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FreeState Trustees Propose a $7 adjustment to Electric Service Charge as a Proactive Approach to Continued Financial Security starting February 2023. Trustees will vote on January 16 in a public meeting.

The cooperative difference means members and service drive the business interests of your electric cooperative. We work for you. We operate as close to cost as possible, and we are consistently working to be as progressive as possible to make certain that your standard of service is exceeded. It’s what we do. Principles and people drive us. Not profits.   

However, factors outside the cooperative’s control are driving prices up, and there is no reprieve in sight.

“No matter where we look, costs are going up,” said Chris Parr, FreeState CEO. “We want to be upfront with our members and provide information that will help them understand the situation the cooperative is facing because it’s the right thing to do.”   

Economic Challenges

Utilities across the country have been hit with the challenge of prices soaring. Materials, labor, and wholesale power costs are at an all-time high.   

“Right now, our biggest challenge is our operating costs, and that’s just the cost of the parts and pieces it takes to distribute power,” Parr said. “We plan, and we forecast, and we are strategic with our finances, but we could not have foreseen the challenges that we are right now. We are in a situation that we have no control over.”

While operations and materials are rising, the real concern for Parr and the board of trustees has been the cost of wholesale power, which is driven by the cost of natural gas.

“We don’t want to panic, but we want our members to know that the cost of natural gas is posing a challenge with our power costs,” said Parr. “We want to be as transparent as possible.”

Seeing Bills Rise

The FreeState board of directors has a fiduciary responsibility to the cooperative, and financial goals and challenges are always the top of mind in the board room.

“Each of us in the boardroom is a member, and we see our bills increasing due to the power cost adjustment,” said Jeanine Murphy, FreeState board president. “We’re also seeing it on the cooperative business side with our wholesale power bills.”

“It’s concerning because it’s something we have no control over,” added Murphy.

“Our planning strategies and how we have been operating have helped to shield us from some of the impacts of the economic climate we’re in, but we are coming to a point where we need to look at some options to keep us in a good spot.”

Murphy added that when reviewing costs, the board asks staff how the co-op can be proactive and not reactive. The answer is not a simple one, but effective and immediate.

A Proactive Plan

Murphy and Parr both said that members should not feel impending doom. The cooperative is still in overall good financial shape. Still, the cost of materials and the impact we are seeing from inflation and the uptick in the interest rate means we must be proactive and act now to prevent any hardships in the coming months.

“The easiest way we can make a positive impact on the co-op’s bottom line is adjusting the electric service charge,” Parr said. “It’s something we can do to help keep us where we need to be and be as proactive as possible because we just don’t know what’s coming.”

“We also know that the timing is terrible, and there is never a good time to adjust a charge,” added Parr. “We all know and understand that, but this is what is best for the overall financial health of the cooperative.”

The board is proposing a two-phase adjustment to the electric service charge. In February 2023, members will see a $7 adjustment to the service charge. In February of 2024, an additional $2 will be added.

“The trustees understand that $11 over two years is not an insignificant adjustment,” said Murphy. “But it is still far from where it could be.”

Other Measures

Parr said the staff at FreeState, along with the trustees, started looking at costs and making sure the day-to-day business expenses were being managed prudently.

“We still need to do business at a level our members expect,” said Parr. “But our staff scrutinizes costs and follows a detailed budget each year.”   

“And those are costs we can control,” Parr added.

Sixty-six percent of costs are not controlled by the cooperative. Wholesale power is the vast majority of these costs, and right now, the entire country is seeing an increase in the cost of power due to generation costs rising.

“Wholesale power and natural gas costs are out of our control,” said Parr. “And they keep rising. Mix those costs with materials, supply chain delays, and even the interest rate, and it’s not getting easier.”    

“We want to provide the best member service and experience we can,” Parr said. “We’ll keep doing that, but there comes a time when we just have to adjust to meet our financial obligations.”

Parr said the board and staff understand that members are seeing much uncertainty and are doing what they can to assist members impacted by the current financial climate.

Members facing financial hardships are encouraged to call the office at 800-794-1989 to discuss options to assist members.