Manager’s Message

General Manager

Every month, I like to take a minute and report on some of the issues that Lane Electric deals with. Sometimes, I may write about poles, lines and wires. Other times, it might be about power supply issues, service interruptions or member meeting schedules. And sometimes, it’s simply to keep you informed about what goes on at Lane Electric, your cooperative.

Be sure to check out the Ruralite archives on our site for other information you might be interested in, too.

Manager's Message

Manager’s Message – August 2018

Down the Line

Dear Co-op Community Members:

Lane Electric Cooperative has been in business for nearly 80 years. You experience the “electric” part every day. How we go about the business of safely providing you reliable electricity is the “cooperative” part.

What does it mean to be a cooperative business?

A cooperative business generally forms to meet a local need. For- profit businesses only offer a service or good because it’s profitable.

Sometimes, consumers must collaborate to acquire a good or service by creating a member-based cooperative. Lane Electric formed in 1939 to bring electricity to the upper McKenzie River and Veneta areas after no investor-owned utility would do so. It simply wasn’t profitable enough, and it still isn’t.

A cooperative business is nonprofit. When it comes to this tax-exempt status under Section 501(c)(12) of the Internal Revenue Code, a cooperative must receive 85 percent or more of its income from members. The sole purpose of that member income must be to meet annual losses and expenses. In other words, Lane Electric doesn’t chase profits to grow the business. We grow the business for members to have affordable access to electricity in rural Lane County.

A cooperative business is democratically controlled. Periodic member meetings occur to elect directors to the board of directors on a one-member, one-vote basis. Sustaining democratic governance requires a good functioning relationship between the board of directors and the general manager. To maintain checks and balances on certain democratic functions, members sometimes participate in co-op committees. Lane Electric’s Nominating Committee, and Elections & Credentials Committee are two examples of members ensuring our democratic processes serve the membership. Please contact me about participating on a member committee.

A cooperative business operates at cost. A cooperative cannot operate for a profit or below cost. There’s a sweet spot between those two extremes called operating “at cost.” At the end of the fiscal year, excess operating net revenues are allocated back to members according to the amount of electricity used by each member. As a cooperative member, every year you are credited an allocation of any excess net revenues—capital credits—to ensure the co-op hits that sweet spot.

Finally, a cooperative is a grassroots organization. It’s not “the government.” It’s all of you, together. It’s consumers collaborating to plan for and meet local needs. That sounds like simply being neighborly. A cooperative business takes being neighborly to the next level.

Matt Michel, General Manager

Manager's Message

Manager’s Message – July 2018

Down the Line

Dear Co-op Community Members:

The Seven Cooperative Principles explain the ideals for why a cooperative business organization exists. Put another way: The Seven Cooperative Principles are like our nation’s Declaration of Independence that we celebrate every July. For example, in May, Lane Electric conducted its annual election to the board of directors. Members completed their ballots and re-elected incumbents Chris Seubert from the Central District and Jerry Shorey from the Oakridge District.

That is cooperative principle No. 2 in action: Democratic Member Control. You are a member of a local democratic organization controlled by its members. Every member has an equal vote—one member, one vote. You elect representatives from the membership to set co-op policies and make decisions. Your representatives are accountable to the membership for their responsibilities to the co-op on behalf of the membership.

Local control through a democratic process. That sounds “self-evident,” doesn’t it? That sounds like Lane Electric is “deriving their just powers from the consent of the governed …” Read on below and think about how great it is to be a part of a local co-op that preserves your right to have a democratic voice in your electric service.

Matt Michel, General Manager


In Congress, July 4, 1776

The unanimous Declaration of the thirteen United States of America

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

Manager's Message

Manager’s Message – June 2018

Down the Line

Dear Co-op Community Members:

There have been several developments on spilling more water for fish in the Columbia and Snake rivers and the impact that has on your power bill.

