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A letter from your president & CEO regarding the recent change to SEC electric rates

Dear Member:

Since joining Southside Electric Cooperative in 2007 as your president & CEO, the co-op’s Board of Directors and I have made it our mission to significantly improve the value that SEC members receive from their cooperative. In a short time, we have cut operating expenses while improving system reliability, placing great priority on doing more with less. This has been no small task over the last six years, amid rising costs and declining economic growth, and we have tried our best to communicate both these savings and infrastructure upgrades to you on a consistent basis.

As a responsibly run cooperative, we consider the task of financial management to be one of the most important things we do here. Just like you and your family, SEC must pay its bills and be accountable to our lenders. In order to meet our financial obligations while continuing to serve you effectively, we must ensure that we charge our members no more, and no less, than what is necessary to run your electric co-op. With this important goal in mind, we recently completed a cost-of service study using an outside consultant to help us examine whether our rates will continue to allow us to recover our costs. The study told us, unequivocally, that a modest rate increase is necessary for the co-op to remain financially stable for the foreseeable future.  Consistent with this study, the SEC Board of Directors voted unanimously to increase our rates for the first time since 2001. And as state law requires, SEC sought and was granted approval by the State Corporation Commission of Virginia to implement this rate change, effective January 1, 2014. On average, members will see a 7.98% increase to their monthly bill. The greatest difference in the new rates is the change to the Fixed Charge, also known as a “facilities charge,” which will increase from $11 to $18 for all residential accounts. Members will also see a small increase in the price per kilowatt hour.

This was by no means an easy decision, and as consumers the term “rate increase” is not something we like to hear. However, given the rising cost of raw materials, fuel and just about everything we use on a daily basis, this is the only responsible path forward. It is also important to note that, through the  implementation of some significant cost-saving measures over the last several years, we have successfully delayed any adjustment in rates until now. Without these prior costcutting changes, an increase would likely have been necessary as early as 2008. Considering that a gallon of gasoline was just $1.47 the last time SEC raised rates 13 years ago, we have taken great pride in our ability to hold down our operating expenses during this time. These cost-saving measures have included: making targeted personnel reductions through attrition (reduction of 42 employees over the last 7 years), creating significant insurance savings through a new industry-leading safety program, refinancing our existing loans to take advantage of lower interest rates, and joining a not-for-profit materials purchasing cooperative that gives us more competitive pricing on poles, wires and other equipment.  We have also implemented new technologies that provide increased reliability and operational efficiencies such as our outage management system, advanced metering and distribution automation.  The recent deployment of more than 54,000 “TWACS” meters over the last year will ensure an intelligent and agile electrical grid for years to come, allowing us to reduce fuel and labor expenses while isolating outages with greater ease. SEC has also moved forward with new IT solutions that save time and money, and we encourage our members to take advantage of these tools.  Earlier this year we launched SmartHub, a new internet portal for managing energy use and paying bills that is accessible by computer or mobile device.

Please be assured that we continue to remain vigilant in operating your co-op with minimal expense, returning any excess funds back to our members in the form of capital credits on a frequent basis. In fact, this past December we returned $2.6 million to SEC members, bringing the total to nearly $40 million over the last 30 years. This is one of the hallmarks of the “Cooperative Difference”, and we plan to continue this practice as we are financially able to do so.

Southside Electric Cooperative is a not-for-profit electric utility — this means we don’t raise rates to generate profits. We raise rates simply to cover the cost of doing business, and then only when absolutely necessary.  Electricity is still a great value compared to other commodities — prices have risen slightly, but have remained relatively stable over the last several decades.  Finally, keep in mind that everything we do is with our members’ best interest at heart.   Rate increases are tough for everyone, but this revenue will help us continue to keep your electric service safe and reliable.  We highly value the relationship we have with our members, and I thank  you for the trust you’ve placed in me and your board of directors.

Sincerely,

Jeffrey S. Edwards
SEC President & CEO