— from Alex MacLeod —
Tracking the financial hole that OPALCO has been digging for itself, and which is resulting in significant rate increases for its electric customer/members, can be daunting.
If you listen to OPALCO management and its board, rates have been rising so rapidly because they were kept artificially low during the Great Recession, or that global warming has depressed energy use and thus revenue, or that we are having to pay the extraordinary cost of replacing the submarine electric cable from Lopez to San Juan.
There is some truth to each of those explanations, but they fail to explain how the hole has gotten so deep and the rate increases so steep.
The real explanation can be found by analyzing the enormous growth in OPALCO’s debt, which has nothing to do with anything other than its ill-advised, go-it-alone foray into the broadband/Internet business.
From the time the OPALCO board decided to enter the Internet business, it’s debt has jumped from roughly $18 million to more than $50 million by the end this year. Narrowing it to the period for which OPALCO has firm numbers — 2014 through 2015 — the increase was from $18 million to nearly $39 million.
Of that $21 million increase, only $4.4 million went to the submarine cable project. The balance — $16.6 million — went to the Internet business: approximately $5 million in startup money directly to Rock Island and roughly $11 million to expanding the “electric” grid and buying Vulcan’s wireless spectrum to support the Internet business.
So, when you step back from the public-relations gloss you can see pretty clearly that OPALCO has spent roughly the cost of the submarine cable on its Internet business. And it has done so knowing that it also would have to replace the cable, the major expense of which is to come due this year.
Among other things, the impact on rates from this investment has been clear. Absent this investment, OPALCO most likely would not have violated one of its loan covenants in 2014, despite the warmer-than-predicted weather that year.
The annual cost of all this debt has risen to about $1.4 million from about $790,000, an increase of nearly 80 percent. At least half of that increase is the result of the Internet business, yet it is the electric rate-payers, not Rock Island’s new broadband customers, paying for it.
While OPALCO swears that the grid-infrastructure improvements were to modernize the electric system, it is clear from the language of its own board resolutions — most particularly the seminal one in November, 2013 — that the goal was for OPALCO to be an “infrastructure provider” for broadband “connections to the home.” That was the same resolution that authorized the purchase of Vulcan’s wireless spectrum for the same reason, even though minutes of the meeting make clear that then-general manager Randy Cornelius said it had no real value to OPALCO’s electric business.
OPALCO’s Net Annual Borrowing in Millions of Dollars
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The recent OPALCO bills are killing! my budget, both personally and at the shop. It’s a real hardship and burden.
Unfortunately, OPALCO’s decisions are negatively impacting those who can least afford to pay higher electric bills and in a sense, subsidizing, “greasing the palms” of those who Can afford Both Broadband and Electricity. It is quite skewed. Thank you OPALCO for showing us that Orcas has become a microcosm of the macrocosm “out there”.
Spirit Eagle
OPALCO claims their rates are reasonable. I think not. My winter bills exceed $150 monthly. I have friends in Los Angeles who pay less than $35 every other month and they have a much larger apartment. I think OPALCO may need an attitude adjustment along with a reality check.
While I have been using less energy in the last 2 months this year,than I did during the same 2 months last year, my bill has quite literally doubled! $185 a month!!! How do they expect low income families to be able to afford it??
The only way to change this is to persuade a majority of voters to elect different board members. If the members continue to reelect those making these decisions they correctly feel that they are doing what most people want.
Theresa Haynie here for OPALCO.
To Ms Wood and Ms Mayo: If your usage is the same or less than a year ago, but your OPALCO bill has doubled, let us look into that for you. Our dedicated Member Services team is here to help with billing questions. And we encourage you to use SmartHub to compare your usage year-over-year or get a Home Snapshot to investigate energy waste.
As for comparing OPALCO to other utilities on the mainland, the contrasts start with number of subscribers (members), regional temperature differences, and generation. PSE generates from their own coal and gas-fired generators to supplement the hydropower dams they manage. Their million-plus subscribers are a huge pool of users, with more commercial than residential service. Their rates should be lower, even without having to buy and deliver energy undersea.
Theresa,
Your comments about comparing OPALCO to other utilities, such as PSE are confusing.
