Providing reliable service, competitive rates and informing our members are keys to 2010 success!

Arrowhead Electric Cooperative provides reliable service, competitive rates and tools to assist our members with energy conservation and controlling energy costs. As your local electric cooperative these are our most important goals. We work hard to meet these goals despite many conditions which make the utility marketplace very difficult. Looming federal legislation on carbon emissions, recent state legislation, and an economy without growth challenges your electric cooperative every day.

The service Arrowhead Electric provides our members is reliable. We continue to improve upon this service by investing and working with our partners. Our reliability when major transmission related problems occur has improved with the installation of the Arrowhead Generation facility in Colvill. We’ve recently completed a major infrastructure upgrade serving the Gunflint Trail, and serving the Caribou Trail and Pike Lake areas. In the coming year, we plan to invest in existing power lines serving Grand Portage, the Gunflint Trail and a re-building of the Lutsen Substation.

In 2009, we faced a March ice storm and a September windstorm which tested the reliability of our system during extreme weather events. These weather events prove the necessity to properly maintain right of ways. We will continue to focus much of our efforts on ensuring proper management of our right of ways.

Significant investment in the distribution system, labor to restore outages after hours and upgrades to aging equipment comes with significant expense. Fortunately, much of this work is capitalized and spread over time. Still, significant obstacles impact your cooperative. The State of Minnesota requires utility companies to generate 25% of their energy from renewable sources by 2025. In Minnesota this means that Wind Energy will generate the vast majority of this energy while other things such as biomass, refused derived fuel, small hydro and others play a smaller role.

Other impacts of a depressed economy or low demand include the loss of revenue to neighboring utilities. Energy can be produced and sold to our neighboring utilities which provide a revenue source to offset our electric rates. During a normal summer Great River Energy can make millions of dollars through sales to other regional utilities. However, the cool summer resulted in less air-conditioning use in the Midwest. Coupled with a down economy in the commercial sector this non-member revenue stream simply did not exist in 2009.

To offset higher energy costs Arrowhead Electric strongly encourages our members to invest in energy efficient home improvements (don’t forget about federal tax credits – see http://www.energystar.gov for more info.) and to participate in our EnergyWise demand response programs such as Electric Thermal Storage (ETS) heating (off-peak) or the Interruptible Dual Fuel program. These programs include significantly lower costs associated with home space and water heating by allowing Arrowhead to turn off the system during the day and/or during times of peak energy demand based upon the program.

Near the end of each year Arrowhead Electric budgets for the upcoming year. The largest cost to Arrowhead Electric– and growing- is wholesale power. All of our power is provided by Great River Energy through long term contracts to ensure relative rate stability. Our 2010 budget includes approximately a 9% increase in wholesale power costs. In 2010, 61% of Arrowhead Electric revenue goes towards wholesale power purchases for our members. To put this in perspective the cost of power as a percentage of revenue averaged 49% from years 2000 – 2007. In other words, since 2007 Arrowhead Electric has cut expenses by 12%.

In addition to wholesale power costs Arrowhead Electric incurs distribution side increases. In an ongoing attempt to reduce our rate increase we have refrained from filling positions, reduced travel expenses, eliminated right-of-way spraying, and eliminated the employee incentive plan. Following a substantial review and examination of expenses Arrowhead Electric will implement the following rates in 2010. They are shown below and compared to the 2009 rates.

                                                                        2010                             2009

Service Availability Charge:   $42.00/month             $36.00/month

Energy Charge:                                                           kWh Charge

            Summer (June, July & August)               11.4¢                           10.8¢

            Other                                                                  10.0¢                           09.6¢

EnergyWise Rates

            Off Peak-Electric Thermal Storage       04.54¢                            04.3¢

            Interruptible Dual Fuel                             05.56¢                            05.3¢

The service availability charge is designed to recover a portion of the cost of delivering electric energy to all members. The service availability charge is reflective of the investment in poles, wires, transformers, and equipment that it takes to provide you with electric service. It also supports fleet, facility and customer service functions, such as line maintenance, right-of-way clearing and general administrative responsibilities. Regardless of how often you flip on the light switch or the TV, these costs are part of the bill you pay so that electricity is available to you when you want it regardless of how much electricity you consume each month.

No matter how we use energy increasing electricity costs do not go unnoticed by anyone in any economy. Increasing electric rates is done only after careful consideration by both staff and the board of directors. While we must increase our rates to ensure our financial obligations are met we also feel it is equally important to provide the tools you need to reduce your energy bill through conservation, energy efficiency and EnergyWise demand response programs. We want you to get involved with your energy costs. Look for ways to reduce your costs around the house, at work or at the cabin. Participate in EnergyWise demand response by enrolling in our Off-Peak or Dual Fuel program.

Look to the future; get involved by contacting your legislators to ensure future climate change legislation is fair, affordable and achievable. Go to http://www.ourenergy.coop to learn more. Finally, as your local and trusted energy cooperative we always welcome your questions, comments and feedback. After all, it’s one of the benefits of being an owner of your local electric cooperative.

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