Created in 1937 to distribute electricity to rural areas of west central Louisiana, Valley Electric Membership Corporation operates under a state charter, serving eight parishes.
It is divided into seven Board of Director districts, who are elected by the customers.
As one of 11 rural electric cooperatives in the state, each of the approximately 31,000 members are part owners of the company.
General Manager and CEO Tom Epperson and CFO Randy Peeples recently spoke with Energy + Infrastructure about the challenges facing Valley Electric and competing with investor-owned power companies.
Energy + Infrastructure: How is Valley Electric different from investor-owned electrical power companies?
Randy Peeples: What differentiates us from investor-owned is that our customer-per-mile rate is a lot lower. We might have only four to five customers per mile and also have to go farther to reach our customers. Basically, the cost of service is equal to investor-owned but there are a lot less people to finance the power.
E+I: What are some of the challenges Valley Electric is facing?
RP: With cost of materials and fuel costs going up in the last eight to nine years, it has been tough to maintain a margin of cost to be comfortable with. Most electric companies buy wholesale fuel supplies, with a big majority buying coal. However, solid fuel energy is under environmental pressure right now. There are things in Congress that could have a detrimental impact on our consumers. New cap-and-trade legislation could raise rates in rural areas 30 to 40 percent.
Tom Epperson: Here is another challenge: You would think we are far enough from the coast, but we were detrimentally impacted by three hurricanes in the last four years. They come onshore and come directly from the south or southeast, and the wind is still hurricane-force or close to it by the time it reaches us.
Because of the pine trees (in our service area), the mixture of wind and pine limbs tears the lines down. We have to bring in contractors from other states to help restore service. It took us 12 days to restore power following Hurricane Rita. Ike and Gustav hit us but it didn’t take quite as long to restore power. We brought crews in from as far away as Pennsylvania. The side effects are that while we are restoring power, customers are without electrical service. Some have generators and others do without. Tornados that have spun off of hurricanes will also hit us.
RP: Storms affect water pump stations, as well. We try to get back electricity on pump stations first. Over the last several years, we have ramped up the tree-trimming budget to try to make a dent in the forests around the lines. We are spending in the neighborhood of $2.5 to $3 million annually now on tree trimming. That is a substantial part of a $50 million budget, and two-thirds of our total budget is buying electricity. We do not produce our own. We have no objective to make money for shareholders, only to keep consumer prices low. We are not trying to make a profit, just cover the long-term cost.
E+I: Is it possible for Valley Electric to add territory to its charter?
TE: If we went outside of our chartered parishes, we would have to franchise, but we are not interested in that. Within Louisiana we have the 300-foot rule. The rule is to try to control competition between investor-owned and co-ops. If you are within 300 feet of both power company types, then the customer has a choice of which one they would like to supply them. If within 300 feet there is only one company, then the customer must use that one. If the customer is outside of 300 feet, then they have the choice of whichever power (company) they want.
E+I: Have you been able to compete with investor-owned companies when the customer has a choice?
RP: We have been pretty successful recently. Rates have been competitive and service has been good. We find that most new customers prefer us because we are able to respond a lot faster to customer requests (than investor-owned).
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