In fact, OPALCO often claims to provide ¨some of the lowest cost electricity in the nation¨. So, OPALCO is choosing what to compare to (other utilities in the nation), not those folks that have made comments. By cost, as one of your member/owners, OPALCO’s statement would seem to me to be refering to the cost I pay for OPALCO electricity. So why not PSE? Why not Douglas, Chelan or Grant County PUD’s if you want to see what low cost electricity is really like?
PSE is a good sized utility. It has ratepayers, not subscribers,(that are protected from unreasonable costs by the Washington Public Utilities Commission). OPALCO member/owners have no such oversite to count on except the Board. There is not much regional temperature difference between OPALCO and PSE. PSE’s cost of generating electricity, transmiting it to its system and maintaining system control area stability (none of which OPALCO does) is likely greater than BPA’s $0.035/kwh rate that OPALCO pays. PSE also must pay federal and state taxes on income, OPALCO does not as its profit has to be returned to member/owners in reduced rates. Dividends must be paid to PSE’s stockholders, OPALCO does not pay dividends. PSE can not borrow capital at OPALCO’s very low Co-Op rate, so capital costs for PSE are significantly higher than OPALCO. So there are lots of factors in making a good comparsion.
OPALCO buys power from BPA under a long term contract (expiring in 2028). BPA delivers what ever electricity OPALCO needs to the OPALCO substation on Lopez Island (and a bit to Decatur, I think). So, OPALCO buys energy on Lopez, not on the mainland. OPALCO does have the cost of paying for the undersea cables and distribution lines to distribute the energy you buy from BPA to its member/owners. PSE has to pay the costs of its distribution system too, but no underseea cables. By the way, I have asked for access to OPALCO’s undersea cable information and have had no response.
Could you tell me where OPALCO gets its reference of ¨number of members, regional temperature différences, and generation¨ as the factors that should be considered when comparing utilities? From my experience, if you want to correctly compare distribution utility performance, there are other factors to be considered, like customers per line mile. Where does OPALCO find that PSE has more industrial than residential load?
I have no affiliation with OPALCO except being a member/owner.
I’m using more power than I ever have before, while in transition between two shops, and household use. I’m never in both places at the same time, so I’m not using twice as much, and my bill certainly has not doubled. After being held hostage by century link, tel, or any number of other allias they have used, for 23 years, I am looking forward to a viable alternative for phone and internet. Century____ has never spent any money to upgrade their antique equipment out here, and they never will. This is a huge project, and requires major investment to make it happen. In the long run, I believe we will all come out with better and more affordable cell and internet service, and yes, we will pay a bit more for our power. What I have seen is that major users of power, commercial, industrial users, are paying a “demand fee”, which homeowners will never see. This demand fee is over $1 per KWH. Yep, that hurts, but it won’t affect the low income household. I agree that presenting the facts would be greatly appreciated, but I suspect in order to sell this proposal, there was some mis representation. We are in it now, so I think the only way out is forward. I’m a low income business owner, I pay between $400 and $500 per month for power, so I may be non sympathetic to people crying about paying 30% of that.
I have 3 meters, one of them – this last billing cycle was $64.09 total usage 13kwh daily average cost $2.13, last year, same billing cycle I used 16kwh, my bill was $41.79, avg daily cost $1.34. When I inquired about a temporary suspension for my one low use meter I was informed that they could but it would be a $200 re-connect fee, double what it was last year. I personally think this is outrageous! My other meters with much higher usage are in the hundreds of dollars monthly. And, there is no solid or transparent explanation as to why the fees have increased so much. When I asked the customer service rep that I spoke to (only took 3 voice mail messages and an email to get someone to call me back) I asked if my rate increases were do to the purchase and running of Rock Island (RIC). I was told that she wasn’t allowed talk about that. Hmmmmm. I think that it is wrong that membership is footing the bill for OPALCO’s ISP escapades.
To M. Walter, please give me a call at the OPALCO office. I’m happy to discuss your bill, the increases, and the Rock Island Communications acquisition in 2015. Theresa Haynie, for OPALCO.
Hi Theresa,
It is certainly the right thing for OPALCO to do to invite M. Walter to visit the OPALCO office to review their electricity costs. An open office to the member/owners of the Co-Op is important.
It would also be great if OPALCO would share the information on the RIC acquistion with the rest of us in a public answer to the second question.