For many years we enjoyed stable wholesale power costs for the electricity that we purchase on behalf of the members that we serve. Furthermore, we were blessed with low inflation and historically low interest rates. Growth and demand for energy was low as well. Today, we are in a very different environment. We are experiencing substantial organic growth and the demand for electricity has increased across the state and nation. New generation is needed and it has increased more than 40%, in costs, in recent years as well. All of this makes it more challenging to ensure competitively priced electric service that is affordable.

Surveys show that you currently place a higher priority on reliability than the cost of the electricity that we sell. Unfortunately, with the cost of everything going up, it also costs more to maintain the level of service and reliability that you expect and deserve.

Please know that your local electric cooperative does not want to adjust rates and that we all liked it better when our cooperative could issue millions of dollars in member credits and member rebates.

The below graph illustrates how our costs have increased significantly over the last four to five years. Items such as poles have increased 25-40%, the wire/conductor that we use across our system has gone up 30- 50%. Our large bucket and line trucks have gone up 40- 50%. It should be noted that we have been holding off some of the planned replacements and have made some reductions in our fleet. I could go on, but you can see that everywhere we turn costs have increased, no different than at your home, farm and business. If you were to look closely at our expenses, only about 18.5% of our expenses can truly be controlled. As an example, our largest expense, which is something we cannot control, is the power that we purchase on behalf of you, our member owners, and it amounts to more than 60% of our total expense.

Our wholesale power costs for 2025 increased 8%. At the end of August 2025, we learned that wholesale power costs for 2026 will increase by an estimated10.55% or about $7.7 million.

Furthermore, South River EMC is responsible for a Wholesale Power Cost Adjustment (WPCA), similar to our Equalizer. In addition to the rate change planned for 2026, your Cooperative is currently facing approximately $3 million in WPCA costs, which will be paid next year. It will most likely be higher by the end of the year.

According to Amadou Fall, COO of NCEMC, our power supplier, the reasons for higher wholesale power include environmental compliance and government regulation, higher fuel costs, and inflation, which has impacted the cost of new generation equipment along with operations and maintenance expense.

Since 2020, the electric utility industry has experienced considerable cost increases due to soaring demand, supply chain challenges, raw materials shortages, the highest inflation in 40 years, and costly regulatory decisions. The impact has resulted in rapid increases in the cost of producing power, longer and more unpredictable project timelines and the need for more financing, all of which have driven up electric rates.

I talked to a friend in one of our western states recently, and he shared with me that his power supplier was expecting to raise rates by 20%. Thankfully, that is not the case with NCEMC, our power supplier. Other electric providers in the state have been raising rates too. While it is not easy to do, we have remained competitive with the Investor-Owned Utility in the state, when you compare the total bill, including a number of riders, to a South River EMC bill.

We will continue to keep you apprised of how market forces are impacting costs on your cooperative.

I can assure you that any decisions made by your cooperative are made with you in mind, to ensure that we continue to provide safe, reliable and affordable electric service. Regrettably, we are in a higher-cost environment today.

We have been here before, but it has been a while.

I would love to tell you that costs have stabilized and that we expect a small adjustment in 2026. Unfortunately, it does not appear that it will be possible, and it very well will be higher than the one in 2025. We will continue to be good stewards and seek to minimize the impact on you. Before I close, I would like to encourage you to check out our website for some energy saving tips. You may also want to contact one of our Energy Advisors as they can offer expert advice. I am here to serve you, and I appreciate the opportunity.