Electric Cooperatives Face $10 Billion in Lost Revenue from COVID-19

Posted: April 22, 2020 at 11:20 am

ARLINGTON, Va. – As the coronavirus pandemic causes local businesses to close their doors and hardworking Americans to lose their jobs, new economic projections show the nation’s electric cooperatives could suffer up to $10 billion in lost revenue through 2022.

According to new research by the National Rural Electric Cooperative Association, electric co-op operating revenues are expected to decline by $7.4 billion as electricity sales fall by 5% through 2022 due to lower U.S. economic output. A surge in unemployment coupled with mandatory or voluntary moratoriums on service disconnections in 46 states is also expected to increase the balance of unpaid electric bills to $2.6 billion through 2022.

“The economic health of electric co-ops is directly tied to the wellbeing of their local communities,” said Jim Matheson, NRECA CEO. “As the economic impact of this pandemic spreads, electric co-ops will be increasingly challenged as they work to keep the lights on for hospitals, grocery stores and millions of new home offices. Policymakers should be mindful of the economic threat facing rural communities and their electric cooperatives by taking steps to prevent the possibility of significant disruptions.”

Not-for-profit electric cooperatives have no shareholders, are owned by the communities they serve and routinely return excess revenues to their consumer-members. Lost revenue can severely constrain the ability of certain electric co-ops to meet the needs of their community. Rural electric co-ops face high fixed costs, including maintaining 42% of the nation’s electric distribution lines to serve just 13% of the nation’s electric consumers

Electric co-ops will be particularly impacted by the economic downturn, and the resulting decrease in electricity sales to commercial and industrial members.

“Electricity powers the American economy and a stalled economy uses less energy,” said Russell Tucker, NRECA’s chief economist. “As GDP growth falls in the wake of COVID-19, co-op electricity sales are projected to decline. We expect reductions in electric co-op sales of 6.1% in 2020, 6% in 2021, and 3% in 2022, for an overall drop in sales of 5% over the period when compared to pre-COVID-19 projections.”

NRECA recently penned a letter to Congress laying out six steps policymakers should take to establish a safety net for rural communities and electric co-ops.

The underlying research was conducted consistent with publicly available forecasts from Moody’s Analytics and using data from other publicly available sources. It projects the COVID-19 financial impact through 2022 on electric co-op operating revenues and unpaid bills.