Appel: An Open Letter on OPALCO

In any small community personal judgments and personalities arise in disagreements and obscure the issues. But no matter how strongly we feel, in the case of OPALCO, the rules of economics are inexorable:

 

1. An electric utility is like a farmer; weather as well as the economy has a major and unforeseeable impact on both rates (Warm or cold winter heating? Hot or cool summer air conditioning and refrigeration?) and reliability (Ice storm? High winds? Tree down? Underwater cables over rough underwater terrain in a corrosive environment?).

2. No matter how folksy a co-op may be, its fundamental obligation is to stay in business. It must charge whatever it takes in order to cover costs. OPALCO can negotiate for materials and salaries, and seek to negotiate with BPA on rates at long intervals, but neither BPA nor OPALCO can control the cost of power when OPALCO’s members’ power needs exceed the fixed-price contracted amount under the OPALCO-BPA power purchase contract. BPA’s reliance on hydropower makes it a farmer too.

3. Looking at OPALCO’s rates and expenses (and looming deferred maintenance costs), its rates have been kept artificially low to avoid further damaging an already anemic county economy. OPALCO borrowed from its internal reserves in order to make up that shortfall. This wasn’t the result of prolificacy; it was to reduce the burden on its member-ratepayers. Now, in technical violation of a loan covenant, it has no choice but to raise its rates.

The coincidental announcements of rate rise with acquisition of Rock Island, Inc. jolted a membership whose first reaction violates the fundamental axiom that correlation does not imply causation. That acquisition, whatever its economic merits, alerted the membership that the board acting alone could put OPALCO into, and assess its members for, virtually any lawful business the board might choose. This was authorized by the addition of Article II section (f), when OPALCO’s articles of incorporation were amended in 1998.

Stock prices have returned to 2008 levels; real estate prices and transaction numbers are returning to something like “normal,” but wages have not. Further attention is needed to the struggling sector of our economy. OPALCO’s virtual monopoly providing electric power imposes a social as well as service responsibility.

Renewables and conservation are both challenges and opportunities for OPALCO and for its members. They’re part of every utility’s plan, but they should be kept in perspective. They are not a panacea for a situation that OPALCO and its members must meet head on for their mutual welfare. We who are off-grid are cheering you on!

Bill Appel

Waldron Island

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