Letter: Financial stability of electric co-ops vital to North Dakota

Letter: Financial stability of electric co-ops vital to North Dakota

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Americans across the country are adapting in a new era. Many are working and learning from home. Others are coping with job loss and wondering how they will pay their monthly bills. The uncertainty spurred by COVID-19 is felt across all industries and job fields, including the electric cooperatives that keep power flowing and help drive economies across North Dakota and the nation. One in eight Americans depend on a not-for-profit electric cooperative to keep the lights on and empower their local economy. In North Dakota, more than 250,000 people depend on electric co-ops for affordable and reliable electric service.

Electricity is essential. It powers hospitals, clinics, grocery stores and, now, millions of new home offices and classrooms. Electric cooperatives are working diligently to keep their employees and consumers safe, while providing reliable and affordable electricity to some of the hardest hit local economies.

Across the country, electric cooperatives are making adjustments and working to help their communities.

Here in North Dakota, cooperatives are donating personal protective equipment to healthcare workers and volunteer first responders, working with local food banks and helping grocers maintain supply chains to rural communities.

Bringing a sense of normalcy to the communities they serve is their calling. Unfortunately, many of these same co-ops are facing potential financial distress.

As not-for-profit organizations, electric cooperatives are owned by the communities they serve and routinely return excess revenues to their consumer-members. Serving a largely rural membership results in higher fixed costs, including maintaining 42% of the nation’s distribution lines to serve 13% of electric consumers. And electric cooperative communities drive our economy, including our farmers and ranchers, small businesses, agricultural proccessors, manufacturers and energy providers. The economic health of electric co-ops is directly tied to the well-being of their local communities. As farmers, ranchers, energy producers and business owners all suffer increased economic impact from COVID-19, so will the local cooperatives. Given the uncertainty surrounding the duration of the pandemic, many electric cooperative leaders anticipate significant long-term economic consequences. As local businesses close their doors and hardworking Americans lose their jobs, newly released projections indicate unpaid electric bills will total $2.6 billion at electric cooperatives nationwide through 2022. Over the same period of time, electric cooperative operating revenue is expected to decline by $7.4 billion, driven by an estimated 5% drop in electricity sales due to lower U.S. economic output. It’s difficult to predict a precise future for cooperatives and other businesses across America, but the outlook is getting increasingly challenging. Congress has played an important role in keeping American families healthy and safe while providing key economic lifelines to small businesses. Still, additional resources will be needed to address looming operational shortfalls for American families and businesses, including electric co-ops.

As Congress considers another stimulus package, lawmakers should provide federal funds to address looming operational shortfalls for electric co-ops that are working to keep the lights on and suspend disconnections for members experiencing financial difficulties during the pandemic. Among other measures, Congress should also allow electric cooperatives to take advantage of low interest rates for existing Department of Agriculture loans, expand funding to build out rural broadband, and expedite federal disaster funds to co-ops that have restored the electric grid after natural disasters. These are challenging times for North Dakota, particularly for rural residents. To get through this crisis, the need for reliable and affordable electricity—and financially strong cooperatives to provide it—is more important than ever.

Josh Kramer is executive vice president and general manager of the North Dakota Association of Rural Electric Cooperatives. Jim Matheson is CEO of the National Rural Electric Cooperative Association. 

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