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Empire Electric feels impacts of inflation, pandemic economy

Empire Electric Association General Manager Josh Dellinger speaks at the annual meeting in Cortez Thursday. Board members Larry Archibeque, left, and Kent Lindsay listen. (Jim Mimiaga/The Journal)
Weakened economy hurt sales; 2% rate cut good news for customers

Empire Electric Association recently cut rates, but also faces financial challenges stemming from inflation and the pandemic domino affect, co-op officials said during the annual meeting Thursday.

Increased equipment costs, a drop in sales, and supply chain issues are affecting the energy cooperative’s operations, said General Manager Josh Dellinger.

The good news is that the cooperative received a 2% cut in power costs from its supplier Tri State Generation and Transmission and passed on the savings to its customers through lower bills.

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The bad news includes increased costs for equipment from inflation, a drop in sales and supply chain disruptions.

“Even with the higher prices, we are dealing with material shortages,” Dellinger said.

Empire now might wait eight to 12 months to receive orders of routine infrastructure equipment, up from two to four weeks.

According to Empire’s annual report, prices for transformers, wire, line hardware and conduit have all increased 25% to 60% in the past six months. Freight surcharges have increased 30% to 50%.

Cooperative members of Empire Electric Association attended the annual meeting Thursday. (Jim Mimiaga/The Journal)
Tri-State Generation and Transmission CEO Duane Highley spoke at the annual Empire Electric Association meeting Thursday in Cortez. (Jim Mimiaga/The Journal)

“Suppliers are no longer quoting firm prices, which means the cooperative pays whatever the price is when the product ships,” the report states.

A local economy damaged by pandemic also has rippled through the cooperative.

Dellinger said in that in 2020, Empire saw a 30% load drop from decreased sales of electricity compared with pre-pandemic levels.

The load loss was the largest in a nationwide survey of 812 electric cooperatives that tracked the energy impact of the pandemic.

“Reduced sales, coupled with higher prices, makes for a challenging business environment,” Dellinger said.

To counter “the dreary news,” he spoke of cooperative improvements.

An infrastructure project to add redundancy and backup power to customers in Monticello, Utah, is expected to be completed this year.

Empire recently cut rates and does not plan rate increases soon. The cooperative said it has absorbed increased costs by cutting costs in other areas to shield consumers from market volatility.

A new, fairer rate structure change in 2021 provides options for customers based on energy use and time. Consumers now may choose an all-energy rate or a time-of-use and demand rate, which can lower consumer costs.

Energy reliability for customers was 99.96% in 2021, Empire reported.

The average Empire consumer-member experienced 3 hours and 27 minutes of cumulative power loss during 2021, which was higher than normal.

“We experienced many weather events and completed several preventive maintenance projects that required outages this past year,” according to the annual report. “However, our reliability was still solid.”

In April, Empire transitioned to a management system with communication tools that map and text consumers about outages.

The system will roll out publicly in about a month, said Andy Carter, Empire member engagement manager.

The outage map system is being tested, he said, and will be rolled out first. The online map will show the vicinity of the outage and the number of meters affected.

Members also will have the option of receiving outage notifications and updates with a text message.

Information about the outage map and text alerts will be included in monthly bills, on the website and through social media and news releases.

Empire distributes power provided by Tri-State Generation and Transmission Association, and the energy increasingly comes from renewable sources.

“We are in the middle of an energy transition,” said Tri-State CEO Duane Highley during a speech at Empire’s annual meeting. “We are growing greener by the day without raising rates and without sacrificing reliability.”

He said that by 2024, 50% of energy supplied by Tri-State will be from cleaner renewable energy such as solar and wind power. By 2030, the goal is for 70% renewable.

Tri-State also is adjusting to increased costs from inflation and has cut $100 million per year from operations, Highley said.

Empire Electric board member Kent Lindsay said that unlike some co-ops, Empire does not plan to drop Tri-State as an energy provider.

“We stand behind Tri-State. They have treated us well,” he said. “There are some co-ops opting out, and the buyout numbers are really expensive. At this time, we are not looking at that.”