Federal Tax Incentives End Early; Member Survey; WEC Secures FEMA Grant

Federal Tax Incentives Ending

Steve: This is a complicated and fast-moving topic. Some of you have probably been following what’s going on in Washington. With the change in political leadership, there’s been a noticeable shift against renewable energy and beneficial electrification at the federal level. A lot of the tax incentives that helped people afford heat pumps, weatherization, and EVs are either going away or becoming harder to access.

These federal incentives were typically larger than anything WEC could offer. Ours were designed to work in tandem. So for members considering these technologies, this may be the last opportunity to take advantage of federal support for some time to come.

Louis: There are two main ways WEC members will feel these changes. First is the direct impact: whether you as a homeowner or renter can access federal incentives. Second is the indirect impact: whether WEC can continue to tap into federal funding to help us invest in infrastructure or manage rates.

On the direct side, these changes are real and already underway. If you’ve been considering a heat pump, EV, or weatherization project and counting on a federal incentive to help you do it, that opportunity may not be there much longer.

On the indirect side, the good news is that nothing WEC has already received is being clawed back. We also haven’t gotten notice that any expected funding is being withdrawn. That’s partly good luck, and partly thanks to careful planning by staff. But the risk is real. As federal priorities shift, what’s available to us also shifts.

One program that is unlikely to move forward is Solar for All. This was championed by Sen. Sanders and was in the process of being rolled out in Vermont when the plug was pulled at the federal level. It would have helped some members with lower incomes lower their bills using federal funding, but absent a successful legal challenge it is unlikely to move forward now.

Returned Capital Credits Pass $10 Million

Louis: Since 1998, WEC has returned over $10 million to members in the form of capital credits. Crossing this threshold is a big deal. Despite serving an area that’s financially as well as physically challenging, Washington Electric has returned a lot of money to current and former members. That’s money members paid in their electric bills in excess, each of those years, of what was required to operate the utility.

Because of the capital-intensive ways in which utilities operate, it takes about 20 years to return the money. That is a source of frustration to some members, but we’ve returned more or less the same amount of money that’s been in rate increases over that same period.

It also speaks to the core of what makes us a co-op. Investor-owned utilities don’t return money to ratepayers.

Steve: Returning members’ money is a basic cooperative principle. Some people might say, why did you collect more money from us than you needed to operate? The answer is because we’re owners of the Co-op, and as owners we are required to own a share of the assets, or equity, in the organization if we expect to be able to secure long-term, low-interest loans to build and maintain the infrastructure of our utility grid. Just as a homeowner needs to hold some equity in a home if they want to obtain a home-improvement loan. 

Another question that sometimes comes up is, why can’t I get my money back right away?

Louis: It’s a reasonable question. The highly regulated, highly capital-intensive nature of an electrical cooperative, and the significant swings we can see in expenses due to things like major storms, is much of the reason why excess margins aren’t refunded just a year or two after they’re collected. A single storm can cost hundreds of thousands in equipment and labor. The financial stability of the organization has to be considered.

Steve: As Louis said earlier, a utility is a capital-intensive business requiring regular investment, and we are legally obligated to assure our lenders that we are a good risk thanks to the member equity we hold. So that excess money we collect represents the ownership that you, the WEC member, has in the organization. It’s returned to you after some years. Each year, as members contribute to their share of the ownership, we return funds to members who paid in earlier. We return the most money to members who’ve been on the lines the longest in order to gradually shift the ownership of the cooperative to those members who are using the Co-op’s service at the present time while keeping the total member equity about the same from year to year.

Before we issue any returns, the Board and staff review our finances carefully: margins, cash flow, upcoming needs. At heart, this is the main reason why you elect a Board of Directors from the membership: it’s the members’ money that’s invested, and it’s the Board’s job to manage it in their best long-term interest of receiving reliable affordable power.

Louis: It’s true that one of the obligations of a cooperative is to return money to members. Investor-owned utilities do not do that. If there are excess margins between revenue and cost, they return that to shareholders. It’s not an exact parallel, but if the Co-op brings in more revenue than it needs, we give that money back. We are obligated to do this, but there are other utility models that do it differently.

I’d be remiss here if I didn’t make a plug for the Community Fund. We do encourage members and former members to consider donating their capital credits to the Community Fund. That fund supports local nonprofits. We concentrate on those smaller organizations that don’t have a dedicated fundraising team, so we’re a low-paperwork, accessible funding source for those nonprofits that serve our members. 

Steve: It’s voluntary, and an effective way to support organizations doing useful work in our towns.

Member Survey This Fall

Louis: This fall we’ll do our regular five-year survey, with help from the National Rural Electric Cooperative Association [NRECA]. We poll our membership on what they feel about the Co-op, what they want us to focus on, areas of concern, how important renewability is for them. It’s very helpful for us if members respond to the survey.

