Dear Members,

We are now midway through 2017, a time I like to provide an update on the financial performance of your cooperative. Since I am writing in mid-June, the information reflects results through May.

As you know, January and February were the coldest months on record for many years. As a result, residential and small commercial energy sales exceeded projections by a significant amount. To a lesser degree, the trend continued through May. Large-commercial sales are quite close to projections. Year-to-date margins are more than double expectations for this point in the year.

Purchased-power cost was a major consideration when the new retail rates, in effect since April, were designed. At the time, the Bonneville Power Administration estimated an increase of 4 to 9 percent in its Tier 1 product was likely. In addition, Hood River Electric Cooperative needs to buy some Tier 2 power beginning in October, priced about 1.5 times greater than Tier 1.

BPA recently released a draft record of decision announcing an average increase of 5.5 percent for Tier 1 power. The new HREC rates assumed a Tier 1 increase of 5.87 percent, so we were not too far off the mark. A final record of decision will be released in late July. Most folks involved in the BPA rate case do not expect significant changes from the draft in the final document.

BPA found it necessary to supplement the rate case to deal with the possibility of reduced secondary revenue that may occur if additional spill at federal hydroelectric projects is required. In my May message, I discussed the state of Oregon injunction that would require more water to pass over the spillways, thus reducing energy generation, at some Columbia River and Snake River dams. If the Oregon proposal is adopted by the court, in whole or in part, BPA will likely implement a “spill surcharge” of up to 2 percent affecting its preference customers, such as HREC. I will keep you updated as more information becomes available.

I wish you a safe and enjoyable summer!

John Gerstenberger, Manager