2020 Annual Report

By Joseph Redetzke Chair of the Board of Directors and Paul A. Erickson Chief Executive Officer

Sangre de Cristo Electric Association’s (SDCEA’s) annual report follows on these pages. The report includes information about your electric cooperative’s highlights from the previous year, as well as a glimpse into what we anticipate our members and consumers may expect in the future.

This year, though, we must also acknowledge that 2020 was not like any other year due to the COVID-19 worldwide pandemic. As we reflect on the past year, we at SDCEA are grateful we were able to uphold our pledge to you when the pandemic broke out that we would provide available, reliable, safe, and sustainable electricity in what was a chaotic and uncharted event.

We hope to be alongside you all as we, together, rebuild from what has been a very difficult time for many.

Charitable Giving

While no one could have fully anticipated the impacts of the pandemic and the disarray in which many local service organizations were left after it hit in 2020, SDCEA was able to provide financial assistance to many impacted organizations through our charitable giving program. The program underwent a major overhaul of its structure in 2019, and was in place to provide a quick response to this need.

Overall, the SDCEA Board of Directors approved $102,000 for charitable giving in 2020. These giving programs are funded by the Power of Change program and unclaimed capital credits, not by increased rates.

In a first-year partnership with the Chaffee County Community Foundation (CCCF), SDCEA awarded $32,350 in charitable grants in early July to 18 organizations serving Chaffee, Lake, Fremont, and Custer counties, funded by the SDCEA Community Grant Program. Giving was prioritized to support organizations focused on addressing the community impacts of the pandemic.

Investing in educational opportunities, SDCEA awarded $35,000 in total scholarships, including one four-year scholarship at $2,000 a year, and 13 $2,000 one-time scholarships. Through matching funds with our energy partners, two $1,000 scholarships were also awarded. Corporate and CEO charitable donations totaled $7,100 in 2020.

SDCEA also supported local youth through 4-H livestock purchases at the Custer County Fair and at the Chaffee County Fair. We also helped sponsor the livestock sale at the Colorado State Fair in Pueblo.

It is also of note that during this time of great uncertainty, SDCEA’s members also stepped up to help those in need. The number of consumers participating in the Power of Change program, where consumers voluntarily have their monthly bill rounded up to the nearest dollar to be placed in the pool of funds for community grants, increased 8.3% in 2020. The Shine Your Light program, also funded by consumer donations, received $2,500 this year, and $1,500 of those funds were used to help consumers who had fallen behind on their bills.

Area Growth & A Shift in Business Practices

Central Colorado defied what some projected would be an economic slowdown in the housing industry during 2020 due to the pandemic. SDCEA increased the number of homes and businesses served from 12,754 in 2019 to 13,100 in 2020.

In March, SDCEA made the difficult decision to close the business office in Buena Vista to the public for the safety of our consumers and our employees. We changed the way we do business quickly and without precedent to serve our existing consumers, as well as keep up with the increased demand for new electric services during the COVID-19 quarantine.

Line crews remained at the ready to respond to outages. Instead of waiting out the course of the pandemic, field crews also kept hard at work installing new services and making improvements on SDCEA’s system to increase reliability of service.

Accommodations were made and equipment was gathered to allow 20 in-office employees to work from home to provide uninterrupted consumer business service. Employee meetings went virtual and internal means of communication and file-sharing were expanded. SDCEA’s website, upgraded just a couple years ago to provide a better option to do business with those for whom a trip to the Buena Vista office is not convenient, provided options to apply for new service, request upgraded services, use online pay options, and read news about the cooperative, all from your home or business. While the website’s functionality was originally crafted for the convenience of consumers, it quickly became a necessity as many of us were quarantined at home.

SDCEA’s services proceeded uninterrupted despite the ever-changing living environment most in the pandemic faced.

Sales & Revenue

Early in 2020, SDCEA’s revenues were well below 2019 due to mild weather and a sharp decline in small commercial sales because of COVID-19 related business closures. Additionally, Colorado Governor Jared Polis issued an Executive Order with a moratorium on disconnections and late fees due to non-payment, further reducing revenues.

