CEO Blog

By Michael S. McWaters,

CEO of Wiregrass Electric Cooperative

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February 25, 2010

The big snow of 2010

I know everyone is tired of this cold weather and ready for some balmy spring days!

Just when we think that mild weather is finally here – it turns cold again.  It’s back into the 20’s at night this week, and everyone is bumping up their thermostats to keep warm. 

My kids were so excited a couple of weeks ago to have snow!  They all ran outside at the first signs and made snow angels, built snowmen and had snowball fights.  For me, it was just something obnoxious to drive in.  But it didn’t hang around long enough to cause problems nor did it cause massive power outages like the heavy snows in the northern part of the country have.

I wasn’t working for the electric cooperative back in 1993, the last big snow in the deep south.  But I do remember it.  My wife Kris was working as a nurse at a hospital then, and an ambulance was sent to pick her up because the roads were impassable.  Since we didn’t have children then, I went along with her and helped with generators and some odd jobs around the hospital to keep busy.  It was better than sitting at home in the dark by myself!

With the amount of snow we had in our area this year, it was nice that the kids who had never had the chance to play in snow got to experience that.  And I’m grateful that we didn’t have to deal with downed power lines and trees and days without power.  A few of our employees even stole a chance to get out and have a little fun in the snow.

However, this frigid air is also having a chilling effect on our budgets.  It’s been cold in February.  Remember that when you receive your next electric bill, and realize that is why your bill is higher.  We haven’t raised the prices – you’ve used more electricity.  When temperatures drop below freezing, your heater uses more energy to warm the air in your home.

Although the price of oil and gasoline have risen with the surging demand this winter, your electric prices have remained stable.  And your wholesale power cost adjustment discount will continue at least through March.

Frigid temperatures don’t just affect energy, either.  You may have to pay more for groceries in the coming months as farmers struggle to salvage their crops due to the unseasonably cold weather in normally warmer cliimates.  Retailers suffer when shoppers stay home when the weather is bone-chilling cold.

Hang in there, though, and it won’t last forever.  Spring is just around the corner . . . and with it will come warmer weather.

February 8, 2010

Tax Season Arrives

As the tax season begins, Wiregrass Electric Cooperative also makes plans and writes checks to pay its share of taxes.

WEC is classified as a “not-for-profit, tax-exempt” organization, but the only “exempt” part is income tax.  Your cooperative is organized under state law as a not-for-profit corporation, but that simply means we set our rates to recover only the cost needed to operate the business. Any money collected above cost is returned to our members as capital credits.

During the month of January, WEC presented tax payments to local municipalities, remitting a total amount of $343,603.12.  This tax was for three percent on gross revenue received from members who live within a municipality’s city limits and 1.5 percent within a municipality’s police jurisdiction. Brad Kimbro, WEC's Director of Member Services, presents Dothan's Mayor Mike Schmitz with Dothan's $237,395 check in the photo on the left.

As our distribution system grows, so grows the amount of privilege taxes WEC pays to municipalities in our service area.  We have had a growth rate of more than 50 percent in just five years in what we pay in privilege taxes since 2005.  (See chart on right.)

So, even though WEC is a not-for-profit corporation under state law, we still pay our fair share of taxes.  And these checks we present to local municipalities help fund important city services that support our economy.

Cary Hatcher, WEC's Manager of Member Relations, presents Hartford's Mayor Jeff Sorrells with Hartford's $4,576.78 check in the photo on the left.

Take a look at the breakdown of the 2009 tax payments (paid in Jan. 2010):

Dothan................................................. $237,395

Kinston Police Jurisdiction................... $1,032.11

Hartford................................................. $902.32

Hartford Police Jurisdiction.................. $3,674.46

Avon................................................. $14,232.32

Webb................................................ $13,199.27

Kinsey............................................... $57,031.71

Samson.................................................. $458.29

Malvern............................................... $4,497.70

Madrid................................................... $219.74

Gordon.................................................. $420.04

Rehobeth........................................... $10,540.16

But that’s not all.  Like other businesses, WEC pays local and state taxes, FICA and payroll taxes, and property ad valorem taxes.

So, while you might dread the upcoming tax season, don’t get overcome with the “late-filing syndrome,” the latest term for a condition that makes it hard to fill out tax returns.  And don’t think you don’t have to pay your taxes.  The IRS is always close by, and you know what they say, “There’s nothing certain in this world except death and taxes.”

January 21, 2010

Cold weather drives up electricity use

If you’re clutching your chest over your latest electric bill, you’re not alone.  Your first impulse was probably to pick up the phone to call and complain to Wiregrass Electric Cooperative that something was wrong with your meter!

The actual culprit was the temperature.  The below-average low temperatures of December and January led to extra need for heat in the home -- which in turn led to more kWh use – which led to a higher electric bill.

The two weekends following Christmas and New Years and the week of January 3-8 were extremely cold.  We had many days in a row of the high not getting above freezing.  This is the week that will really drive bills up.

When the nights drop low but the weather warms up during the day, you use less electricity than those days when the temperature drops low and remains below freezing all day.  Those are heating degree days -- when you consistently use more electricity all day than just at night or early morning. 

The chart below demonstrates how cold temperatures drive up kWh use. This is the daily peak for the end of December 2009 and the first of January 2010.  WEC reached a new all-time peak on Jan. 11 of 131,897 KW.  You can see several “spikes” in December when we had cold weather on the 20th-22nd, then again on the 29th.  January started high and remained high through the 13th.  These “peak” days are when you used the most electricity, thereby making your bill higher.  WEC didn’t charge more for each kWh – our members just used more.

You can’t turn your heat completely off, because your pipes would freeze and it would take more electricity to warm up your home when you got home from work or school.  But you can turn it down when you leave in the morning.  A programmable thermostat is perfect to set for the week, and you won’t have to remember every day to turn down the thermostat.

