Manager’s Message – June 2022
The last time prices for a basket of goods and services—the consumer price index—rose over a 12-month period at the same pace as it has been lately, many of you reading this message were either not yet born or had significantly fewer body aches.
Several decades have passed since we last saw expenses soar so abruptly. According to economists, some of the most glaring differences between the 1980s and today are associated with current supply chain shortages. Even if someone wants to pay an arm and a leg for something today, you may be forced to wait a long time before receiving your purchase.
Wasco Electric Cooperative (WEC) is not immune to skyrocketing prices. One of the latest CPI reports indicated market prices have increased more than 8% within the past year for a broad spectrum of expenses.
As you know, we buy wholesale power, transmission services, poles, wires and other necessities to maintain the electric system. Those costs are increasing at an unsustainable pace. The most alarming expansion in costs WEC has seen recently is not attributed to fuel for our fleet—as you can all relate to—but for transformers. And yes, fuel is expensive for us, too.
One of the most unique purchases we annually incur is for transformers. They are a specialty item dependent on raw materials, such as metals for manufacture. There is no alternative piece of equipment we can substitute.
WEC’s suppliers have increased prices approximately 400% in little more than a year, while extending lead times for delivery of new units from the usual six to 12 weeks to 50 to 100 weeks, given the most recent estimates.
In other words, we now pay four times more and wait five times longer for the same transformer today as we did about a year ago. That shift cannot be anticipated quickly because it is a monumental shift from predictable, historical averages from which we estimate our annual budgets.
We continually work to control costs. However, many expenses fall outside our ability to mitigate and leave us in a financial shortfall if our revenues do not keep pace. Meanwhile, our system has aged and requires substantial upgrades and replacements.
Therefore, due to what has been described above, and many additional contributing factors, we must raise our rates to finance ongoing needs.
Beginning in June, WEC will increase rates 8.25%. A rate breakdown based on rate class is on page 8.
Thank you for understanding this necessary decision.
Sincerely,
Ned Ratterman
General Manager