The past three years have certainly been action-packed for Director Kirk Alter. During that time he vigorously pursued, studied for, and obtained both NRECA certifications available for co-op board members: Certified Co-Op Director (CCD) and Board Leadership Certificate (BLC). These represent both an accomplishment and investment by, and for Tipmont members, as it is crucial that directors are skilled in the areas of shared governance; technical, legal, and economic aspects of the distribution co-op business; and board leadership. While Kirk came to the board with extensive senior business management experience as a business owner and Purdue professor, this certification process really allowed him to hone his skills specifically to the co-op model that focuses first and always on members first!
As all fellow members know, these past three years have presented some significant challenges, especially in the areas of economics. Increasing EPA regulations have affected all states where the predominant means of producing electricity is via coal, resulting in increasing cost of electricity production. As a distribution co-op, Tipmont doesn't generate any electricity. We purchase all of ours from Wabash Valley Power Association. This means that as a board we constantly struggle with working hard to keep rates as low as possible. During the past three years, we have been able to keep rate increases to a minimum and it looks like we have a secure and stable future. During the rate process, we worked very hard to ensure that all members could provide input via town hall meetings. With that in mind, it is important as members to know that our two biggest costs are purchased power and construction costs.
One of the most important jobs of the board is fiscal oversight and long-range planning. This is an area of special interest and expertise for Kirk and a place where he can put to use his experience as a successful small business owner and his education as an MBA for fellow members. Tipmont is not a small financial concern. Last year, as members we provided $53 million of power to fellow members and owned and supported a distribution infrastructure and plant worth $105.4 million. Unlike the investor-owned utilities of the world, as a co-op we are non-profit which means we only collect what is necessary to provide the power purchased from Wabash Valley, and to build, operate, and maintain the infrastructure investment of the members. Our three biggest costs are power ($36.6m, 69% of revenues collected), operations and maintenance expenses ($8.6m, 16%), and loan interest and depreciation ($4.4m, 8.3%). As good stewards, we retain a small percentage of revenues to protect members against unforeseen events; a rainy day precaution ($3.7m, 7%). The balance of our expenses is combined in the many costs of running a $50m+ operation to arrive at the $53m. Once the reserve number is determined, the rest of any balance is returned back to members in the form of capital credits. During Kirk's first term the amounts returned in the form of capital credits have remained consistent with $600,000 being returned last year.
In summary, during Kirk’s first term the following have been accomplished: membership has increased, non-power costs as a percentage of revenue have remained consistent and capital credit retirements have remained consistent, reliability has improved and outages decreased, focus on the core business has been renewed, number of directors supported has decreased, member’s ability to control their costs via time-of-use rate structure has been brought online, and the Tipmont board has empowered its first woman as CEO, albeit as interim. Kirk believes this constitutes a good start and would welcome the opportunity to serve his fellow members for a second term, especially as the key events of the multi-year labor contract negotiations will occur in 2014, and the new CEO will need to be mentored and brought up to speed rapidly.