Friday, April 10, 2009

Rocky REA General Manager's Report, 2008

The report was delivered at the Annual General Meeting of the Rocky Rural Electrification Association meeting in Leslieville, Alberta on Thursday, April 9, 2009.

I would like to extend a warm welcome to all that have joined us here this evening. Our Chairman, auditor and guest speakers are sharing a significant amount of information within their reports. To avoid duplication, I will limit this report to my first impressions of the Rocky REA, a brief summary of 2008 operations and some of the major challenges facing us in the future.

First Impressions

Being the new guy on the block, I would like to provide my initial impressions of working within a local cooperative.

What I have discovered is a tremendous set of advantages.

Firstly, the most obvious one is that REA’s operate on a cost basis. Investor owned power companies must produce a profit margin for shareholders. On the other hand, the Rocky REA provides safe and efficient service for its members at rates that recover current year operating costs and set aside funds for capital replacement and growth, without the additional burden of a profit margin. This enables us to provide you, the member/owners of the REA with very competitive rates for high quality service.

Secondly, the Rocky REA operates solely in the local area. We do not support a head office outside of the REA boundaries. Our employees live and work here. In so doing, they contribute to the support of the local community and economy. In addition, a significant portion of the REA goods and services budget is spent in the local economy.

Thirdly, the board of directors and many of the employees are REA members, which automatically gives them a vested and personal interest in the success of the organization. In contrast, large investor owned power companies spend much time and resources attempting to create a sense of ownership in their employees in order to enhance performance. REA’s do not have to create a sense of ownership; the people that serve this organization in most cases are member/owners.

Fourthly, the greater network of REA’s in Alberta is also cooperative in nature. The Rocky REA is a member of the Alberta Federation of REA’s that represents the interests of REA members throughout the province. The head of this excellent organization is our own Merv Rockel, a director of Rocky REA and a leader at the provincial level.

The final observation I will make about the REA structure concerns the cooperation between individual REA’s. Investor owned power companies will do their best to conceal information from each other in an attempt to gain the upper hand, force the competition out and ultimately “corner the market”. In the REA world, there exists a spirit of cooperation and mutual preservation. Trust is established, information is shared and multiple REA’s benefit from the sharing of cost saving measures, improvements to operational methods and even in the recruitment of personnel.

2008 Operational Summary

Much of the 2008 operational results have been addressed in Chairman Earl Graham’s report.
However, further items of note include the following:

1.reduction in the construction of new member services as the economic downturn found its way into our area

2.focus on activities such as pole replacement, pole testing, breaker box upgrades, poles in-line for non members and high load escorts

3.great progress in the development of our internal vegetation management activities as we have moved away from sub-contracting this work

4.completion of a new consolidated Compliance Plan with subsequent approval from the Market Surveillance Administrator. This plan demonstrates our compliance with provincial regulations requiring that our members have customer choice regarding retail energy options.

5.continued strong financial results; these will be presented by our Auditor this evening. Suffice it to say that we have achieved an excellent cash position at a time when the watchwords in the press include such phrases as “financial crisis”, “credit crisis” and “liquidity concerns”. As you will see, the Rocky REA has been able to handle current year operational expenses while retaining earnings that will be required for future capital replacement and growth and provide a hedge against the uncertainty surrounding future operational costs.

Future Challenges

1.Uncertainty in Electricity Market Prices

The majority of power produced in Alberta comes from coal powered generators. The impact of carbon taxes and the cost of sequestering carbon may lead to higher electricity rates in the future. Your REA will continue to keep watch over future hedge prices to ensure that long term costs are kept within reasonable limits.

2.Safeguarding the REA Distribution System

Remote as it may seem, should we experience a natural disaster such as a forest fire or extreme storm that incurs damage to the majority of our distribution system, the REA would be faced with extremely large replacement costs.
To mitigate the possibility of fire damage we carry out a systematic program of controlling the build up of vegetation in the proximity of the system.
In addition we maintain a Deposit Reserve specifically for the purpose of capital replacement and maintenance of the distribution system.

3.Succession Planning

Like nearly every industry today, the electricity industry faces the future problem of replacing many employees that were born in the baby boomer generation (1946 – 1964). The Rocky REA will not be exempt from the far reaching impact of the retirement of this generation of workers and board members as well.
Strategic planning in this area has become essential to ensure the long term viability of the organization.

In conclusion, I would like to extend my thanks to the staff and board of directors for the support I have received in this challenging position. As indicated earlier, every person in this organization takes a personal stake in the overall success of the Rocky REA and that has been particularly evident in the assistance I have received. I am very pleased to be associated with this team.

Respectfully submitted,

Jerry Reglin B.Mgt., CMA
General Manager 

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