In May, the Bonneville Power Administration announced the state of Oregon’s court-ordered spill experiment cost $38.6 million in lost hydroelectric generation. After BPA’s spending reductions in fish and wildlife costs and other adjustments, BPA whittled the cost down to $10.2 million. The cost to Lane Electric is nearly $52,000. BPA will finalize the amount in late June. We knew an increase was coming—see the September 2017 Ruralite back page—and we budgeted for it. That in turn, had an impact on the April rate increase.

In addition to the added power cost, the state of Oregon’s lawsuit added an estimated 1,001,743 more metric tons of CO2 into the Pacific Northwest atmosphere. This is equivalent to putting 217,770 more cars on the road for a year! According to the Oregon Global Warming Commission, transportation emissions were already a primary driver of Oregon’s increasing CO2 emissions. This experiment made Oregon’s carbon profile worse without any assurance fish would benefit.

Meanwhile, back in Washington, D.C., the House of Representatives passed H.R. 3144, a bipartisan bill that would call a “timeout” on the spill experiment. During the House floor debate, Oregon Rep. Kurt Schrader (D-Canby) spoke eloquently in support of the common-sense bill. The bill is now in the Senate and faces a long road, but raising the issue for open discussion is worth the effort.

Oregon’s 18 electric co-ops will continue advocating in Congress and Salem for a coherent, common-sense energy policy in Oregon that balances the complex and vital issues of carbon, affordable power and fish passage mitigation. You have a voice on this issue through Lane Electric. Be a part of a grassroots effort by joining ORECA Grassroots on our website (bottom-right at www.LaneElectric.com). You will receive updates and calls to action.

Finally, thank you for coming out to have dinner with us in May at one of the co-op’s five district meetings. All of us at Lane Electric—the board and employees—enjoy being your host and sharing time with you. From Crow to Lowell to Westfir to Dorena and Blue River, we gathered together to be a part of a grassroots tradition. Take another look at the small communities I just listed—each with their own story, yet all connected in the shared co-op community of Lane Electric. The district meetings are fun, social and informative, so make it a habit to attend every year. We look forward to seeing you.

Matt Michel, General Manager

Manager's Message

Manager’s Message – March 2018

Dear Co-op Community Members:

In the Oregon Legislature’s 2018 Short Session, Lane Electric joins Oregon’s 17 electric co-ops in advocating for a cap-and-trade bill that addresses both carbon and affordability. The ORECA position statement is reproduced below.

Matt Michel, General Manager


Statement of the Oregon Rural Electric Cooperative on Association Cap-and-Trade Legislation: HB 4001 and SB 1507

For the last few months, ORECA has worked collaboratively with the Clean Energy Jobs Utilities and Transportation work group to address our initial concerns with SB 1070, particularly with respect to the ability of electric cooperatives to comply as regulated entities under a state cap-and-trade program. We greatly appreciate the efforts of Sen. Dembrow and Rep. Helm to work constructively with us to improve the legislation.

However, we cannot support HB 4001 and SB 1507 until the state of Oregon recognizes their current environmental policies are not only inconsistent with the proposed cap-and-trade legislation, they are punitive for rural Oregonians.

ORECA members buy their power from the Bonneville Power Administration, which markets the power produced at federal dams. The state of Oregon continues to aggressively pursue policies and operations that significantly reduce hydropower generation at the federal dams in the Columbia River Basin. Spilling water at these dams has far-reaching ramifications for electric cooperatives and the environment that the state of Oregon refuses to acknowledge. For example, increased spring spill is estimated to cost $40 million to consumers, will increase carbon emissions by approximately 840,000 metric tons a year and has unintended consequences for migrating juvenile and adult salmon. It is clear the state of Oregon will not be able to meet its carbon goals if federal hydropower continues to be devalued. Unfortunately—despite our best efforts—the state of Oregon has been unwilling to find any common ground with respect to the operation of the federal dams.

