The mission statement at your cooperative is simple: “Member-Focused. Safe. Reliable. Affordable.” We always attempt to keep each part of this mission at the forefront. In 2017, affordability will move ever so slightly to the front of the line.
We have not raised rates since July of 2011. Everyone at Cherryland is proud of this fact. However, the time for a rate increase is growing closer. Though our 2017 budget doesn’t look positive, it is an aggressive worse-case scenario. Weather will play a factor as it always does. After that, it becomes a financial battle between projections and reality.
What has occurred over the past five years? The answer has several pieces. The easiest and most obvious is the simple passage of time and the associated effect of inflation on many of our daily costs.
To keep up reliability, we have been proactive as we aggressively rebuild sections of our distribution system each year. This has required an investment that ranges close to $5 million annually. At least two-thirds of this is borrowed money. Thus, even a slight increase in interest rates can have a major effect on our bottom line.
Trees are another major expense item. Due to maladies like oak wilt and emerald ash borer, the million-dollar tree trimming budget has grown closer to $1.2 million. We have an aging forest with mature trees that are beginning to die as well. If we back off on this battle, reliability will certainly suffer. Nobody wants that, so we keep putting money and manpower into the fight.
Cherryland is approaching 79 years of age. This means our aging plant that is constantly at the mercy of the weather needs continual maintenance. With almost 3,000 miles of line, we simply can’t rebuild it all. We must be vigilant and aggressive with our inspections and proactive with repairs. This takes time and money but greatly improves our reliability.
As we invest in our hard assets, it has also been necessary to invest in our employees. In search of qualified workers, neighboring utilities have raised the stakes in the form of hourly wages. Cherryland has had to keep pace. We will never be able to lead the market, but we can combine a solid benefits package with fair wages to put up a defense that has retained some of our best employees so far.
We are seeing some increased growth in new meters that may help offset some of these rising economic factors. We do expect this to continue; although the trend is hard to predict, so it is not one we rely on in our budget projections.
So, the big questions: “How much could the rate increase be?” Today, I think two percent is the minimum and four percent is the maximum. “When could the rate increase occur?” Our best estimate is the fourth quarter of 2017 or first quarter of 2018. When the day comes, I am confident the resulting rate will still keep us lower than our largest utility neighbor.
As the year unfolds, please stay tuned to these pages for more updates. You will always be the ultimate judge of our member-focused, safe, reliable and affordable mission.
Just do the rate increase now our reserves will grow to offset the need in the future.
A 2-4 % is not that much money as our economy advances.
David
That is a nice thought. However, if we generate excess margins, we must allocate them to the membership and pay them back in later years. Thus, we attempt to keep our margins/profits as close to “just right” as possible. This helps avoid a cash flow issue 20 years from now. It is the old cliche: for every action, there is a reaction. Thanks for the input.
I was curious about the direction and possibility of high speed Internet as another revenue source? You mentioned it earlier in the summer.
We have received the feasibility study and will be reviewing it with the board on February 20th. We will make a formal announcement of our future intentions after that meeting.
Thank you for giving us the heads-up. It’s always good to know what to expect, and you have given us plenty of lead-time if we need it. Plus, your honesty and clear explanation about why as well as what is reassuring. So glad I have Cherryland!
Thank you for the frank information. No it isn’t ever great news that the consumer will be paying more but it has to be understood that the last couple years have taken a toll on the infrastructure of the power system along with aging technology that needs to be updated to increase efficiency. a 2-4 percent increase sounds very reasonable given our reliance on energy in today’s world. Working in the technology sector at a local hospital I also understand the need to stay competitive with wages to bring in the best talent you can. The most important resource is a strong work force the only way to continue to have that is to pay that work force responsibly. We have been very happy with Cherryland and the utility it has provided to us in Lake Ann. Thank you
Very much like the idea of your using the vending of high speed internet as a means of revenue. I know I would welcome the option of buying my service from Cherryland.
Can you please contact me in regards to going on a payment plan?
Thank you
Thanks for the heads up. Whenever it comes…please be sure to continue your commitment to renewable, clean sources for power (i.e.: wind, solar) even in the face of the current administration in Washington.
We will certainly do so. The current administration is not our worry however. Today’s problem is local township zoning and the lack of support from environmental groups. We lost out on a wind farm opportunity because 2 small townships did not want to approve the structures. We did not receive help from one environmental group. It appears to us that the Sierra Club does not support big wind projects. It is frustrating and disappointing but we will keep striving to find affordable and clean resources for power.
Hmmm…you know, a lot of the arguments against renewable energy always come down to “well, the customer is going to have to pay more”. And here we are, paying more anyway. While as a business owner I understand the need to increase rates, and I’m glad that you haven’t done so in 6 years, it is time for you and all the other utility companies to STOP using “higher rates” as a feeble excuse NOT to invest in clean energy solutions. We WILL run out of fossil fuels – its inevitable, its just a matter of time. Those companies that change with the times will survive, those that don’t will go the way of the dinosaurs – but we can’t wait another billion years for their bones to turn to fuel – go GREEN its good for the Great Lakes!
