Vital signs strength in challenging times: electric cooperatives in 2009.

AuthorOlivier, Dave
PositionReport

Across the country, across industries, in virtually every sector of business, 2009 saw the economy continue its slow but steady recovery from the longest recession since World War II. Our nation's electric cooperatives took the lead, with annual data for 2009 showing that rural electric cooperatives not only maintained their financial health but even performed better than the industry average in terms of sales and consumer growth.

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While costs and rates continued to trend upward, the major benchmarks of co-op financial performance stayed strong or even improved. In a year of falling electricity sales, rural electric cooperatives experienced a smaller sales decline than the industry as a whole, while consumer growth slowed but continued. (1)

Sales and Customer Growth

The combination of a poor economy and mild weather produced a low sales growth year for most electric utilities in 2009. Despite this, the decline in retail sales for rural electric cooperatives was not as severe as for the industry as a whole as seen in Figure 1. Preliminary data from the Energy Information Administration ("EIA") through October indicates a strong rebound in sales in 2010.

Distribution co-ops sold 390 billion kWh in 2009, down 1.7% or 6.8 billion kWh from 2008. This was actually the first time co-op sales did not experience positive growth. The total utility industry was hit much harder. Sales for all utilities declined 4.2% nationally. In fact, 2008-2009 was the first time in 60 years where total electric utility industry sales declined for two consecutive years.

[FIGURE 1 OMITTED]

The level of kWh sales is primarily dependent on three factors: the number of new customers added, weather conditions and economic activity. All three factors, especially the latter, played a part in driving down sales across the industry in 2009. The first of these factors, number of new customers, increased only modestly for co-ops in 2009, less than one percent. This was a significant departure from historical norms, where co-ops had been accustomed to high customer growth rates. From 1974 through 2007, the annual average rate was 2.8%. Yet in 2009, electric cooperatives grew only 0.6%, as shown on Figure 2.

The second major factor affecting energy sales is weather. Weather conditions affect heating and cooling, the main component of residential sales. A mild winter and cooler-than-normal summer in certain parts of the country in 2009 contributed to lower sales for many co-ops. However, residential sales were only off 0.6% overall during the year and nearly forty percent of all cooperatives had positive sales growth in 2009. These co-ops are shown in two shades on Figure 3. The darker shade represents co-ops that had the highest total sales growth, over 2.5%. The lighter shade shows the co-ops that had from 0% to 2.5% total sales growth.

Record wet conditions in Minnesota and North Dakota led to increased grain-drying activity, which is quite energy intensive. As a result, sales increased in that region. Drought in the southwest increased irrigation sales. On a statewide basis, Texas had the largest absolute increase in kWh sales, selling 580 million kWh more than the prior year.

[FIGURE 3 OMITTED]

The third major influence on sales is the economy. This was certainly true for 2009, with the recession causing significant declines in commercial and industrial (C&I) sales. C&I sales were down 3.3% for cooperatives, but down a much more significant six percent for the total industry.

Although C&I...

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