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Economic and dam related articles

Flathead Electric Having One
of its Best Years Ever

by Nancy Kimball
Daily Inter Lake, December 16, 2007

Flathead Electric Cooperative's rates are dropping for the second year in a row this January, for an overall $3 million rate reduction.

Members got an early Christmas present through another $3 million worth of rebates on their November bills, averaging close to $29 per customer.

The cooperative retired capital credits in October, paying members their ownership share for service received from 1987 to 1992.

And drivers along U.S. 2 are watching daily progress on a major renovation that is transforming the face of Flathead Electric's headquarters in Evergreen.

So, what's up with the co-op?

"Flathead Electric is in a favorable financial position at this time," board president Earl Messick said when announcing the rate reduction in November. "We can't predict long-term wholesale power costs, but for now we all get to share in this good fortune."

Weather played a key role in the directors' decisions this year. A bitter cold stretch in January and the summer's sweltering heat wave both spiked electricity use, beefing up revenues to unanticipated levels this year.

The board added up the revenues, salted away enough equity to satisfy lenders and buffer against future events, then opted to share the bounty among all the utility's members.

MAKING THE biggest visual impact this winter are 8,000 square feet of added space and another 1,000 square feet of remodeling on the 1975-vintage building.

Construction workers are scaling the scaffolding and riding scissor lifts outside a new set of curved walls for the redesigned public entrance along U.S. 2 East. It's the showpiece in what Communications Director Wendy Ostrom Price said is the first phase of a 10-year master plan.

Remaining phases will get under way as funding becomes available, she said.

"The board of directors makes these decisions incrementally," Price said.

The two-story entry remodel will do away with two problem areas -- the old confusion over where the front office is, and the dicey proposition of dashing from the parking area and across the drive-up lane before reaching the front door.

Cashiers and member service representatives will be up front and center just inside the new entry to help people paying their bills and inquiring about service. Until its expected completion in February, the public-service entry is on the north side.

Over the 10-year renovation, work spaces will be redesigned to group employees who need to communicate quickly and easily with each other.

A very public benefit eventually will be a bigger community room for groups throughout the area to use for meetings and other events.

It will be easily accessed from the outside and can be closed off from the rest of the cooperative's business offices for security purposes.

To the south, a new drive-up service window will run parallel with Terry Road. A second drive lane will be added, helping expedite service and cut down on wait time.

Extra parking space will be added near the front of the building.

To the rear of the 17.2-acre campus, the long-term plan is to build a new shop and expand the cramped space maintenance and substation workers use now.

It calls for abandoning the present Cooperative Way, but cut-across traffic between West Reserve and Terry Road still will be able to skirt the cooperative's far western boundary.

The old ballfields also will be abandoned.

It's the second major expansion at Flathead Electric.

The first came in 1999, Assistant General Manager Mark Johnson said, after the cooperative acquired Pacific Power in 1998. That's when the two-story additions on the south and north sides of the original building were added.

BEHIND THE scenes, financial decisions come after extensive boardroom discussion.

Price said directors realize that rates inevitably will go up in 2011, after the current power-supply contract expires.

"There are areas seeing 50 percent jumps now," she said. "Add to that the money we will have to put into (federally mandated research for) new energy sources," and expenses are bound to rise.

In an effort to smooth out that transition, Johnson and General Manager Ken Sugden already are investigating new sources, potential partnerships with other cooperatives and ways that everyone can conserve energy.

But for now, the five-year contract signed with Bonneville Power Administration in October 2006 draws the bottom line.

"It all comes down to wholesale rates," Price said.

That contract specifies Flathead Electric will get all its power from Bonneville for the agreement's five-year term. Right after the contract was signed, Price said, Bonneville announced a 3 percent rate reduction.

Operated under the U.S. Department of Energy, BPA is required to give preference to cooperatives, Price said, and passed along the rate reduction to Flathead Electric.

The resulting January 2007 rate drop applied only to Flathead Electric's residential users.

But the newest reduction will cover all commercial and residential classes of the cooperative's 50,000 members -- who are using 64,000 meters -- indexed proportionately to their usage.

Residential customers and small general-service commercial customers will see a 1.4 percent reduction, Price said. Larger commercial users will see larger reductions.

"It's a balancing act," Price said. "How much can we give back and still have reserves for the unexpected?"

MEMBER NUMBERS and usage have grown markedly in the past few years.

In 2007, Price said, the bulk of growth came from the commercial sector as Hutton Ranch Plaza, Spring Prairie Center and others came online. The prior two or three years, she said, brought growth primarily from residential users.

All told, they've been averaging 2,000 new customers a year.

As member numbers grow, so does the budget.

Proposed budgeted revenues for 2008 are about $90 million, Johnson said. The board of directors will hold a workshop this week to go over the budget, then will finalize it later.

Electricity sales would supply more than 99 percent of that revenue, Johnson said, with pole contact fees paid by cable, telephone companies and others providing a fraction of the revenue.

In the overall budget, $20 million is proposed for capital projects such as new substations, poles, wires, underground cable replacements and the like. It's an essential part of keeping up with the Flathead Valley's changing face.

"We're in transition from one power capacity to the next," Johnson said. "And it's all due to growth."

Nancy Kimball
Flathead Electric Having One of its Best Years Ever
Daily Inter Lake, December 16, 2007

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