Since January, we have been discussing resiliency and storm recovery planning through the use of an Emergency Reserve Fund, which will go into effect in the coming weeks.
As residents of north Louisiana, we all understand the year-round threat of extreme, damaging storms. Tornadoes, straight-line winds, tropical storms, ice storms, and even the occasional hurricane can cause millions of dollars in damage in a single day. As much as we wish we could control the weather and keep storms at bay, we know future harmful storms are inevitable.
In August of 2020, Hurricane Laura arrived in our service area as a category 1 hurricane and caused nearly $5.4 million in damage. We borrowed money to pay for that damage to our system, and we paid more than $237,000 in interest on that borrowed money.
Part of operating under the cooperative business model is that Claiborne Electric is not-for-profit. We only collect what is necessary to run the Co-op. We don’t have investors or shareholders; we are completely owned by and obligated to the members we serve. Each member pays their share of purchased power, along with the cost of operating and maintaining the Co-op each month.
When we borrow money after the fact to pay for storm recovery, there is a significant interest component in repaying those loans. That interest, like all costs of the Co-op, is eventually paid by every member along Claiborne Electric’s lines. Those costs end up in the rate you pay for electricity. Building an Emergency Reserve Fund will eliminate these interest charges and significantly reduce or eliminate our reliance on borrowed funds for storm recovery efforts.
In the next few weeks, members will see a line item on bills for this fund. The line item will be listed as Emergency Reserve Fund. For all residential accounts, members will contribute $2.50 per month. Small General Service accounts will contribute $5.00 per month, and Large General Service accounts will contribute $50.00 per month. The fund is not set up to be a permanent charge. The fund is set up to build slowly for 42 months, or until it reaches $3 million.
The current fund balance, along with any use of the funds from the previous year, will be stated in the Annual Report, which is distributed to members at the Annual Membership Meeting and made available on the Co-op’s website.
An Emergency Reserve Fund is an efficient way for members to jointly contribute to a fund that will provide a source of emergency funding when a storm happens. Ultimately, this fund will save members money and keep rates low by eliminating borrowed money and the interest associated with storm loans.
Planning for storms in advance and having a resiliency plan in place makes the Cooperative stronger and more prepared when inevitable storms occur. We believe this fund will help us responsibly deliver the best possible service to you, our members.