Due to people spending more time at home, the reduction in small commercial sales was partially offset by an increase in residential sales. A cold November and December further offset the decline in sales. As of December 31, 2020 sales were up slightly at 0.83% over 2019 and revenues were up 0.63% over 2019. Residential revenue increased 2.9%. Small commercial revenue was down 5.13%.

Wildfire Mitigation

Colorado experienced three of the state’s five largest wildfires in history in 2020. Communities were devastated by loss of life and property, as well as the environment in which they lived. Smoke filled the air in central Colorado and throughout much of the state for months.

SDCEA has long recognized the potential for a devastating wildfire in our service territory sparked by vegetation in contact with electric lines. Determined in 2020 to act on our concerns and to help sustain local communities, an accelerated program was needed to address this issue.

After determining that then-current funding levels for wildfire mitigation along SDCEA’s electric lines could not accomplish the need for increased, immediate mitigation, in October the SDCEA board approved a monthly rate rider to help pay for increased mitigation efforts. Revenue from the rate rider will be used only for the specific purpose of wildfire mitigation. The wildfire mitigation rider will be reviewed periodically for effectiveness by the board. The monthly charge will “sunset,” or be removed from SDCEA bills, when the wildfire mitigation rider is no longer necessary.

We hope that through this commitment, the high quality of life for those living in our region will remain long into the future.

Renewable Energy & Energy Efficiency

If you are looking into investing in a solar installation, we have the information you need to make an informed decision on your purchase. SDCEA does not sell solar systems. However, we can provide an impartial evaluation of the cost and benefits of your project. You can then determine if that project is right for you.

SDCEA has one of the highest percentages of home and business solar installations in the state. In 2020 net meter accounts (accounts that measure solar production) were up to 450, compared to 393 in 2019 and 317 in 2018.

The 2-megawatt (MW) Trout Creek Solar facility went on line on January 31, 2019. Since then, the facility has produced more than 10,000 megawatt-hours (MWh) of renewable energy, about 10% below projections due to mechanical downtimes. The Trout Creek Community Solar program had 14 subscribers as of the end of 2020.

As a member/owner of Tri-State Generation & Transmission, our wholesale power supplier, SDCEA directly benefits from more than 475MW of utility-scale wind, solar, and other renewable projects currently on line through Tri-State. Tri-State’s estimate for the percentage of emissions-free (renew- able) energy consumed by its members’ retail customers in 2020 is 33%. Tri-State is currently developing an additional 100MW of solar and 104MW of wind-powered projects. Once on line, those projects will increase Tri-State’s wind and solar resources by 45%.

Combined with about 5% of our power supply from local sources, such as from roof-top solar and the Trout Creek Solar facility, SDCEA projects nearly half of our power will be obtained from renewable sources in the next few years.

SDCEA also prioritizes keeping electric costs down and has not increased electric rates since July 2017. The SDCEA board approved undertaking a comprehensive cost of service study and rate review in 2020 to evaluate current rates, as well as explore new rates that allow for better integration of distributed energy resources and new technologies for beneficial electrification such as electric vehicles, batteries, and cold-cli- mate heat pumps. SDCEA engaged a leading national rate consultant to assist SDCEA staff with the project. The study and rate review will be completed in 2021. New rate recommendations are expected to be developed from information gained from the review.

Based on the rate study findings, the new rate options will complement efforts to decrease energy-related emissions, and to encourage energy efficiency. These tools will allow consumers to better manage their electricity usage and their monthly electric bill.

SDCEA is your trusted, local, objective energy partner. If you have questions about carbon reduction, renewable energy, or energy efficiency, please contact us.

Improved System Delivery

An aggressive work plan was put in place in 2020, despite making accommodations for the pandemic.

