Inland Power reports rise in net margins for 2013
Inland enacted 4.5 percent rate hike earlier this monthApril 10th, 2014
Inland Power & Light Co., the Spokane-based electric cooperative, has posted net margins of $3.8 million for 2013, up from $2.1 million in 2012.
Also, as it had indicated previously, the cooperative implemented a 4.5 percent rate increase as of the beginning of this month.
Inland Power CEO Chad Jensen says the organization incurred a Bonneville Power Administration rate increase of 9.6 percent on wholesale power and 11 percent increase on transmission services in October 2013. Inland Power passed along part of that increase to members with the recent rate hike.
The co-op is what’s called a “full requirements” customer of the BPA, meaning that the BPA, which markets the electricity generated by the Northwest’s federal dams, provides all of the co-op’s power requirements at cost-based rates.
Jensen says Inland is fiscally solvent and well positioned for the future.
“With those margins last year of $3.8 million, we were able to return more than $1.5 million in capital credits to the membership. Those checks were mailed out to our members just before the end of the year in December 2013,” Jensen says. Capital credits are sums returned to members in the form of checks out of any revenue surplus above what the cooperative needs to cover operating expenses and capital expenditures.
Because Inland Power is on a two-year rate cycle with BPA, it won’t see another rate increase before October 2015 and won’t increase rates again for its members before October 2016, Jensen says.
For the nonprofit co-op, net margins are the equivalent of a for-profit company’s net income.
Inland Power had a good year overall in 2013 with reported operating revenue of $64.8 million, up nearly 4 percent from $61.1 million a year earlier.
One reason for the increased revenue, Jensen says, is that Inland Power has prepaid a portion of its power bills to BPA through 2028.
“We were one of four Bonneville customers that were allowed to prepay, and it is paying off great dividends to the Inland membership,” he says.
Inland Power borrowed $173 million at 3 percent interest to prepay the money to Bonneville and for doing so received a 4.25 percent discount on future power bills. That spread of 1.25 percentage points on $173 million saved Inland more than $1.6 million as of Dec. 31, 2013, and will save an additional $19.4 million in coming years, Jensen says.
“This is a direct saving in lower electrical rates to our members and the reason for the sizable increase in our balance sheet totals,” he adds.
Jensen says without the prepay program, the cooperative would have had to implement a 7 percent rate increase rather than the 4.5 percent hike.
“Our members recognized the direct benefits of the prepay program as a 2.5 percent rate savings,” he says.
Jensen says even with the rate increase, Inland has some of the lowest rates in the U.S. out of 891 cooperatives.
“Our rates are amongst the lowest 1 percent in the country, the lowest 15 percent in the Northwest, and lowest 11 percent in the state,” he says. “Our residential rate is 7.3 cents (per kilowatt hour), while the Washington average is 8.7 cents.”
Inland’s total cost of electric service in 2013 was $62.3 million, up 14 percent from $54.4 million in the prior year. The co-op’s total assets at the end of last year were $323.6 million, up 113 percent from $151.5 million.
The co-op has seen significant interest in new development after years of declining demand for new services.
“While we are not to pre-recession status by any means, the prospects are definitely looking up,” Jensen says.
The co-op added 60 members, mostly residential customers, to its total membership in 2013. Its overall membership now totals 39,010. Most of those members are in 13 counties, mostly rural, in Washington and Idaho.
Inland employs slightly more than 100 people currently.