Consolidation Study Update – July 2012

Consolidation Update
by Jim Thompson PE General Manager

Over the past few months, members have been informed about the consolidation discussions between Adams Electric Cooperative (AEC) and Western Illinois Electrical Coop. (WIEC).  The first step was for both co-ops to submit their financial data to National Rural Utilities Cooperative Finance Corporation (CFC) to analyze the information and make an independent assessment of the information.  
    A joint meeting was held between both cooperatives’ board of directors at the end of May. A representative from CFC was there to explain how CFC made their analysis.  CFC created financial models for each co-op’s future expenditures, looking at operations, maintenance, administrative and other costs five and ten years in the future. Finally, a model was made for the same time periods showing the costs and projected savings by combining the two cooperatives. CFC’s analysis indicates the combined cooperatives could save $401,074 in the base year and $5,238,059 over a ten year period at a 2% inflation rate and $6,138,941 at a 5.0% inflation rate.
    During the meeting, both boards had the opportunity to speak with Randy Price, CEO of Carroll-White REMC in Indiana which finalized a consolidation of two cooperatives on January 1, 2012. Our boards had the opportunity to ask questions on their consolidation process. Randy indicated that their cooperatives also had an analysis prepared by CFC and, so far, their savings looks to be more significant than indicated.
    With the information exchanged at the joint meeting, both boards felt good about the discussions. Both boards take their responsibility to their members seriously with the long term goal of keeping electricity reliable and affordable.  
    In June, WIEC will hold their annual meeting for WIEC members to learn more about the consolidation process. Committees are being formed that will focus on issues such as bylaw development, wages and benefits for employees, integrating financial statements, and rate consolidation. A Gantt chart (timeline) has been established to keep both cooperatives on task. A special committee has also been formed that will continue to keep employees and members informed of the consolidation process.