Highlights of the April 18, 2017 Meeting of your Board of Directors

Three major expenses for Wells Rural Electric Company (WREC) are:

  1. Purchased power and transmission
  2. Debt service
  3. Infrastructure operations, maintenance and repair

Together, those three functions consume 83% of the annual budget. Given the fiscal impact of these activities, it stands to reason that your Board and employees spend a great deal of time managing these functions. These activities also support your Board’s goal to provide safe, reliable and affordable electricity. Adequate budgets for infrastructure operations, maintenance and repair have a direct impact on safety and reliability. The cost of purchased power, transmission and debt service have a profound impact on rates.

WREC has been taking advantage of unusually low interest rates to reduce costs for our members. Over the past several years, WREC has restructured nearly all of its debt. Savings are passed through directly to our members through lower electricity rates.

At our April meeting, we received a presentation on WREC’s debt portfolio and interest rate forecasts. We then approved a plan to structure debt to maximize the savings available with current interest rates while maintaining WREC’s equity target.

In contrast to fixed interest rates available for some long-term loans, rates for electricity purchases fluctuate.

We received a presentation summarizing our member’s anticipated requirements for electricity through 2024. Those requirements were then compared to available wholesale power supply options.

Since 1975, Bonneville Power Administration (BPA) has been WREC’s all-requirements wholesale power supplier. WREC’s members have reaped the benefits of reliable hydroelectric power and cost-based rates, which historically have been lower than market purchases.

Despite recommendations from WREC, and our industry allies, BPA’s rates have increased while other energy prices have flattened or decreased. As a result, market purchases can sometimes be more affordable than purchases from BPA.

In order to meet growing demands for electricity, and to capture the savings between market prices and BPA rates for our members, WREC became a founding member of Northwest Energy Management Services (NEMS). By partnering with other similarly sized utilities across the Northwest, WREC was able minimize its costs while gaining the expertise necessary to execute market purchases.

While WREC has been controlling its costs, BPA is expected to announce a rate increase in late July 2017. That rate increase will become effective in October. The impact of the increase in wholesale power costs will be analyzed through a Cost Of Service Study (COSS), which will produce recommended rates for all of WREC’s members. Additional information will be provided as it becomes available.

Rates can also be affected by legislative actions. WREC is working closely with the Nevada Rural Electric Association (NREA) to ensure that your interests are protected as the Nevada Legislature considers proposed legislation. Assembly Bill 206, which would mandate an 80% Renewable Portfolio Standard but exclude hydroelectricity, has been debated as have bills mandating energy efficiency standards for homes and a bill that would mandate that a specified percentage of total revenue be used exclusively to fund energy efficiency programs for low-income households. While these bills are well-intentioned, the effect would be additional increases in rates and loss of local control over program design and implementation.

After discussion, we adopted Policy 1-18, Nonmember Requests for Company Information. This policy is intended to protect proprietary information, but allows discretion for the Board to evaluate requests on a case-by-case basis. We scheduled the mandatory workshop for all non-incumbent candidates for the Board of Directors on June 29, 2017. After review, we approved the agenda for the current meeting, the minutes of the Board meeting held March 21, 2017, the summary of those minutes for publication in the May edition of Ruralite magazine, the minutes of the Safety Committee meeting held March 14, 2017, and the Safety First Verse. We reviewed and approved the January and February Form 7 Financial Reports.

We received presentations from Kirk Dahl, Jon Dahl and Lois Nannini on topics addressed at the National Rural Electric Cooperative Association (NRECA) Directors Conference. Those topics included cybersecurity, director engagement and crucial conversations. We authorized Jon Dahl and Bruce Widmer to participate in upcoming conferences. Lastly, we reported time devoted to Board business between March 22, 2017, and April 18, 2017.