In many respects, 2023 can be summarized as perhaps the most challenging and rewarding year in your cooperative’s history, or at least in recent memory. This summarization is based on the large number of challenges and setbacks we faced throughout the year. In the end, your cooperative was able to respond and continue to improve our members’ quality of life. 

The first area I would like to address relates to the weather. Beginning in June of last year and continuing through the winter of 2023 and now spring, our area has been in the crosshairs of a number of violent storms. Some of these devastating storms brought high winds, rain and lighting, while others brought ice and heavy, wet snow. In the wake of these storms, our members and region were left with countless numbers of damaged trees, homes and infrastructure. Our operation crews worked tirelessly to restore power and replace broken poles and facilities. In addition to working nights and weekends, your cooperative requested and received help from many of our neighboring cooperatives on two occasions. On behalf of the Board, I would like to thank all of them and our employees for their hard work. They truly are the difference makers in our ability to restore your power in a timely manner. 

Unfortunately, these service interruptions, system damage and additional labor come at a cost and in 2022 played a big role in operating margins being down nearly $80,000 from 2021 levels. We are estimating that the February 2023 storms will come in at an additional cost of $225,000 and will be reflected in next year’s financials. 

As we have also seen, our economy continues to struggle with inflation, rising interest rates, price increases and shortages of materials. In fact, we have seen virtually everything from interest rates to poles, wire and hardware increase in the last year. Even the energy markets and our wholesale power prices have been affected by the downturn in the economy. Based on our current administration’s efforts to address the problems and their position on fracking and natural gas constraints, we really don’t see any relief in the near future. In and of itself, these changes would be a challenge, but when you consider our efforts to build a broadband internet network in the region, these cost increases certainly became much more troublesome. 

Internally, your cooperative had to work through a rather large and complicated data processing conversion to allow for the expansion of services to include broadband internet. Setting up a completely new billing process for broadband was tedious, but when you consider the efforts to complete the engineering, design, mapping and marketing, there was a tremendous amount of behind-the-scenes work done before we could even get to start construction.

However, in spite of all of these challenges, in October 2022, we began connecting our Fiber to the Home (FTTH) internet service to members in the west side of our service area. Today, we have nearly 1200 total accounts when we consider our Point to Point (P2P) network. In fact, we have reached a significant milestone by now having all of Phase 1 of our FTTH network completely open and available to our members. We are presently working in Phase 2, which includes the area north of Angola and the lakes region with an anticipated completion date of August 2023. By the end of the year, we hope to have Phase 3 serving the east side of our territory completed, and by this time next year, we plan to have the network available to all of our members.

Unfortunately, those same economic factors I mentioned earlier are contributing to higher-than-expected costs on the FTTH project as well, and this may create some additional risks for us as we move forward. However, our member’s participation and the level of service they request could play an important role in offsetting these expenses. As an example, in phase 1, nearly 50% of members connected to the broadband internet service and a majority of those signed up for the 500 Mb: gold service level. Initially, we estimated the take rate to be 40% and that the 100 Mb: silver service level would be the most popular. Clearly, this interest level indicated that the demand for broadband in our area is stronger than expected and how needed high-speed internet is here in rural Steuben County. 

In spite of all the challenges that I have mentioned, your cooperative was able to finish the year in sound financial condition with over $454,000 in operating margins before we add any patronage related to our wholesale power provider Wabash Valley Power Alliance. Our equity is down a bit to 45% due to the capital investment in broadband, but still very commensurate to industry standards. Our retail rate is up slightly to cover some of the debt service associated with our capital expenditures as well as changes in our wholesale power costs. However, it still remains very competitive and one of the lowest in the region.    

Finally, I would be remiss if I did not take this opportunity to not only thank our employees but also compliment them on all of their hard work and dedication this year. There is no way we could have managed to work through so many challenges and yet achieve so much without these highly skilled individuals. Every day they show up ready to take on whatever needs to be done. It is a privilege to be by their side and because of their efforts, I’m confident that your cooperative will continue to provide the services our members need to help improve your quality of life.