While we also appreciate the sponsor’s sincere interest in developing a carbon proposal that invests in rural Oregon, we have many unanswered questions about how the cap-andtrade policy will impact electric utility rates, transportation costs and jobs in rural Oregon and “frontier” Oregon areas such as Harney County. These questions require significant examination that the short session cannot provide. Nevertheless, ORECA and Oregon’s electric co-ops stand ready to work with the Oregon Legislature and Gov. Kate Brown on these issues, including opportunities to reduce carbon through the electrification of the transportation sector using carbon-free hydropower.

Manager's Message

Manager’s Message – February 2017

Dear Co-op Community Members:

Down the Line

What does it mean to be a member of a co-op community in today’s world and, specifically, an electric co-op community? More than you may realize.

First, a co-op is a not-for-profit organization. Rate increases don’t maintain a profit for shareholders. The co-op exists to provide service to its members at cost.

Second, a co-op is a federal tax-exempt organization. This helps keep your electricity costs lower because the co-op doesn’t pay a federal corporate income tax.

You may have heard about investorowned utilities returning money to their customers in 2018 because the company expects a smaller income tax bill. Those customers will now get to experience what electric co-op members experience every year with capital credits. If in any year Lane Electric collects more in rates than is needed for expenses, capital credits are allocated to each member based on electricity use.

Third, a co-op’s core principles and values are embodied in the Seven Cooperative Principles: 1. Voluntary and Open Membership 2. Democratic Member Control 3. Member Economic Participation 4. Autonomy and Independence 5. Education, Training and Information 6. Cooperation Among Cooperatives 7. Concern For Community Lane Electric Co-op is a grassroots community business. As a co-op member, you have a voice in the co-op, which exists to serve you, its member. You elect community-minded

neighbors to serve on Lane Electric’s seven-member board of directors. They, in turn, hire a general manager to prudently oversee and plan co-op operations.

How does this all affect the recent $4 increase to Lane Electric’s fixed basic charge for all rate classes? The increase is needed to provide service at cost, not for profit. The Lane Electric Board of Directors reviewed staff’s budget proposal in depth to provide transparency into the budgeting process.

The board concluded additional revenue was needed to maintain the financial health of the co-op.

An increase to the fixed charge instead of the kilowatt-hour use charge avoids overcollecting money from members if unusual weather causes greater electricity use.

Lowering the single-phase demand threshold to 31 kilowatts fairly allocates more cost to those members using greater system capacity.

In other words, when a rate increase happens for Lane Electric Co-op community members, it happens because it is the responsible thing to keep the co-op financially healthy for its community.

Don’t forget to check the Capital Credits to see if you have capital credit money to collect.

Matt Michel, General Manager

Manager's Message

Manager’s Report – January 2018

Down the line

Dear Co-op Community Members: This winter is shaping up to be colder than recent years and thankfully without a major ice storm like the Pre-Christmas Iceaggeddon last year that knocked us all for a loop. As I write this a week before Christmas, I hope I haven’t jinxed our good fortune of no major storm! As you weather this winter, remember that your electric Co-op is here to help you manage your electric bill. For example, you can track your usage online with SmartHub, manage your bill with Pay As You Go, or give us a call to talk about energy efficiency programs and ideas.

In November, I let you know that the Co-op’s financial health allowed the Board to avoid a rate increase this winter when your electric bill naturally goes up, and that in April increasing costs would cause a rate increase for the first time in over a year. Effective on bills printed on or after April 1st, there will be a $4.00 increase to the monthly Basic Charge for all rates classes. For those single-phase account with a demand billing component—typically commercial accounts—the threshold for billing the Demand Charge will decrease from over 50 kW to over 31 kW.

What is driving the need to increase rates? Increased wholesale power costsaccount for nearly one-third of it, including a new fish spill surcharge caused by the State of Oregon’s lawsuit against the federal agencies that manage the Columbia River federal hydroelectric system to mitigate for fish impacts.Another one-third of it comes from staffing changes to improve the meteringsystem and enhance our

line extension design services for members. The remainder is driven by inflationary health care costs, improvements in our safety education program, and more energy assistance grants. Charging for kW demand at the lower threshold point of 31 kW and above will help account for the trend of higher peak capacity use.

