Agricultural News
Rural Electric Cooperatives Projected To Lose $10 Billion Due To COVID-19 Impact On The Economy
Tue, 05 May 2020 15:54:05 CDT
Rural electric cooperatives are forecast to lose $10 billion over the next several years due to the COVID-19 impact on the economy. This stunning announcement was made Tuesday during a teleconference for news media. National Rural Electric Cooperative Association CEO Jim Matheson said the revenue loss was based on economic data from sources including Moody's and J.P. Morgan factoring in reduced GDP and unemployment rates.
Matheson said electric co-ops serve 42 million people in 48 states and because of the unique nature of their business model, a damaged economy significantly impacts the co-ops.
We are built and owned by the people we serve, he said. We have no shareholders and operate on lean margins. Electric cooperatives have meaningful ties to rural America and invest $12 billion annually in their local communities, he said.
Matheson said the $10 billion estimate consists of two major areas: unpaid electric bills account for $2.6 billion and reduced operating revenue accounts for $7.4 billion as electricity sales are expected to drop 5 percent through 2022.
When the economy is stalled there is less electricity used, Matheson said.
Joining Matheson on the teleconference were electric cooperative leaders from around the country, including Jennifer Meason, CEO, Cotton Electric Cooperative based in Walters, Okla.
Cotton Electric Cooperative serves 22,000 meters with 5,200 miles of line in southwest Oklahoma, with the primary industries being oil and gas and agriculture.
Meason said they have 3,900 small to large commercial accounts amounting to about 50 percent of their total kilowatt hour sales. During the past month they have experienced a 10 percent drop in kilowatt hour sales from their top 20 accounts.
In addition, Meason said they have had requests from about 40 accounts to be disconnected.
These are accounts we have served for decades, Meason said.
If this continues, Meason said, they would experience a decrease in revenue of $3.2 million.
She added they are anticipating an even greater drop in electricity sales.
For residential customers the impact is also significant.
Many of our members have been laid off or furloughed, Meason said. The Co-op is working with the members to extend temporary suspension of disconnect for nonpayment through the end of May or longer.
Every day the economic slowdown continues, the delinquency rate goes up.
Meason said on April 3 the Co-op had 300 past due accounts but by May 5 that number had jumped to 1,471.
We're working everyday with our members to help them with payment arrangements, Meason said.
To hear more comments from the NREC teleconference, click on the listen bar below.
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