Since the Valley Electric Board likely will consider a rate increase later this year, I thought it might help if I shared with you some of the things VEA has been doing since 2010 to keep the rates stable through the worst recession in Nevada’s history.
All of our costs have increased over the past six years but none compared to the transmission expansions and subsequent operating capital components. Of course, the big driver is the new 230 kV line we needed in order to meet industry standards for redundancy, which helps prevent the type of outages we experienced in 2007. So we’ve had to be innovative in order to grow new revenue sources and keep operating expenses in check.
Being innovative is an important part of who we are. By looking outside the box, we have created revenue opportunities that have helped us absorb costs and stave off additional rate increases since 2010. This happened in spite of reduced sales brought on by the economic downturn and cyclical weather.
First, let’s look at some of the ways VEA has been able to grow revenue. Since 2012, VEA has been awarded or signed contracts with Nevada National Security Site, Creech Air Force Base and the California Independent Systems Operations for services. These contracts bring in nearly $20 million annually. VEA provides solutions for NNSS, Creech and ISO while allowing our co-op to spread the advantages of our existing assets such as transmission lines which were built with fiber-optic lines for our internal SCADA use.
We’re just now beginning to see the benefits of our fiber-optic initiative. Running the fiber along our power lines enables VEA to branch out into a completely new business – broadband communications. The demand for broadband service is sorely lacking in Nye County as anyone who attended our district meetings earlier this month heard over and over. No existing broadband provider was willing to invest in the infrastructure necessary to deliver the capacity.
Indirectly, broadband will help hold down rates for both communications and electricity by promoting economic development in the Pahrump Valley. As our broadband capacity expands, so will the county’s ability to attract new businesses and grow existing businesses, which spreads the cost of service among a larger base. Broadband is no longer a luxury, it’s a necessity. Residents and businesses expect it. As the service expands and the reliability improves, business and residential growth can occur as well. Everyone else benefits from the growth.
Almost all of our costs have gone up since 2010. Those include operating expenses, transmission, long-term debt and depreciation. By expanding our revenue base, we have been able to absorb the increase in expenses.
That’s not all. When the Great Recession hit us, we made cost reductions wherever possible to hold down our expenses. Our employee base was 96 before the recession.
We cut that number back to 78 by 2010 during the height of the economic downturn. Only now are our employee levels approaching pre-recession highs. Those reductions in operating costs helped us hold the line on rates up until now.
Which brings us to a place where we have to consider a rate increase in July 2016, six months before we had hoped. We’ve been sharing that message with our member-owners at all the district meetings in March.
One of the great things about conducting our annual district meetings is the opportunity it gives me and Valley Electric Association board and executives to meet face to face with our member-owners. We come away from those meetings each year energized.
The feedback drives us. There is nothing like a personal conversation with you in your community to remind us what our mission is: reliability and affordability.
That mission now applies to more than electric service. We’ve heard your requests for reliable, affordable high-speed internet service, and we’re moving rapidly to bring broadband to every VEA member-owner. In addition, we’ve heard your concern and sympathetic understanding for the rate adjustment.
A detailed cost-of-services analysis by an independent third party will have to be reviewed before any action is taken by the board on a rate increase. All five rate classes will be examined in the study, which likely won’t be ready for board examination until at least May.
No final decision on a rate increase will be made by the board until after the board has had time to review the study, ask questions and consider additional feedback.
We are proud of the way we’ve been able to hold down costs to our member-owners while absorbing our own expense increases for the past six years.
We will do everything we can to keep rates as low as possible while we continue to serve our communities reliably and affordably.
Thomas H. Husted is chief executive officer of Valley Electric Association Inc.