Great River Energy approves 2012 budget
Great River Energy's board of directors recently agreed upon one of the most important financial decisions for the year ahead with the approval of the 2012 budget. The budget will ensure a reliable and affordable power supply for Great River Energy's member cooperatives
Great River Energy is owned by, and provides wholesale power for, 28 electric distribution cooperatives in Minnesota. Great River Energy’s board of directors, which is made up of its member-owners, budgeted a revenue requirement from its members of $810.5 million in 2012, an increase from the 2011 budget of $756.6 million.
How important are wholesale power rates? They typically account for 60-70 percent of a distribution cooperative’s costs.
Budget driversFactors inside and outside of Great River Energy are contributing to gradual increases in the cost of service. One example is the cost of enhancements to Great River Energy’s electrical infrastructure. Over the past decade Great River Energy has invested in generation and transmission resources as well as environmental improvements.
Those investments are putting additional pressure on costs as a result of economic factors. Home building has fallen off, so there are fewer new members. The way people use electricity is also changing, as members are using energy more efficiently. In a cooperative business, fewer new customers and reduced sales puts upward pressure on prices.
The cost of generating electricity is also increasing, both with traditional resources and newer technology. Great River Energy’s fuel costs will be higher in 2012, primarily because costs are increasing at the North Dakota coal mine that supplies fuel to Great River Energy’s largest power plant. In addition, a Minnesota regulation that mandates renewable energy is also leading to higher costs. In fact, costs associated with remaining compliant with Minnesota’s Renewable Energy Standard are expected to cost Great River Energy about $30 million, or add about $2.50 to the average homeowner’s monthly electricity bill in 2012.
Although investments in new resources may lead to higher rates in the short term, they will provide long-term benefits to members. A diverse mix of power generation assets and purchases means that Great River Energy doesn’t expect to need new resources for many years.
Keeping power affordableAll utilities are taking measures to keep power costs down. Great River Energy has a business improvement program that has resulted in significant cost reductions. The cooperative’s operating costs have remained relatively flat over the last five years, despite heavily investing in its infrastructure. In fact, Great River Energy’s operations and maintenance budget for 2012 is less than it was in 2007.
Great River Energy is also working with the communities it serves to encourage smart growth through economic development, demand-side management and energy efficiency programs. Commercial activity in cooperative communities is beneficial for end-use members and electric cooperatives.
What can consumers do?Great River Energy and its members offer a variety of resources to help consumers use electricity more efficiently. Most homes have the potential for enough low-cost efficiency improvements to counteract annual increases to power costs.
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Recent investments, such as Elk River Peaking Station, have given Great River Energy’s member cooperatives a diverse mix of generation resources, but are putting pressure on wholesale rates in the short term. |
