On April 21, 2020, the National Rural Electric Cooperative Association (“NRECA”), an organization that represents the interests of over 900 electric cooperatives nationally, issued a fact sheet projecting that COVID-19’s economic impact on electric cooperatives will total an estimated $10 billion through 2022. This fact sheet follows an April 6, 2020 letter from the CEO of NRECA to congressional leaders requesting legislative remedies to help address the challenges currently facing electric cooperatives as a result of COVID-19. Among other things, NRECA explains that, absent federal assistance in the form of federal funding and repricing of the United States Department of Agriculture (“USDA”) Rural Utilities Services (“RUS”) debt, co-ops may face severe financial distress due to prohibitions against utility disconnections, increasing electric bill nonpayment, and loss of load.
As detailed in the fact sheet, NRECA predicts a $7.4 billion loss in operating revenues as electricity sales decrease by an average of approximately 5% between 2020 and 2022. This projection corresponds with forecasts from Moody’s Analytics estimating a similar decline in pre-COVID-19 Gross Domestic Product (“GDP”) projections, which historically correlates with comparable reductions in electric co-op sales.
NRECA also projects an additional $2.6 billion loss resulting from higher instances of unpaid electric bills. As explained by NRECA, electric co-op served areas are likely to be significantly impacted by rising unemployment, as nearly 2.5 million jobs in these areas are in sectors of the economy most at-risk during periods of economic downturn (e.g., travel, transportation, and leisure and hospitality industries). As a result of increasing unemployment caused by COVID-19, as well as the widespread implementation of mandatory or voluntary disconnection moratoriums in response to the pandemic, NRECA expects payment delinquencies to peak at upwards of $1.8 billion in 2020.
In its April 6 letter to Senate Majority Leader Mitch McConnell, House Speaker Nancy Pelosi, Democratic Leader Charles Schumer, and Republican Leader Kevin McCarthy, NRECA commended the congressional leaders on the comprehensive and bipartisan response to COVID-19 so far but advocated for further legislative action specifically targeted at aiding electric cooperatives. NRECA made the following recommendations to Congress:
- provide federal funding to electric cooperatives and other providers who are complying with the disconnection moratoria to address their operational shortfalls—namely to cover incurred costs that cannot be recouped through existing avenues;
- reprice USDA RUS loans, which nearly half of all electric cooperatives rely upon to finance their operations, to today’s low interest rates without pre-payment penalties;
- increase the amount of lending available under the RUS Guaranteed Underwriter Program;
- provide internet service vouchers to families and small businesses who are unable to pay their internet service providers, thus avoiding the need for such providers to disconnect service due to nonpayment;
- make additional investment in existing programs, like the USDA RUS ReConnect Broadband Loan and Grant Program with slight programmatic adjustments around eligibility of applicants and available areas; and
- direct the Federal Emergency Management Agency (“FEMA”) to swiftly provide pending funds to the communities that have been devastated by past disasters, noting that many electric co-ops in Florida have still not received FEMA reimbursements for the impacts of Hurricane Michael in 2018.
Click here to read NRECA’s fact sheet, and click here to read NRECA’s letter to Congress.