Construction projects in 2020 included rebuilding SDCEA’s main feeder from Buena Vista to Twin Lakes in Chaffee and Lake counties. This project will increase reliability in service to consumers who are served by the Buena Vista and Twin Lakes substations. It also gives SDCEA the capability to shift loads carried along the lines from the substations to restore power more quickly in the event of an outage if needed. The project is 18.5 miles long.

SDCEA rebuilt a 12.5-mile section of the electric infrastructure from Mount Princeton Hot Springs west to St. Elmo over the last year. The project will increase service reliability and allows Colorado Central Telecom to use the line to provide fiber internet service to the Chalk Creek area in Chaffee County.

Work began on a six-phase project to rebuild and take ownership of all electrical infrastructure in the Chateau Chaparral community in central Chaffee County. When the project is complete, SDCEA will add more than 300 new accounts to our system.

Power cable replacement projects were completed in Glen Vista and Blumenau subdivisions in Custer County to improve reliability of service.

Community Outreach

SDCEA hosted a Business After Hours gathering just prior to the pandemic shutdown. A public Q&A, which focused on solar and other environmental topics, was held with CEO Paul A. Erickson during the event. SDCEA intends to participate in more public forums once the COVID-19 pandemic abates.

To protect the health of our communities and employees, as well as adhere to state and county directives on how many people were permitted to gather in a common space, SDCEA’s community meeting room was closed to the public for much of 2020. We pledge to open the room again when it is deemed safe to do so.

Capital Credits

SDCEA is a non-profit electric cooperative. At the end of the year, our financial statement shows if revenue exceeded costs and resulted in a positive margin. Margins are used by SDCEA for operating capital and, over time, may be paid back to our members in the form of capital credit refunds when the financial position of the cooperative permits and policy provisions are met.

If you had electric service with SDCEA during a year for which the board of directors approved the return of capital credits, that amount will be reflected as a bill credit on your November bill. Refund checks are also sent to those who are no longer members on our system. In 2020, $676,216 in bill credits and capital credit checks were returned to members who had service here in 1996, 2002, and 2003.

SDCEA Governance

SDCEA is governed by a seven-member board of directors elected from and by the membership. The board establishes operating policies and directs the cooperative’s overall business operating goals.

Three director seats on the SDCEA board were open in 2020. Joseph Redetzke and David Volpe ran unopposed and were re-elected for three-year terms. Incumbent Director Suzanne Kelly was challenged by Jo Reese and Kelly was also re-elected for a three-year term.

Generally, board elections are held in conjunction with SDCEA’s annual meeting, as is planned for 2021. However, for the first time in SDCEA’s 81-year history, the annual meeting was canceled in 2020, the result of the pandemic.

SDCEA worked hard to ensure an open election in which all members could participate, despite the annual meeting cancellation. An expanded election process was developed for candidates for SDCEA board seats. Candidates were posed a series of questions about their interest in running for the SDCEA board. The answers were highlighted in a four-page piece that was featured on the website, and printed in Colorado Country Life magazine, and arrived with ballot information to member voters.

Director elections took place by mail only, and votes were processed by a third-party election management company.

Also of note in 2020, completing his coursework online, SDCEA At-Large Director and Vice President Dan Daly received his Board Gold Credential in September, an achievement that recognizes his significant commitment to ongoing education regarding the operations of an electric utility.

Annual Meeting

We hope you will join us for the upcoming annual meeting on June 9 at Mount Princeton Hot Springs Resort, 15870 CR 162 in Nathrop. Due to health guidelines limiting seating at the event, attendees must pre-register to attend. SDCEA will follow all safety guidelines and public health orders to keep our staff and members safe during the meeting, including if necessary, limiting the number of attendees. You may reserve your seating for the meeting on our website, or by calling us toll-free at (844) 395-2412. Meeting check-in registration will begin at 9 am; the meeting starts at 10 am.

SDCEA’s business-only format for the meeting will include the election of directors; reports from SDCEA President Joe Redetzke and CEO Paul Erickson; guest speakers from the Colorado Rural Electric Association and Tri-State Generation and Transmission, and more. An open session at the end of the meeting will be held and questions from the audience will be taken by SDCEA’s board and management team.

