Highline Electric Assoc. annual meeting videos, reports available on hea.coop
Highline Electric Association’s 2020 annual meeting was not held March 24 as it normally would have been due to the COVID-19 pandemic.
As a service to HEA members, an annual update video, voiced by HEA General Manager Dennis Herman and Chief Financial Officer Jim Jackson, has been placed on Highline’s website at hea.coop.
Additionally, from the website, members can download or read the directors’ reports from Mike Bennett, board president; Leo Brekel, Tri-State G&T representative; Ted Carter, Western United rep; Jim Lueck, Colorado Rural Electric Association rep; and Merlin Prior, Nebraska Rural Electric Association rep.
An outage call simulation video was created earlier this year and can be found on the HEA website. Another video shows aerial drone footage of the new Riverview solar project that went online last November.
Use of deferred revenues helps meet financial goals
In his financial report for the year, Jackson explained Highline’s use of deferred revenue to help attain financial goals in 2019.
Operating revenues for 2019 were $50,470,258, which is a decrease of $4.8 million from 2018. Decrease in revenue was due to a couple of matters, according to Jackson. Weather was a major factor of decreased sales, as was a decrease in oil and gas accounts.
Rural Utilities Service allows HEA to defer revenue in years which have exceptionally strong margins and to recognize those in subsequent years.
In 2018, Highline used $300,000 of deferred revenue. In 2019, $1 million of the remaining $1.7 million of deferred revenue was recognized.
Jackson pointed out that the current budget calls for $700,000, the balance of the deferred revenue, to be recognized in 2020.
Herman recapped the deferred revenue history in his general manager report.
In 2013, Highline anticipated a hardship based on wholesale rate increases from Tri-State. At the time, Tri-State was anticipating cumulative rate increases of close to 14% over the three-year period from 2016-18.
Highline had strong operating margins at the time and was able to defer $2 million in revenue between 2013-15 with the hopes of smoothing the rate increases to members, Herman pointed out.
Tri-State’s need for rate increases leveled off at 8%, and Highline has been able to utilize the deferred revenue to spread the effects of the wholesale rate increases to members over time.
Since Highline has operated with negative operating margins in 2018 and 2019 and is budgeting for negative operating margins in 2020, and since they anticipate depleting the deferred revenue in 2020, Herman said there will likely be upward rate pressure in 2021.
He said they are estimating the rate increase necessary will be in the 2%-3.5% range. He reported the good news that Tri-State is projecting stable rates for the foreseeable future.
Two events in 2019 depleted Highline’s cash reserves. The first was the prepayment of $4.2 million of higher interest rate debt. The passage of the farm bill provided the opportunity to prepay the debt without penalty.
This prepayment, coupled with the completion of a new construction work plan and loan application with RUS, will drive the blended interest rate even lower, Herman noted. The completion of the Riverview Solar Project had an impact on cash, as well.
In 2019, Herman noted that Highline introduced an on-bill financing program. HEA applied for and received financing from the United States Department of Agriculture’s rural energy savings program. The on-bill financing will allow members to make energy effciency improvements to their homes and businesses.
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