CEO’s Message – August 2022
The Reliable Energy Source to Hit Back at Inflation
Global supply chain disruptions combined with labor shortages and skyrocketing inflation have dramatically increased the cost of goods and services. According to the Bureau of Labor Statistics, as of June, the consumer price index had risen 9.1% over the past year. This is the largest increase since 1981.
Wells Rural Electric Company has not been immune to the impact of these price increases. Compounding the problem are growing supply chain delays. Some of the items WREC relies on for day-to-day operations, such as transformers, have been increasingly difficult to acquire. Lead times for new transformers—essential to bringing power to homes and businesses—have grown to more than a year in some cases.
To help offset these impacts, we are proactively managing the costs we can control and adapting our business. We recognized during the height of the pandemic that materials and manufacturing would slow, even before the explosive rise of prices and supply chain complications. We have secured additional stock of materials and equipment and formed a strategic alliance with a regional electrical equipment supply cooperative to keep our daily operations flowing smoothly and to try to minimize negative impacts to our members.
However, even the best planning is contingent on improvements in the global manufacturing and transportation sectors. We are not confident the elements impacting all aspects of supply chain issues and related cost increases will improve soon. Some indications signal we can expect the situation to extend into 2023.
Out of the darkness of the current economic situation is one bright spot: hydropower.
Because of hydropower and the dams that produce it, utilities around the Northwest—including WREC—have an edge to keep our rates competitive. Unlike the rising cost of natural gas, which powers 30% of the United States, we do not have volatile fuel costs with hydropower. That is a major reason WREC’s rates, and many in the Pacific Northwest, remain some of the most competitive in the nation.
But the state of hydropower is under constant attack. A recent draft report from Washington Gov. Jay Inslee and Sen. Patty Murray says breaching the four lower Snake River dams to allegedly help endangered salmon populations recover and replacing the benefits the dams provide could cost up to $27 billion. While the report does not make specific recommendations on whether the dams should be breached, it still understates the considerable benefits the dams provide: safe, reliable, affordable and carbon-free hydroelectric power, flood control, irrigation, low-carbon transportation benefits and regional power adequacy.
At a critical juncture in our nation’s history, maintaining clean and affordable power is paramount to ensure our local economy and livelihoods. While there are challenges ahead, we should celebrate and defend hydropower as a natural resource that has served us reliably for decades.
Clay R. Fitch, CEO