–by Alex MacLeod —

There is mounting evidence that OPALCO’s Rock Island Communications continues to be a black hole into which members’ money is being dumped in the hope that one day — some day — it will begin pumping big profits back into the cooperative.

More seriously, there is also growing evidence that OPALCO’s management, with the complicity of its board, is hiding the degree to which Rock Island is failing to meet its most basic financial targets. The deception is egregious and deliberate and needs to be addressed.

Question: How do you make an underperforming business look like it is succeeding and meeting expectations?

Answer: Quietly lower the expectations, a lot.

That is what OPALCO management and its board have done. After having reported Rock Island’s progress against its 2016 budget for a quarter, it quietly changed those targets to different, and much lower numbers, which it now identifies as Rock Island’s “business plan.”

How big are the changes? Well. Rock Island’s planned revenue for 2016 was dropped by more than a half-million dollars, or more than 20%, from $3.211 million to $2.646 million, and it’s not even on a pace to meet this lower expectation.

But by changing the numbers, Rock Island goes from a flood of red ink to what looks like success. Magically, by lowering the target by more than 23%, first-quarter revenues were ahead of plan by about 2%, when otherwise they would have been behind by about 21%.

Curiously, and only because of member concerns about how much money Rock Island has been swallowing, OPALCO’s management has been promising the board and the membership an updated business plan for Rock Island since last November. Prior Rock Island business plans have been used by management and the board to justify the financial sense of the Internet business to the membership, whose electric rates have risen significantly to pay for it. Now, that the rubber continues to not hit the road, the board has chosen not to share this new, more modest, business plan with the membership.

No wonder.

While revenue expectations have been significantly reduced, spending has not. Rock Island has blown through $6.5 million in 15 months of a $7.5 million start-up “loan” from OPALCO that was to last 36 months.

Even under the new plan, operating expenses through the first quarter are running more than 15% ahead of plan ($1,018,000 versus $880,000) and its losses have grown by 30% — from a $377,000 loss to $491,000 — more than the downward-adjusted plan.

Next year, Rock Island is supposed to be financially healthy enough to pay back to the cooperative the $7.5 million start-up loan. Don’t count on it. At best, the “loan” will be repaid only if OPALCO co-signs for it, at which point it is just paper-shuffling.

What all this means to us members is our electric rates will continue to rise. In the material General Manager Foster Hildreth gave the board for its May meeting, five full pages were devoted to weather forecasts for the year ahead, laying the groundwork for arguing, yet again, that lack of electric demand will drive up rates.

As before, that is just a smokescreen to hide the real reason: Something in the neighborhood of $20 million that OPALCO has spent on its Internet business and that we are paying for as if it were electricity and which, in its best-case scenario, will only benefit about a quarter of the membership.

In the meantime, do we get to see Rock Island’s new business plan, or is that another secret management and the board will keep from the coop’s members?

Alex MacLeod is a longtime OPALCO member who lives on Shaw.

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