Now nearly halfway into 2021, many of the challenges of 2020 have not entirely disappeared. But you, and SDCEA — your community electric cooperative — have proven to be resilient. And, as we close out the 2020 business year during our annual meeting, we hope that together we will move toward a more positive, brighter 2021. One thing you can count on is SDCEA is ready to provide reliable, safe, and sustainable electricity to meet your needs now and into the future.

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79th Annual Meeting Condensed Minutes

June 20, 2019  in Westcliffe, Colorado

Awaiting approval due to the 80th Annual Meeting Cancellation because of the COVID-19 pandemic in 2020.

The 79th Annual Meeting of the members of Sangre de Cristo Electric Association, Inc. (SDCEA) was called to order by President Joseph Redetzke at 10 am on Thursday, June 20, 2019, at Cliff Lanes, Westcliffe, Colorado.

• Invocation – Redetzke introduced SDCEA CFO Donnie Schell to give the invocation.
• Pledge of Allegiance – Redetzke led the Pledge of Allegiance.
• National Anthem – Redetzke introduced Paul Erickson to lead the membership in the singing of the National Anthem.
• Quorum requirements – SDCEA Attorney Jack P. Wolfe reported quorum requirements are 50 members registered in person. 58 members were registered. Wolfe declared a quorum present.
• Close registration – Wolfe closed registration at 10:07 am
• Annual meeting notice, certificate of mailing – Wolfe presented the annual meeting notice and certificate of mailing. Wolfe reported the meeting notice was mailed to all members of record addressed according to information on file, as of the date of record of April 22, 2019. He presented the 2018 annual report and noted it was distributed in the June issue of the Colorado Country Life magazine.
• Introduce director nominee – Wolfe introduced director nominees.
  Uncontested: Fremont County – Geoffrey Gerk (incumbent) Custer County – Tommy G. Flower (candidate)
• Election of directors – Wolfe reported that Fremont County director Geoffrey Gerk, and Custer County candidate Tommy G. Flower are running unopposed, and may be elected by voice vote. Motion carried to elect Gerk and Flower to three-year terms by voice vote.
• Minutes of the 78th annual meeting – Wolfe entertained a motion to dispense with the reading of the minutes of the 78th Annual Meeting held June 20, 2018, and approve them as written. Motion was made and carried.
• Introduce directors – Redetzke introduced directors present.
• Recognition – Redetzke recognized Kaufman and Wolfe who are both attending their last SDCEA annual meeting as director and attorney for SDCEA.
• Introduce Guests – Erickson introduced guests: former directors; Phil DeLuca, Arlie Riggs, and Howard Eggleston; former employee Kenneth Goertz; Tri-State Generation & Transmission Senior Vice President of Organizational Services and Chief Technology Officer Ellen Connor, and Relationship Manager Mike Frailey; CREA Executive Director Kent Singer. Member Janice Yalch was presented flowers in recognition of her recent citizen of the year as well as her regular attendance at SDCEA annual meetings over the years.
• President’s report – Redetzke discussed the growth experienced by SDCEA during 2018, now serving over 13,000 meters which is an increase of 275 new services. He discussed the importance of electricity in our daily lives and how essential it is to provide health care, running businesses, operating schools, and more. The innovative efforts of SDCEA to deploy the 2-megawatt utility scale Trout Creek Solar project. Redetzke mentioned the impact SDCEA has on the youth in our service territory by awarding approximately $39,000 in scholarships and sending five high school students to Washington D.C. with the Colorado Rural Electric Association’s (CREA) Youth Tour.
• CEO’s report – Erickson spoke about SDCEA’s commitment to clean energy. A few of the efforts undertaken by SDCEA are the Electric Vehicle Charging Stations installed in Buena Vista that SDCEA received a $39,000 grant to install. He spoke about more than 317 privately-owned roof-top solar, wind, and hydro net meters in operation in 2018 and that SDCEA expects to add approximately 60 more in 2019. Erickson also discussed future efforts to allow consumers to purchase additional power from SDCEA’s Trout Creek Solar project. He talked about a new “prepay” program that will be available to consumers which will help those consumers not able to pay a deposit, to start electric service. Erickson introduced the new logo for SDCEA to the members present.
• Treasurer’s report – Abel presented the Treasurer’s report and addressed the 2018 financial data as shown in the annual report.
• Guest speakers – Erickson introduced Ellen Connor, Senior Vice President of Organizational Services and Chief Technology Officer and Kent Singer, Executive Director of the Colorado Rural Electric Association.
• Power supply report – Ellen Connor spoke about how cooperatives differ from investor-owned utilities. Connor also discussed membership/ownership of Tri-State.
• Colorado Rural Electric Association report – Kent Singer discussed legislative issues important to electric cooperative consumers.
• Old, unfinished, or new business – There was no old, unfinished, or new business.
• Questions – Redetzke and Erickson addressed comments and questions from members about renewable energy battery storage, plans for expanding service in the Wet Mountain area to improve reliability and remove dependence on Black Hills Energy. Problems with renewable energy and electric vehicle mandates were raised by a member. True-up for net metered account consumers was discussed.
• Door prize drawing – Drawings were held for one $100 bill credit, two $50 bill credits, four $25 bill credits, and one television provided by Tri-State.
• Meeting adjourned at 11:30 am