We’re doing a couple of things differently this time. We’re doing the survey entirely electronically. We’re not doing a telephone component to that survey. NRECA has discovered the statistical relevance and ability to weight surveys to accurately show the will of the membership can be done primarily through email, and it’s difficult and expensive to get people to respond to telephone surveys. 

We’re doing two things to ensure we’re getting good participation: we’re doing a sampling who’ll be a statistically valid and weighted survey of members, and we also plan on opening that response to all members who would like to participate.

We’ll promote it widely so anyone who wants to opt in can do so. Notifications will come through email, Front Porch Forum, and bill messages. If you wish to take the survey but don’t have internet, call us and we’ll send you a paper version.

Steve: We want to hear from a range of members across all 41 towns—not just the ones who call or come to meetings. This gives us a more accurate picture of how our service is perceived so we better know where we need to improve and where we’re doing well. 

WEC Secures FEMA Mitigation Grant

Louis: Members will undoubtedly remember the Christmas 2022 storm. We had something like 272 separate outage events, over half our members without power at some point, and more than 40 broken poles, which is a huge deal. Replacing a pole typically takes a half a day per pole, sometimes more.

FEMA has money that is available to repay public entities like electric cooperatives and municipalities for damage they incur from storms significant enough to be classified as FEMA eligible. But they also have a pool of money for mitigation projects which are likely to reduce the likelihood of outages in the future. Washington Electric put forward proposals for half a dozen of these mitigation projects

Ultimately, we received funding for one project, and that is a $784,000 rebuild of the line on Bliss Road and Barnes Road in East Montpelier. FEMA will cover about $578,000. We’ll borrow the rest from the Rural Utilities Service. We’re going to rebuild most of that line with more resilient architecture to replace all the poles and move some of the poles from offroad to on the road.

This is a major project for Washington Electric. It fits squarely in the type of project we should be doing to minimize outages going forward and to speed restoration times given increasing damage from storms. I ask the readers and members of Washington Electric to support this project. Any project causes disruption and issues; as we embark in late summer and fall we’re doing this to reduce outages and speed restoration of outages in that part of our territory.

Steve: A large part of the line in question is a major trunk line, and failure of that line due to trees falling on it disrupts a lot of people. So strategically improving that line should serve a lot of members  well in the future. 

Louis: It’s a great point. That line feeds up to County Road and connects a large portion of our territory together.  

Steve: Previous member surveys have always demonstrated to WEC the importance members place on maintaining and improving the reliability of WEC’s power lines. We’ve had members come and talk at Board meetings about this topic. Frankly, if WEC is going to meet the expectations of people who are using electricity for charging electric vehicles, running all-season heat pumps, and other uses, I think there’s an expectation we need to keep improving reliability. This kind of targeted investment—using federal funds to address known weak spots—is a great example of what WEC has been achieving behind the scenes.

Louis: That’s exactly right, Steve. This is an attempt to address both storm cost and restoration expense, and increasing member expectations around reliability and restoration speed, and to fund it with a grant.

There are two things readers might be interested in here: this might be our first FEMA mitigation funding—different from major storm funding—and it’s the first time we’ve used cable spacer line architecture. That’s having three phase electric lines built in a bundle with a messenger wire above them to keep trees from falling on them. This is a line type increasingly used to prevent damage from storms, and I believe isn’t one WEC has used in any significant way elsewhere in its territory.

Steve: I think this initial grant from FEMA is going to prove useful and is an example of our commitment to increased reliability. Thanks to the staff for putting in the work to secure the grant. The Board is fully supportive. It’s a good outcome for members.

Wrightsville/Coventry Updates

Louis: We do have a purchase and sale agreement for the Wrightsville hydro plant, but the sale depends on the buyer getting final approval for a Certificate of Public Good with the Public Utility Commission. Until then, WEC will continue to own and operate it.

Coventry continues to perform well. We’re making a major upgrade to the chiller system. That’s the part that removes moisture from the gas before it enters the engine. It’s an important reliability and efficiency investment for a plant now 20 years old.

Steve: I think the staff and Louis in particular should be credited for their hard work to maintain our portfolio that is not only cost effective but also 100% renewable. Before I joined the Board, I maybe thought that WEC going 100% renewable was a respectable box to be checked as we move on to other tasks. I have come to recognize that it is a commitment that requires constant attention and judgement to manage it in the real world.

Louis: Thanks, Steve. A huge amount of that credit goes to our staff and Board predecessors who were wise enough to build Coventry. It was a great idea.

Steve: Yes; credit is due to previous Boards for the vision to get WEC into renewability well before the Renewable Energy Standard made it a requirement for all Vermont utilities.