There’s more timely news I want to share with you. The January retirement of two longtime Co-op employees: Wayne Schvaneveldt and Dave D’Avanzo.

Wayne retired in early January after over 38 years at the Co-op! Quite a run, Wayne!

Wayne was the friendly and helpful serviceman for you up the McKenzie and out in Dorena. His soft-spoken, kind, and steady presence at the Co-op will be missed. May your retirement bring you well-deserved happiness and joy, Wayne.

Dave D’Avanzo will retire at the end of January. Many of you have worked, and laughed, with Dave since 2002 in his role as the face of the Co-op in your community. Dave is a larger-than-life guy who is great to have around. His Lane Electric family and the entire Oregon electric cooperative family will miss him as he and his wife write the next chapter of their lives together. Best wishes on your retirement, Dave.

Matt Michel, General Manager

Manager's Message

Manager’s Message – November 2017

Dear Co-op Community Members:

Down the line

Your electric Co-op’s financial health looks good enough to get us through the winter season without a rate increase. The Co-op’s Board recognizes the value to members of not having a rate increase happen right before we all start using more electricity to heat our homes.

That’s why both the Board and staff are relieved to see that Lane Electric’s financial health is strong enough to carry us through winter.

In April, we expect to have a rate increase to address reliability improvements, inflationary pressures, and the Bonneville Power Administration’s wholesale power costs.

Stretching dollars to help members manage their winter budgets is just one example of the benefits of being part of Lane Electric Co-op. A co-op exists to return value to the grassroots community that created it—monetary value and community value.

Your Co-op is not-for-profit, so if higher electricity use from a cold winter brings in more revenue than budgeted, then yourdemocratically elected

Board may use that money to delay a rate increase and you still receive back a proportional share of the net excess margin as a capital credit.

Your Co-op supports and nurtures the rural community fabric that our members cherish.

Lane Electric donates to our local Granges, food banks, and high school graduation nights. We work side-by-side on economic development issues with the communities of Oakridge, Westfir, Lowell, Veneta, Creswell, Lorane, Crow, Dorena, McKenzie Bridge, Rainbow, and Vida to help them have a sustainable future.

Bottom line: Lane Electric Co-op delivers more than electricity. We energize the communities we serve.

Matt Michel, General Manager

Manager's Message

Manager’s Report – October 2017

Down the line

Dear Co-op Community Members:

We owe you an apology. Specifically, we apologize to those members–about 15% of you—for the confusion on your August bill that said you were past due. It was a bill printing error, not an accounting error. That is to say, the “past due” will not negatively affect your payment history with Lane Electric or your credit report.

We further apologize to all of our members for not meeting your—and our—expectations for exceptional member service. I’ll briefly describe what happened in order to assure you that we have dug down to the root cause of the error.

This year Lane Electric’s Board of Directors elected to retire two years of capital credits and return that money to you, the co-op’s membership. We worked with our enterprise software co-op, NISC, to have the credit appear on your August bill in a more noticeable location. However, in doing so the bill print software didn’t calculate the bill correctly. If you called us confused about being “past due” on your July bill payment, our Member Service Representatives heard the concern in your voice and walked you through paying your August bill.

So what happened? This year we changed how capital credits were presented on your bill. In years past, it showed up in the upper right “YourElectric Bill Information” section as a credit to your balance. This year, it showed up in the middle left “Your Energy Bill Description” section. We moved it to the bill description section because that’s where we make adjustments to your bill. And since Murphy’s Law is alive and well, in attempting to highlight your capital credits being applied to your bill, our bill printing software got confused. The software pulled the “Current Month’s Charges” amount from the July bill, compared it to the amount you actually paid (after we applied your capital credits to your account), and incorrectly called the difference a “past due” amount on your August bill.