Certainly you can take measures to conserve electric use; but when temperatures drop to 19 degrees, you must stay warm.  And a heat pump just won’t warm up at that temperature without utilizing the energy-guzzling emergency heat strips.

Levelized billing can help

One way you can help your budget it to sign up for levelized billing.  Wiregrass Electric will levelize (or average) each month’s bill according to the previous 12 months use.  Your bill will fluctuate “slightly” each month, but you won’t get hit with a high heating or high cooling bill just a few months out of the year.

As always, we want you to understand your bill and how your kWh use affects your bill.  An excellent tool to help you with this is the Billing Insights section on our Website.  By filling in your account number and some details about your home, Billing Insights will provide you an analysis of your home’s energy use and advice on what you can do to conserve electricity use – thereby lowering your bill. If you have any questions, please feel free to contact our Member Care Team at 1-800-239-4602.

January 4, 2010

Welcome 2010

As Wiregrass Electric Cooperative begins 2010, our wish is for improved economic conditions for our country and the Wiregrass area in particular.  2009 was a volatile year for energy prices as the cost of wholesale power more than doubled for WEC.

However, we look forward to a brighter future in 2010. 

The Murphy Mill Substation

In December, WEC and PowerSouth Energy energized the new Murphy Mill Substation on Brannon Stand Road. This 20,000 KVA substation was the result of years of planning and combined efforts of PowerSouth Energy Cooperative and Wiregrass Electric Cooperative.  It will serve much of the area west of Dothan where WEC has seen an explosion of growth.  With the inclusion of WEC’s 15th substation, the system will be more reliable and relieve the load on the Brannon Stand and Bay Springs substations. 

This massive steel structure is located in a partially wooded area to inconvenience area residents as little as possible.  Hopefully, they will consider the improved service more than compensates for transmission lines strung nearby.  Transmission to the substation included a mile of new 115 KV lines.  WEC also upgraded existing lines to distribute the electricity.

PowerSouth and WEC worked together toward a common vision and goal for the new substation – to bring it online safely and with as little intrusion on area residents as possible.  I’m sure the commuters along Brannon Stand Road will be glad that the trucks are now out of the way and life can get back to normal – for that area anyway.

The process took about six months in its construction in addition to upgrading transmission and distribution lines serving the substation. The site will have tightly restricted entry for employees of PowerSouth and WEC and is strictly off-limits to anyone else.  Substations are not a place for the public, especially for kids playing.  Those “HIGH VOLTAGE” signs are there for a reason.

A Rate Redesign

2010 also brings about a change in how WEC structures its rate design.  To better manage the costs of providing you with a reliable source of electricity in a financially sound manner, WEC has changed its rate structure beginning with the January billing cycles. This new structure will be displayed clearly on the bill by breaking down costs into: distribution cost, wholesale power cost and wholesale power cost adjustment.

Distribution Cost displays what it actually costs to operate your electric cooperative.  It consists of (1) a fixed amount we call a Facility Charge, which covers some of the fixed costs of delivering power to your home or business, and (2) an energy charge that varies monthly with the kilowatt-hours of electricity you use each billing cycle, to cover the remaining distribution costs.

Wholesale Power Cost reflects the average base rate per kilowatt-hour that WEC pays its wholesale power provider, PowerSouth Energy Cooperative, for the electricity we buy to distribute to homes and businesses throughout our service area. This is strictly a pass-through amount, reflecting what we actually paid PowerSouth for the energy we bought and delivered to you.

Wholesale Power Cost Adjustment (WPCA) allows WEC to quickly and accurately respond to monthly and seasonal fluctuations in the cost of generating electricity. Wholesale power is impacted by factors such as weather extremes and movements in wholesale fuel prices.  Weather variation can cause unusually high or low consumer demand or energy usage.  Unexpected fuel price movements cause increases and decreases in WEC’s monthly wholesale power costs. These changes will be reflected on your bill through the Wholesale Power Cost Adjustment.   Most of the time, the WPCA will have a leveling effect on consumer bills, providing a credit or being very low in high consumption months, and adding only a small increase in low consumption months.

WEC is changing the rate structure because, as a cooperative, we operate “at cost.” While most businesses work to make a profit for their shareholders, we either reinvest any profits into improve the system or return them to our members as capital credit refunds.

Under our former rate structure, WEC depended heavily on the sale of power to recover our fixed costs (salaries, equipment, depreciation, etc.). This model works fine as long as members use enough kilowatt-hours to cover our fixed costs. The hotter the summers and the colder the winters, the more kilowatt-hours were sold. Under such a structure, milder weather, conservation efforts, job losses and similar economic factors that result in lower power sales make it difficult to fund the day-to-day operating costs of the cooperative.

Our new rate structure levels out the annual cash flow for Wiregrass Electric Cooperative and allows us to recover our actual fixed operating costs throughout the year — an important factor for an “at cost” provider like WEC.

Because of the Facility Charge portion of our Distribution Cost, some members will see an increase in their bill while others will see a decrease. The average household, which uses approximately 1,200 kilowatt-hours per month, will see a slight decrease. The greatest change is that every member will now have a better understanding of what costs contribute to their energy bill each month, and each bill total will better reflect WEC’s fixed costs of providing electricity to that account.

We want to reassure you that WEC will always be proactive in planning for your future energy needs. We work hard to anticipate any potential issues that could escalate the costs of energy.  Whenever possible we work to minimize the impact those issues could have on your energy bill. And while we can’t avoid all the changes on the horizon, what we can do is work together to develop the best ways to handle them.

Each member will receive a more detailed explanation in the mail about the new rate structure.  If you have any questions, please feel free to contact our Member Care Team at 1-800-239-4602.

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