Well, the paradigm has shifted over the last few years. Renewable energy, wind in particular, has become much more affordable. Because of this shift, the renewable portfolio at Cherryland has grown to 18%. We had hoped to reach 30% in 2017 but recently lost out on a big wind opportunity due to zoning issues in 2 small townships in Michigan’s thumb region. It is also interesting to note that the Sierra Club was not interested in lobbying the townships for more wind nor was any other environmental group. Everybody wants wind but nobody was there for the fight. We will continue to look for more renewable opportunities. I only ask that you not put the results entirely at the feet of the utility. Environmental groups need to get behind big wind and solar projects as well.
Wow, last time I commented here it was in regards to your high speed internet feasibility studies, and my concern the costs of implementing the infrastructure for such internet services would mean higher electric service rates. Go figure…Do you think we are Uneducated? Unaware? You are attempting toay out more intermet infrastructure, to stream more revenue and profits over time to CEL. In the meantime you are justifying increased rates with ,”wear and tear” on your current electric infrastructure, and inflation? I didn’t know CEL was subject to higher inflation rates…all businesses have seen very little inflation since 2010, by means of the Federal Reserve’ stagnant rates. I haven’t seen a raise in 13 years, I drive a 15 year old vehicle, and you want to try to use depreciation and inflation as an excuse to raise electric rates? Come on Tony, Cherryland execs. You are better this.
Don’t be a thin piece of butter on a big piece of toast… Focus on Cherryland electric services. Forget the high-speed internet studies and infrastructure layout. That is not what CEL is about. It is already affecting our rates, because your projected costs are way up. Cherryland is not going to compete in internet services, do you honestly think competitive rates are possible in that sector?? Be reasonable. S-A-T-U-R-A-T-E-D market, national providers. Focus on what you do well and remain competitive with rates, or risk losing big customers.
I in no way think any member is uneducated and am disappointed in your implication that I do. We only ever began looking at fiber as a service to members who did not have it available. As a community minded provider, we felt it was our duty to take a good look at the offering. We have done that and will be discussing the results with our board this month. After that, we will release a statement on where we go if anywhere. I would ask for patience as we do that. I think the cooperative’s track record of being fiscally responsible over my 14 years at Cherryland does warrant a little patience, trust and understanding.
Anyone can do a quick Google search on the average rate of inflation over the last 10 years. My search comes out to 1.77% per year on average. Cherryland general rate increases over the last 14 years average well below 1% per year. In fact, they have been none for almost 6 years. I stand by my statement that inflation and depreciation are two factors for the rate increase. Cherryland rates have also dropped well below those of our largest neighboring utility. This wasn’t true 10 years ago.
I don’t put butter on my toast. I drive a 10 year old car to work and my backup truck is 16 years old. I fully understand the problems of our area and the wage climate in northern Michigan. I believe everyone at Cherryland has a concern for the rates that affect all of our members. Our mission statement remains. Member focused. Safe. Reliable. Affordable. – It always will.
Thanks for your input. Again, I only ask for patience, trust and understanding as we near a conclusion of the fiber study.
Tony Anderson
Unfortunately no one likes increased costs, but in reality you must keep pace with costs. A rate increase every 6 years is not bad. It is really amazing that you have managed to hold increased down that long. Thanks for a job well done!
I am curious what the cost per customer is for the glossy magazine that you send out frequently. I personally do not understand the value to this.
We spend about 45 cents all in (setup, printing, mailing, etc) per magazine delivered. Obviously, this is less than a first class postage stamp. This is possible because we share the magazine with 8 other cooperatives in the state of Michigan. The value of the magazine lies in the fact that it helps us keep members informed of issues that can impact their safety, reliability and affordability. The magazine is also our most efficient method of posting “required by law” notices of public meetings, annual financial reports, bylaw changes and rate increases. I believe the magazine is a great bargain for the price.
This certainly appears to be a bargain compared to the cost of mailing necessary notices. Thanks for your reply.
Please remember to consider seniors and low income customers.
Does Cherryland Electric Coop have a discounted rate for homeowners with geothermal furnaces?
Hi Robert – yes, we do offer a discounted rate for members utilizing geothermal furnaces. Our energy use adviser Tammy Squires would be happy to speak with you more about the subject. Her number is 231-486-9261 and her email address is [email protected]. Thanks!
If you had more competition like in the automotive manufacturing industry and in real estate, etc you wouldn’t get away with fleecing your customers. You’d be forced to get creative and come up with cost REDUCTUONS instead. This is very disappointing news. That’s all I have to say in my meaningless message to you.
Regrets.
Apples and oranges. I stand by the reasons and disagree with the fleecing of customers comment. When you look at cooperatives across the nation, there is only 1 of the 900 better than Cherryland in the meters per employee category. This is the leading indicator of efficiency in our industry. Then, one must consider the fact that Cherryland has to invest $3-$5 million per year in infrastructure to keep the lights on. Finally, show me a list of other businesses who have kept costs down below 1% per year on average over a 20 year period. I regret that you are disappointed but I do believe we have a good record of being creative while keeping costs down.