your bill) starting in November after rate meetings with the members, for the reasons we explained in the magazine at the time. We also announced a 2 cent per kilowatt-hour (kWh) WPCA starting for January usage at that time, as we knew we needed to implement at least that much of a WPCA to meet our required financial ratios from our lenders. Then there was a tremendous increase in the cost of natural gas in December and January, which drove up the wholesale cost of power all across the western US. Those cost increases required us to raise the WPCA by an additional 2 cents per kWh starting for February billing.
Last year was a tough financial year for your cooperative. The unexpected drivers were primarily the extreme drought that greatly reduced our hydropower deliveries. Making it worse was that the U.S. Bureau of Reclamation kept revising our expected power supply downward each month, which crippled our ability to buy replacement power on a cost-effective basis. Compounding this was the Russian invasion of Ukraine, which raised natural gas prices. Natural gas prices generally set wholesale electric rates on the margin. Then in the fall, the state of California was short on power supply, which drove wholesale prices even higher due to high demand and low supply. Lastly, there was a strange spike in natural gas, reflected in power prices in December and parts of January. At the peak, power and natural gas were trading for 10 times their normal price. The California Public Utilities Commission is opening an investigation into potential market manipulation with this last event.
How Are Rates Set?
The cooperative’s rates are set by the elected board of directors, keeping in mind the requirements of good financial planning and the requirements of the mortgages. The members elect the board, and the board works with management to set rates. The final decision belongs to the board. The board listens to the members of the cooperative, and the comments, letters and feedback they and the staff receive are discussed at every board meeting. When raising our base rates, the cooperative always notifies and meets with the membership to get feedback and to discuss rate design options. When we must raise rates quickly, we have sometimes used the WPCA method, and we don’t always have time for more than a month’s notification.
How Do Our Mortgages Play Into This?
When the board sets rates, they always keep in mind the mortgage requirements. Plumas-Sierra Rural Electric Cooperative (PSREC) was formed in 1937 and began operations in 1938, bringing power where no one else wanted to serve. We borrowed money from the Rural Electrification Administration. The REA later was renamed the USDA Rural Utility Service, and they are still our primary lender. We also borrow short-term capital from a giant private member-owned bank called the National Rural Utility Cooperative Finance Corporation. Both entities secured the loans with mortgages with clear financial performance requirements. If we have a bad financial year—like we did in 2022—we are required to raise rates to make sure we hit our minimum ratios the next 2 years. This means the board must raise rates to meet these ratios.
What Are We Doing To Mitigate This?
We are always looking at cost control measures, but we’ve been running lean for many years. We have diversified into the telecommunications business to bring essential services, but to also improve our economies of scale. We have always watched our dollars carefully, but that means there isn’t fat to cut.
We are not just accepting the costs and passing them through. We are working hard to build a bigger connection to the Nevada grid, allowing us to bypass some of the worst costs of the power that comes to us through the PG&E Transmission system.
We have been very successful in expanding our telecommunications subsidiary through State of California grants and some federal grants. That allows more cost sharing between electric and telecommunications.
Along with other members of the Northern California Power Agency, PSREC has been involved with litigation on the wholesale cost of power from the federal dams and hopes to have good news there soon. In addition, we’ve been working with Federal Emergency Management Association (FEMA) to recoup some of the costs of the Dixie Fire, and we are in litigation with PG&E over the Dixie Fire as well. Lastly, we will get more hydropower this year, though the exact amount is still undetermined.
What’s the Future of the WPCA?
The board of directors wants to reduce this when they can. We will discuss this at each board meeting. At the same time, we must recover from the impact of 2022, and we need to rebuild our cash reserves to keep our utility functioning.
We will keep you informed as things change both in Ruralite and on our website.
Lineworker Appreciation Month
April is Lineworker Appreciation Month. PSREC lineworkers are responsible for keeping power flowing day and night, regardless of holidays, vacations, birthdays, weddings or other important family milestones.
Beyond the years of specialized training and apprenticeships, it takes internal fortitude and a mission-oriented outlook to be a good lineworker.
In PSREC’s service territory and across the country, an electric co-op lineworker’s mindset of helping others often extends beyond their commitment to their work and into their communities.
Given the dedication of PSREC’s lineworkers—both on and off the job, and especially with the onslaught of storms throughout February and March—I encourage you to take a moment to acknowledge the many contributions they make to our local community. In the past two years, we have dealt with four massive wildfires and a historic winter. Even though the fires burned under our transmission lines and this winter has dumped enormous amounts of snow and rain, we were able to keep the power on with few interruptions.
Telecommunications
Fiber-optic service is now available in Loyalton north of Highway 49 with service south of Highway 49 coming early this month. Call (530) 832-4126 to schedule your installation. Coax conversions continue in North Portola. Call us to find out if your service location is eligible for conversion. Galeppi Ranch in Quincy will open sales later this summer.
Currently, Plumas-Sierra Telecommunications’ grant projects are in various stages of design, permitting and construction. PST continues to apply for California Advanced Services Funding to bring high-speed internet to our local communities and is currently working on three grant applications for 2023.
We continue to expand broadband coverage throughout the region. Get on our interest list or sign up for service by calling (530) 832-4261 or visiting the Plumas-Sierra Telecommunications website.
Fire Prevention
This spring we will begin our right-of-way work. This includes clearing poles, trimming trees, and removing trees that threaten our rights-of-way and our communities.
Your help is greatly appreciated with this crucial ongoing project. Our members have helped identify trees that have turned color or are clearly damaged. This is a big help—sometimes trees die and turn color after we’ve inspected them for the year.
Another way to help is cooperating when we need to remove trees. We don’t cut trees unnecessarily. It is a big expense to the cooperative. But if a tree is a hazard tree, we are legally required to remove it. When members cooperate with us on tree removal, it reduces our costs—which helps keep rates down— and keeps us all safe. Given California’s strict liability standard, PSREC must remove all identified hazard trees off our lines. If you have any questions or would like more information, call (530) 832-4261 ext. 6076, or email me.
Sincerely,
Bob Marshall
General Manager
