Navigating a Changing Electric Industry
CEO Column | October Ohio Cooperative Living
If you follow the news surrounding the electric industry today, there is a lot to take in. Data centers, transmission projects, power plant retirements, rising costs, and concerns about whether there will be enough electricity to meet future demand are all competing for attention.
While these may seem like separate issues, they are actually closely connected.
Electricity has to be generated, transported across high voltage transmission lines, and ultimately delivered through Pioneer’s local distribution system before it reaches your home or business. Changes anywhere along that path can affect both cost and reliability. One of the biggest changes in Ohio has been the amount of generation removed from the electric grid. Since 2015, nearly 10,000 megawatts of fuel-based generation have been retired in the state. Ohio, which was once able to export power to other areas, now depends on importing electricity during periods of peak demand. At the same time, new large electric loads are adding demand to the system.
All of this plays a role in why we’re seeing so much discussion — and concern — about new generation and transmission infrastructure across Ohio.
The good news for Pioneer members is that our cooperative is in a strong position as these changes take place.
Through our shared ownership of Buckeye Power, Ohio’s 24 electric cooperatives have a generation portfolio that currently provides capacity beyond our members’ peak needs. When that excess electricity can be sold into the wholesale market, those sales can benefit cooperative members.
Earlier this year, Pioneer received approximately $1 million in additional margins from Buckeye Power, and we have been passing those savings directly back to our members through lower power costs on their monthly electric bills.
And, locally, we are focused on managing our own distribution costs.
About 72% of Pioneer’s operating expenses are tied to the cost of generating and transmitting electricity to our system. The remaining 28% reflects the local costs of operating and maintaining Pioneer’s distribution system — including the substations, transformers, poles, wires, and people needed to deliver electricity to your home or business.
Those distribution costs, like the costs of everything else, are increasing, and in some cases, rapidly. Since 2020, the cost of poles, transformers and other equipment utilities rely on has increased 30% to 50% or more. We’ve seen that firsthand in our own substation construction. A large substation transformer that cost approximately $400,000 in 2019 now costs more than $1 million. Lead times to procure this type of equipment have increased as well.
Despite those cost increases, we continue to balance rates, borrowing, and the cooperative’s financial strength so we can make the investments necessary to maintain reliable service while keeping costs as affordable as possible.
There is a lot happening in the electric industry, and much of it is outside of Pioneer’s control.
What we can control is how we respond. That means planning ahead, making necessary investments, managing the costs within our control, and advocating for decisions that serve the best interests of our members.
