When my husband and I tied the proverbial knot 16 years ago, people asked me if being married felt different. It did. Our vow to stick together in good times and bad, for better or for worse, profoundly changed our relationship. There were no longer “my” problems or “his” successes, there were only “our problems and successes.”

Being a member of a co-op has a bit of a similar vibe—the financial health and viability of the cooperative is truly a shared endeavor.

When times are good, we share in our positive margins by returning capital credits to you. Since 2009, Cherryland has returned $31.5 million in capital credits to our members in the form of a bill credit or a check every December. This year, for the first time in 14 years, we will not be retiring capital credits. That was not an easy decision nor one we made lightly. For more about what goes into this decision, check out the message from our CFO, Mark Wilson.

We find ourselves in the midst of significant financial challenges and just like when times are good, we must tackle those challenges together.

We are projecting to end 2023 with negative operating margins. This is largely due to mild weather. When it’s really cold or really hot, we sell a lot of electricity. When it’s mild, we don’t. This year, our sales are about 5.5% lower than last year. This is despite the approximately 3% rate increase we implemented in April.

We are also facing significant cost pressures. In the last few years, the cost of supplies we use regularly has increased precipitously. Overhead conductor costs 88% more today than it did a few years ago, underground cable costs 49% more, and the cost of transformers is up 32%.

The cost of our inventory and system investments has increased with interest rates. In a capital-intensive industry like ours, small changes in interest rates can mean big increases in our cost to do business.

If we were a profit-driven business only concerned with making returns to our investors, we would likely respond to these challenges by decreasing our investment in our system. But, we are a member-driven organization and those temporary decisions would mean less reliable electric service for you in the long run.

Instead, we are going to manage this year’s challenges by pausing our capital credit returns and tightening our belts for 2024 while we put together a long-term strategy for future years.

In 2024, your team will be tackling three things to help us navigate the co-op through this time of incredible cost pressure. First, we will develop a three- to five-year financial forecast that will account for all of the major system upgrade projects we have coming up. Second, our board will be revising our equity management plan to account for the change in our cost of delivering reliable service. And, finally, our team will take a hard look at where we can mitigate costs long-term without sacrificing the service we provide you. All this work will inform our plans for electric rates over the coming years.

There is so much more to come on the aforementioned initiatives; for now, I want to ensure you that your cooperative remains fully committed to delivering you best-in-class reliability and affordable electric rates. There are significant headwinds working against us, but we will tackle these challenges like we always do— together, with a focus on doing what’s best for our members.

If my 16 years of marriage have taught me anything, it’s that bad times don’t last. Sometimes all you can do is hunker down and weather the, well, bad weather. While we won’t be returning capital credits this year, we will look forward to sharing future returns with you in future years.