The capital credit appeared on your August bill like we expected, but the credit had already been applied to your account towards the July bill.

Your Lane Electric team has worked through their root cause analysis and put in motion changes that will address the printing error. Next year, should the Board choose to return capital credits, we’ll be ready to make it happen smoothly.

A co-op is a community business and we are disappointed that we caused confusion in the community we serve. We want to earn the privilege of being your member-owned co-op and your Trusted Energy Advisor. That means accepting responsibility when things go wrong, and taking steps to see that it doesn’t happen again. Thank you for your patience and understanding.

Matt Michel,
General Manager

Manager's Message

A Look At BPA Rate Pressures…

Dear Lane Electric Community:

Following up on my commitment to keep you informed on the rate pressures we see coming, we expect the Bonneville Power Administration (BPA) to increase its wholesale power rates by an average 5.5% over the next two years. We expect BPA’s transmission costs to remain about the same. Recall that Lane Electric’s power and transmission costs are roughly 40% of our operating costs—by far our largest cost center. Once we receive BPA’s final decision, we’ll plug those new rates into our estimated electricity sales for the rest of 2017 as well as 2018 to see what impact BPA’s rate increases will have on our financial health.

Why are BPA’s rates going up? Well, there’s the Good and Not-So-Good.

The Good: BPA did a good job cutting over $252 million out of their wholesale power costs and over $126 million in transmission costs over the next two years. I applaud BPA for their efforts. Relative to the uncontrollable cost pressures I describe below, you’ll see that the size of these reductions are very significant. Lane Electric advocated for these cost reductions in collaboration with PNGC Power, our generation & transmission co-op, and the Public Power Council, a regional trade association of BPA customers from across the Northwest. Our basic message was that BPA’s rate increases outpace inflation and are unsustainable. BPA heard that message and did what they could to bend that rate trajectory down, some.

The Not-So-Good: There are three significant costs drivers that BPA has no control over. First, BPA is selling less power to its public power customers, so BPA has less money to operate with. More efficient homes—specifically, more energy efficient appliances, heating/cooling, water-heating—along with evolving business processes needing less power, have permanently altered the Pacific Northwest’s power appetite. Second, BPA is making less money selling excess power in the western power market because cheap solar and natural gas power are keeping wholesale prices lower. Over the next two years, BPA expects its surplus sales revenue to drop by $100 million. That’s money that BPA would have used to offset its wholesale cost of power to Lane Electric. The third uncontrollable cost increase is escalating 2012 Residential Exchange Program Settlement payments to investor-owned utilities, like Pacific Power, totaling over $34 million more over the next two years. The REP Settlement is a long story so here’s the BPA website for all the details: www.bpa.gov/finance/ResidentialExchangeProgram.

There are also cost drivers that BPA does have control over. BPA insisted on collecting an additional $40 million over the next two years to start phasing-in a cash reserve over the next several years. BPA is concerned that the credit rating agencies may downgrade them sometime in the future because BPA may not be able to pay its bills. This is despite BPA having guaranteed contracts with public power customers—like Lane Electric—for power sales until 2028, a line of credit with the federal government, and the ability to raise wholesale rates to cover costs. To top it all off, even if BPA’s credit rating were downgraded, the additional cost they would likely pay to borrow money would still be less than what they want to collect! BPA should have a financial reserves policy, but not the Cadillac version.

Finally, Governor Kate Brown’s decision to short-circuit scientific consensus by suing the federal agencies implementing the Columbia River Biological Opinion (BiOp) may add up to another $40 million over the next two years. I talked about this on back pages of the March and June Ruralite.

In summary, we will again see rate pressure from BPA due to several complex factors. Staff will analyze the financial impacts for the Co-op’s Board of Directors and seek policy guidance on any retail rate action they believe necessary to keep your co-op on the right track for reliable power and affordable rates.