CEO’s Message – June 2023

The Rising Cost of Doing Business

I was shopping for Mother’s Day cards last month and happened to notice the price on the back of one of the cards…8 bucks! What?! I must say, the days of choosing two or three favorites and deciding later are over!

We’ve all got our stories of jaw-dropping price increases during this current inflation economy. The cost of everything—small things like greeting cards, coffee and chewing gum, all the way up to appliances, cars, travel, and yes, even electric utility equipment—is on the rise.

In many cases, the driver behind these increased costs is the raw materials behind the finished product. Increased demand for things like steel and copper, the “main ingredients” in much of the equipment that makes up your electricity delivery system, is hitting the utility industry particularly hard.

With the increased worldwide demand for these and other materials critical to our mission of keeping your power flowing steadily and safely have come strains on the supply chain: labor shortages, increased freight costs, and delays in shipping, delivery and construction, which also carry costs.

These market factors have dramatically impacted the price we have to pay for the equipment we need. For example, in 2020, one small padmount transformer, the size that would serve one large household, cost $1,511. In 2023, that same transformer costs $3,375. Our basic underground primary cable that cost $3.34 per foot in 2020 now costs $6.14 per foot. And the conduit that insulates that cable has gone from $1.51 per foot to $6.40 per foot in that same time period.

According to the U.S. Dept of Agriculture, the Consumer Price Index for all food
(the cost of a trip to the grocery store) rose 8.5% from March 2022 to March 2023. For comparison, during the last 24 months, our equipment costs have risen 32% overall. Smart, selective purchasing is more important than ever, and tough decisions have to be made.

Unfortunately, the price of electricity itself will not be able to escape this trend. Our Tier 1 cost, determined by our contract with BPA, is a bit more predictable as it is part of a long- term contract. Our Tier 2 energy (the 15 percent or so of our total annual load that we purchase on the open market; made up of solar, nuclear, natural gas), is less predictable and more susceptible to periodic market fluctuations.

At this point, you might be asking, “What’s the good news?”

The good news is that Columbia REA is in no way circling the wagons or throwing in the towel or waving the white flag. Apply any “surrender” metaphor you like; we are not doing that. What we are doing is keeping you informed, which is my job, and doing our best to keep your lights on, your homes and businesses safe with uninterrupted power, and your costs as low as possible, which is the job of all of us here at Columbia REA.

Best,
Scott Peters, CEO