Duncan’s Digest – 2020 Outlook – Rising Costs
The costs of virtually everything required to operate a modern electrical system are increasing rapidly. Our 2020 outlook is a mix of good and bad news. The good news is wholesale power costs are stable, so we’re able to apply a higher, member-favorable Power Cost Adjustment (PCA aka Hot Bucks) credit to your bills starting January 1. The bad news is the customer charge component for both residential and certain commercial members is increasing. The residential increase is 17 cents a day and the commercial customer and demand charge increases vary by rate type.
SECO’s mission is to construct, maintain and restore the electric system. We construct new facilities to meet growth demands. We upgrade and maintain the electric system to prevent outages. When an outage occurs, we restore as quickly as possible. Unfortunately, the costs associated with our three mission-critical focuses are rising at an alarming rate.
The 2020 construction work plan tops $55 million to construct new and upgrade existing infrastructure. Tree trimming, storm hardening and system maintenance work is performed largely by contract labor.
Construction and maintenance costs are rising by a whopping 25 percent in 2020. The job market is tight and contractors who perform system reliability maintenance are paying higher wages to keep workers on their payroll. This isn’t just a Florida utility phenomenon – it’s happening nationwide and was spurred when California utility PG&E was court ordered to significantly beef up their tree trimming and system maintenance programs to reduce fire risk. Florida lost a significant amount of its utility-related contract labor workforce to California and we are paying the price despite a booming economy.
SECO Energy is experiencing systemwide growth. Every part of our service territory requires infrastructure additions, system upgrades, storm hardening, tree trimming or communications improvements whether you live north, south, east or west of our headquarters.
You may be wondering why the financial benefit of customer growth isn’t covering rising costs, and it’s a valid question. The answer lies in the low average residential member’s energy consumption. In our service area, the average kilowatt hour (kWh) monthly consumption today is 1,037. This average consumption is much lower than our cooperative peers due to the growing Central Florida trend of energy efficient homes and businesses, use of natural gas appliances, and a strong increase in solar installations. Low energy consumption equals a lower monthly bill – that is good for our members. Less energy consumption and use of solar are also good for the environment. So, what’s the downside?
There are significant financial challenges to low kWh sales, even for a not-for-profit electric provider in a growth environment. We must adjust the monthly customer charge that is collected to cover the costs associated with the delivery of power and system reliability maintenance.
A recent cost of service study indicates that the cost of delivering power and maintaining infrastructure in the residential sector is nearly $35 a month. Currently, we apply an average residential customer charge of $25 a month (83 cents a day). We are bridging that gap by increasing this customer charge by 17 cents a day. Commercial account customer and demand charge increases vary based on the cost of service study. Those adjustments are detailed in our rate tariff online. These collective increases will raise total revenue by about 3.5 percent.
We have tightened our corporate belts to carefully monitor controllable expenses while striving to maintain system reliability, but as I mentioned previously and as you can see on the 2020 Project Map, new construction, upgrades and maintenance are required across our entire service territory.
In response to growth and to preserve reliability, we must build new substations, add power transformers at existing substations, upgrade voltage and conductor and convert critical overhead facilities to underground. The work plan includes building new communication towers, upgrading our radio system and installing fiber-optic cable and microwave backhaul for automated communications that facilitate faster outage restoration. To storm harden, we must support an aggressive pole replacement and vegetation management program systemwide. All of these components play critical roles in the delivery of reliable power and speedy restoration in the event of an outage.
The bottom line is that none of us like having to increase the customer charge, but it is quite necessary to ensure continued service reliability. At the same time, we are pleased that stable fuel costs are allowing a larger Hot Bucks Credit (PCA) that will offset most or all of the increase depending on your respective usage level. These changes reflect the difficult balance between affordability and reliability.
Each year, SECO Energy employees participate in an employee-funded United Way Pledge Drive. Our employees understand that local community support is needed year-round and not only during the Christmas season.
The 2020 United Way Pledge Drive was an amazing success. SECO employees pledged $70,316 to United Way agencies in ten local counties. This total increased almost seven percent over 2019.
Citrus, Lake, Marion and Sumter Counties are where the bulk of our employees live and received the highest dollar amounts in donations. The breakdown by county is:
Other Counties (Hernando, Levy, Orange, Pasco, Polk, Volusia): $3,640
Join us in United Way’s mission to improve lives by mobilizing the caring power of communities to advance the common good. To donate or volunteer, visit United Way online.
Kathy Judkins – Senior Consultant for Civic, Charitable & Government Relations
Length of Service: 12 Years
“SECO IS COMMUNITY FOCUSED.” Kathy Judkins, Sr. Consultant for Civic, Charitable & Government Relations is a fourth-generation Floridian residing in Marion County. Her role with SECO Energy focuses on the cooperative principle of Concern for Community. Kathy manages annual SECO employee-giving campaigns and is excited that SECO is nearing the $1 million United Way contribution mark in the coming year. Kathy is honored to give hope to members in our service territory through SECO employee contributions to United Way. She also manages the Toys for Tots campaign companywide and is proud of SECO employees’ efforts to bring joy to children in our service territory on Christmas. Kathy also develops relationships with State Legislators and U.S. Congress members in Washington, D.C., to engage on issues related to the energy industry that could affect SECO’s ability to provide affordable, reliable service to our members.
SECO Energy and our employees are long-time sponsors of Relay For Life events that support the American Cancer Society. Our superhero employees participated in the Sumter County Relay For Life event on Saturday, November 2. The SECO team’s theme was “Superheroes Finish The Fight.”
In 2019, SECO raised $25,655 for the American Cancer Society to support cancer research, patients and caregivers and to fight for a cure.
Learn more about Relay For Life or donate to the American Cancer Society online.
SECO Energy and our employees are Making A Difference at Christmas by donating toys for local children through our Annual Marine Toys for Tots collection drive. Members also joined in the gift-giving by adding new, unwrapped toys in the donation boxes at our five Member Service Centers.
Toys donated through Toys for Tots are delivered to local children. The donated toys remain in our local communities. For many children, toys donated by our generous employees and members will be the only gifts under the Christmas tree.
SECO employees rallied to pack Santa’s sleigh by donating over 60 bicycles and tricycles for local children, along with hundreds of other gifts. New this year, SECO’s member-funded Pennies from Heaven program matched this number with additional bike purchases. It’s clear that our employees enjoy playing Santa for local children through
Toys for Tots.
Thank you to our generous employees and members who are willing to share their Christmas joy and spirit with others. Making A Difference at Christmas brings happiness to children across our area.
December is the month of giving, goodwill and cheer. Keep the Christmas spirit alive in the new year by joining SECO Energy’s Pennies from Heaven program. By joining Pennies from Heaven, SECO rounds up your bill to the nearest dollar and donates those pennies to charitable causes in the communities we serve.
The small change donated through Pennies from Heaven supports financial assistance to worthy causes in our service area. Requests for Angel Fund bill payment assistance are administered through several area agencies by calling 211 or visiting 211 online.
This year, we are excited to announce that Pennies from Heaven will purchase bicycles and tricycles to match the number donated by SECO employees! Thus far, employees donated over 60 bikes and trikes and SECO will double the amount. This means hundreds of local children will get their Christmas wish of a new bike courtesy of SECO employees and SECO members who donate to Pennies from Heaven.
Enroll in Pennies from Heaven to put your extra pennies to good use in charitable causes in our communities. Just a few cents every month can change lives. Learn more about the program or enroll online.
Thank you and Merry Christmas!
Read the full December 2019 SECO News online.