August Manager's Message
On May 2-4, 2011, two of Renville-Sibley’s management staff, one Renville-Sibley director and the Cooperative attorney attended the NRECA Washington, D.C. Rally where we met with the Minnesota delegation to voice our concerns or support of proposed legislation. Renville-Sibley’s First District Director David Tomes, Energy Services Manager Brian Jeremiason, Cooperative Attorney Charles Hunt and I spent three days in Washington D.C. talking to our elected officials about issues related to providing affordable and reliable electricity to each of our members.
Another topic we raised with the Minnesota legislators concerns the continued viability of the Rural Utilities Service loan program. Not-for-profit electric cooperatives, like Renville-Sibley, maintain nearly ½ of the nation’s electric distribution system. Electric cooperatives’ distribution plants cover 75% of this country’s land mass while serving only 12% (approximately 42 million) of America’s electric consumers. Co-ops serve both sparsely populated areas and regions with growing populations. Providing safe, affordable and reliable electricity can be very challenging.
For more than 75 years rural electric cooperatives have enjoyed a partnership with the U.S. Department of Agriculture’s Rural Utilities Service (RUS) which makes it possible for cooperatives to construct and maintain their distribution, transmission and generation assets. Loans provided by the RUS Electric Program help make these worthwhile investments possible and these loans are in turn, paid back with interest by co-op borrowers which allows co-ops to maintain stable consumer rates.
Co-ops like Renville-Sibley have never forgotten that affordable electricity is a key component for economic growth. Since the average co-op household’s income is 14% lower than the national average, we know that every dollar matters to our consumer members. As demand for electricity continues to grow, RUS loans are critical for building the infrastructure needed across the country, while keeping electric rates affordable.
Every year since 2008, Congress has approved a $6.5 billion loan level for the RUS Electric Loan program and this level has not cost the federal government a single cent over that time. Electric cooperatives and the RUS hare very careful and diligent when it comes to loan management, resulting in an excellent record of loan repayment throughout the country. In fact, this low-cost, low-risk model will enable the RUS Electric Loan program to contribute more than $100 million to the U.S. Treasury for deficit reduction in Fiscal Year 2012.
President Obama’s Budget for Fiscal Year 2012 recommends a $6 billion loan level, which is an improvement over past Presidential budgets. However, the proposal would restrict lending on $4 billion of the total requiring it to be renewable-related or for carbon sequestration projects. While some cooperatives are in need of financing for these specific purposes, locally-driven business decisions, not Washington, D.C., should determine what type of projects are financed from RUS.
The USDA Guaranteed Underwriter program allows qualified private lenders to issue a guaranteed note to the Federal Reserve Bank (FFB) and use the proceeds from that note to make utility loans to rural electric cooperatives. This program strengthens the public-private partnership and leverages additional investment in rural America at not cost to the federal government. The Guaranteed Underwriter program was authorized at $500 million for Fiscal Year 2011 but President Obama recommends no funding for 2012.
Since the RUS Electric Loan program is projected to earn more than $100 million for the federal government by loan repayments from rural electric cooperatives in 2012, we encouraged all the Minnesota legislators to sign a letter to the Agriculture Appropriations Subcommittee that outlines the importance of restoring the funding at the $6.5 billion level for 2012. We encouraged them to oppose restrictions on RUS lending to cooperatives and encouraged them to support the continued funding of the Guaranteed Underwriter program.