Coronavirus in Oklahoma: State cooperatives see surging delinquencies as disconnect moratorium continues
The economic collapse caused by the coronavirus pandemic isn't just impacting urban residents, it's also is devastating economic activities in rural America and hurting electric cooperatives that support those areas.
The National Rural Electric Cooperative Association estimates a resulting decline in energy needs among its organization's customers will cost cooperatives about $7.4 billion in revenues between now and the end of 2022.
It estimates cooperatives will lose another $2.6 billion over that time to unpaid electric bills it won't be able to recover.
Oklahoma’s Cotton Electric Cooperative, which serves 22,000 customers using 5,200 miles of distribution lines in eight southwestern counties, illustrates the problem regarding declining energy sales well.
Jennifer Meason, the cooperative’s CEO, noted it has seen a 10% decline in the amount of electricity it has sold since early March to its 20-largest customers, primarily oil and natural gas operators.
While only about 20% of the system’s customers are oil and gas operators, Meason said they routinely account for about 50% of the energy the system routinely sells.
She said the system’s other commercial customers, meanwhile, reduced their power needs by more than 70% in April, with many — some who had been customers for decades — requesting disconnections from the system.
“Even being conservative and optimistic, we could lose an estimated $3.2 million in revenue, a substantial amount for a cooperative our size, if those reductions continue the remainder of the year,” Meason said.
Meason offered up her observations as part of a conference call the national organization held to describe how the ongoing coronavirus pandemic both is impacting cooperatives and their customers.
Electric cooperatives, officials said, are nonprofits that have been built the past century and are owned by the customers they serve.
Typically, cooperatives operate on lean margins because they routinely return excess revenues back to their customers on an annual basis.
While Cotton and various other Oklahoma cooperatives are being impacted by reduced oil and gas industry activities, others across the nation are seeing reduced power demand from other types of industries.
An Iowa-based cooperative that serves a relatively low number of customers but uses a lot of energy is seeing significant revenue losses after ethanol producers it serves closed because of declined fuel demands.
Rick Olesen, the CEO of the Iowa Lakes Electric Cooperative, said 65% of the energy it distributes go to those high-use accounts.
To make things worse, closures of those facilities caused corn prices to dive, further impacting the state’s agriculture economy and creating situations “we never thought we would see,” Olesen said.
“The best thing we can do is advocate for our member owners, get them some help in the next stimulus package,” he said.
Jim Matheson, CEO of the National Rural Electric Cooperative Association, said his organization aims to do just that by lobbying Congress to include targeted benefits for rural Americans and the cooperatives who serve them.
It seeks a provision that would direct the U.S. Department of Agriculture’s Rural Utilities Service program to help cooperatives save money by immediately taking advantage of historically low interest rates to reprice or refinance cooperatives’ debt, without penalizing borrowers. Currently, cooperatives hold more than $40 billion in loans they have taken from the program to make infrastructure improvements.
It also asks Congress to provide vouchers to needy families and small businesses enabling them to pay their internet service providers, which include many cooperatives. Service is especially crucial during the pandemic for online school assignments, teleworking and telemedicine, cooperative officials said.
It also seeks for Congress to direct the Federal Emergency Management Agency to reimburse cooperatives for past disasters, noting that some Florida cooperatives still haven’t been reimbursed for expenses they incurred to rebuild their systems after Hurricane Michael in 2018.
The letter was sent to Senate Majority Leader Mitch McConnell, R-Kentucky; Senate Minority Leader Chuck Schumer, D-New York; House Speaker Nancy Pelosi, D-California; and House Minority Leader Kevin McCarthy, R-California.
“The economic health of electric co-ops is directly tied to the well-being of their local communities,” Matheson said. “As the economic impact of this pandemic spreads, electric co-ops will be increasingly challenged as they work to keep the lights on for hospitals, grocery stores and millions of new home offices. Policymakers should be mindful of the economic threat facing rural communities and their electric cooperatives by taking steps to prevent the possibility of significant disruptions.”
Jeff Hohn, CEO of the Kenergy Corp. Electric Cooperative in Kentucky, said a major issue his cooperative is seeing right now is the number of customers it has who can’t pay their bills.
“Our members are out there struggling,” Hohn said, noting that 28.5% of his state’s labor force has filed for unemployment. “They are having problems and we are looking for ways to help them out.”
In Oklahoma, cooperatives voluntarily agreed to implement a moratorium on account disconnections that normally would happen when a customers can’t pay their bills.
They also have waved disconnection, reconnection and other service fees for now, and have contributed significant dollars from foundations their members support to help out food banks and other organizations that are working to help people in their areas.
Chris Meyers, CEO of the Oklahoma Association of Electric Cooperatives, said his member organizations know well about the ups and downs of the state’s energy industry.
“But, we have never seen such a broad impact across the board,” he said. “People who have lost their jobs through no fault of their own are in tough shape. It is going to be difficult for a while, and it is going to take us a long time to dig out of these holes.”
Hunter Robinson, CEO of Central Electric Cooperative in Stillwater, said he has been in the cooperative business for 21 years and hasn’t seen a situation like today’s, where commercial customers that are primarily oil and gas operators either have dramatically reduced the amount of energy they are using or have requested to be disconnected from the system entirely.
Robinson said Central, which serves 26,000 customers in all or parts of seven counties in north-central Oklahoma, also has seen its numbers of delinquent accounts climb involving both commercial and residential customers.
“We will work with anyone to try to remove penalties and late fees connected with those,” he said.
Patrick Grace, CEO of Oklahoma Electric Cooperative based in Norman, said it too has seen delinquencies involving both a prepaid service program and traditional accounts climb.
The cooperative serves nearly 60,000 mainly residential customers in parts or all of seven counties in south-central Oklahoma.
“We definitely are in unique, unprecedented times right now,” Grace said. “We are trying to figure out what this means and how we will move forward.”
Grace said there probably are some people who have decided to not pay current bills as long as they won’t be disconnected, adding they probably will pay once that possibility reappears.
“What we can’t collect through rates will be pushed out to debt. So it will come from our members, either those we have today or those we will have tomorrow,” Grace said.
Meason said Cotton Electric Cooperative has seen an increase in delinquent accounts, as well.
“These are indeed challenging times for our customers and the cooperative,” she said. “But despite those challenges, we remain steadfast in our dedication to our members and remain focused on delivering safe, reliable and affordable power to them and are making adjustments as we go along.”