A Message from the President and Chief Executive Officer
Fiscal year 2021 was historic and there is a good chance that 2021 may well be remembered as one of the most challenging years in Arkansas Electric Cooperative Corporation’s (AECC’s) history. To quote Charles Dicken’s Tale of Two Cities, “it was the best of times, it was the worst of times.” I like to end things on a positive note so I will start with the worst of times.
The event that made 2021 truly historic was winter storm Uri. Due to the record low temperatures during storm Uri, AECC experienced rolling blackouts when the Midcontinent Independent System Operator (MISO), one of our regional transmission organizations (RTO), called for immediate load reductions to keep the electric grid stable. Additionally, natural gas constraints and high load demand during storm Uri resulted in extremely high natural gas prices and corresponding extreme power prices. Storm Uri cost AECC’s members approximately $100 million.
Continuation of the global pandemic even after release of the long-awaited vaccines proved to be a continued strain on the organization. This strain was felt around the globe and the result was supply chain disruption. Longer lead times and increased prices for critical infrastructure made operations and maintenance more challenging and expensive. Supply chain disruptions also impacted our fuel costs.
Due to staffing and equipment constraints, the Union Pacific railroad coal deliveries that supply some of our coal plants were inadequate to maintain normal coal plant operations. Coal conservation at the coal plants – combined with natural gas prices that nearly doubled in 2021 as compared to 2020 – resulted in significant increases in fuel costs for our members. The net impact of storm Uri, supply chain disruptions, and high natural gas prices combined to create a historic situation that caused AECC’s revenue to surpass $1 billion for the first time ever. Most CEOs would celebrate an increase in top line revenue; however, I do not. This increase in revenue represents significant cost increases for our members who saw their wholesale power cost increase from $48.16 in 2020 to $65.52 in 2021. AECC’s mission is to provide reliable, affordable electricity and services, and 2021 challenged that mission more than any year in history.
AECC also received confirmation this year that the White Bluff Steam Electric Station will be required to cease operations in 2028 and that the Independence Steam Electric Station will be required to cease operations in 2030. This represents a loss of 25% of our baseload power portfolio. Our 2030 Strategic Plan will determine exactly what we replace these generating resources with, but current options are limited to either natural gas, wind or solar generation. The aftermath of Storm Uri, with the extreme volatility of natural gas prices, constraints on natural gas supply and the intermittent nature of wind and solar generation resources, highlighted the need to focus more on reliability. The combination of rolling blackouts and extreme power costs motivated AECC to begin a Balance of Power campaign to inform legislators, regulators, and members of the need to balance affordability, reliability and responsibility of our future generating portfolio.
Arkansas’ electric cooperatives have proven that a diverse and resilient power supply is in our members’ best interests. We continue to advocate for development of a national energy policy that isn’t solely focused on a single objective, but rather a policy that is balanced and encourages a diverse mix of coal, natural gas, advanced nuclear and renewable energy that addresses climate concerns while also contributing to the overall affordability and reliability of our electric grid. We advocate for a national energy policy that truly reflects the Balance of Power and supports our national interests.
I like to focus on the positive, so now for the best of times. Last year I reported that AECC had commenced working on our strategic plan to serve as a roadmap to 2030, and I am pleased to report that the board of directors formally approved our 2030 Strategic Plan this year and we have commenced executing our plan. We also reaffirmed our commitment to our mission of providing reliable, affordable electricity and services, safely and responsibly (Reliable-Affordable-Responsible) to our members. Last year I also reported that AECC had ceased operations at our Bailey Power Plant, and this year the board approved reuse of that site by approving a 122 MW solar project in Woodruff County. AECC’s first generation resource, the Thomas B. Fitzhugh Generating Station (a gas-based facility), reached a milestone of 60 years of service to electric cooperative members. I am also proud that we codified and published our Core Values this year. Safety is one of those core values and our employees worked safely this year with only one recordable injury in 2021.
Our employees persevered and not only survived but thrived in 2021. We continued to implement our COVID-19 pandemic plan and our employees rose to every challenge this year. I am privileged to lead such an outstanding team. I continue to be excited about the future for AECC and look forward to executing our 2030 Strategic Plan and continuing to serve the Electric Cooperatives of Arkansas in 2022.
Arkansas Electric Cooperative Corporation