Surprise Valley Electrification Corp. (Surprise Valley) has reached a preliminary agreement to acquire PacifiCorp’s Lakeview service area. If finalized, Surprise Valley will acquire the right to serve the Town of Lakeview, along with the equipment used to distribute energy to those customers. Surprise Valley is a nonprofit rural electric cooperative that has served the neighboring region for 90 years.
This transaction is one of several planned by PacifiCorp to sell portions of its Oregon service territory to cooperative utilities. In Wallowa County, Oregon Trail Electric Cooperative plans to take over service to 5,514 customer meters; in the Monroe area, Blachly-Lane Electric Cooperative would take on 1,162 customer meters. In the Lakeview area, Surprise Valley would take on 2,228 customer meters.
Surprise Valley currently serves approximately 7,000 customer meters in rural Oregon, California, and Nevada. Surprise Valley has some of the lowest electric rates in the country, with residential and small commercial rates of 11.35 cents per kilowatt hour.
“We know this area well and we work hard to provide reliable and affordable service to our members,” Surprise Valley General Manager Brad Kresge said in a statement. “We are looking forward to serving Lakeview the same way we have served this region for almost a century.”
The preliminary agreement is still non-binding, and remains subject to more investigation and negotiation. Any final decision will be made by the cooperative’s democratically-elected Board of Directors. Surprise Valley began exploring the transaction only once it concluded that member rates would not go up. The transaction will proceed only if it benefits both current and future members.
Historically, cooperatives were formed to serve sparsely populated rural areas that the private utility companies refused to serve. Urban areas have more concentrated customer populations, and are therefore generally more cost-effective and lucrative. As the National Rural Electric Cooperative Association explains, “power companies ignored the rural areas of the nation.” After the passage of the Rural Electrification Act of 1936 and the Electric Cooperative Corporation Act in 1937, communities could form cooperatives to obtain low-interest federal loans and bring electricity to rural areas. Ever since, electric cooperatives like Surprise Valley have provided power to their member-owners on a non-profit, cost-of-service basis.
For Lakeview’s current PacifiCorp customers, the transaction represents the opportunity to be served by its neighborhood cooperative utility. For instance, Surprise Valley already has service people working in the area, which means outage response times would likely improve. Area residents and businesses have also expressed frustration with power supply problems that have limited regional growth. However, these power supply constraints are a regional infrastructure issue that would not be resolved just by Surprise Valley taking over service. Still, the cooperative explores all available options to provide quality, reliable service to its member-owners, and would do the same for Lakeview.
For current Surprise Valley members, the transaction could provide important benefits. The cooperative currently relies heavily on irrigation, which means that demand surges during the growing season and drops off in winter. This variability makes planning challenging, and can result in unexpected financial shifts based on weather. The Lakeview area would bring a greater share of large commercial and industrial customers. These large, year-round operations could help smooth out seasonal load swings and create a more diversified customer base. In addition, a larger pool of customers helps spread fixed overhead costs over a broader pool. This economy of scale is a key driver behind utilities of all kinds because it can help stabilize long-term rates.
If negotiations are successful, the transaction would still be subject to approval by the Oregon Public Utility Commission, a process that can take 12 months. During the negotiation and regulatory approval period, PacifiCorp will continue to provide service to customers in the area.
Source: Modoc Record