Respectfully submitted,
Suzanne Kelly, Secretary, Chair

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2020 Financials

Comparative Balance Sheet

Assets	12-31-2019	12-31-2020
Total utility plant	$67,427,075	$69,789,793
Accumulated provision for depreciation	$(22,009,625)	$ (23,630,410)
Net utility plant	$45,417,450	$46,159,383
Total other property and investments	$11,157,996	$11,052,251
Cash-general funds	$210,090	$2,204,639
Cash-special construction funds	$1	$1
Investments	$842,800	$342,800
Accounts receivable	$2,172,721	$2,487,361
Material and supplies	$896,416	$1,153,602
Prepayments	$10,720	$19,204
Other current and accrued assets	$141,551	$207,719
Deferred debits	$681,690	$569,942
Total assets and other debits	$61,531,435	$64,196,902

Liabilities	12-31-2019	12-31-2020
Equities	$4,255,939	$4,865,264
Patronage capital	$18,577,001	$18,158,990
Long-term debt	$31,910,316	$34,182,060
Notes and accounts payable	$1,408,126	$1,688,570
Consumer deposits	$417,065	$462,456
Current maturities-long term debt	$1,900,550	$1,653,000
Other current and accrued liabilities	$924,266	$1,026,481
Regulatory Liabilities	$1,350,000	$1,350,000
Deferred credits	$788,172	$810,081
Total liabilities and other credits	$61,531,435	$64,196,902

Operating Revenue & Expenditures

Operating Revenue	2019	%	2020	%
Residential	$15,077,260	72	$15,530,758	74
Irrigation	$126,889	1	$130,683	1
Small commercial	$4,645,468	22	$4,418,817	21
Large commercial	$725,794	3	$705,179	4
Street lighting	$92,378	0	$93,751	0
Other electric revenue	$156,682	1	$87,007	0
Sub-total	$20,824,471	99	$20,966,195	100
Revenue deferral out	$(450,000)	NA	NA	NA
Revenue deferral in	NA	NA	NA	NA
Total operating revenue	$20,374,471	NA	$20,966,195	NA

Expenditures	2019	%	2020	%
Cost of power	$10,173,741	51	$10,308,153	49
Operations and maintenance	$3,933,824	20	$4,615,171	22
Administrative and general	$2,486,330	12	$2,503,032	12
Depreciation and amortization	$1,922,151	10	$1,922,061	9
Taxes, interest, and other deductions	$1,626,372	8	$1,572,049	8
Total cost of electric service	$20,142,418	101	$20,920,466	100
Operating margins	$232,053	NA	$45,729	NA
Non-operating margins	$526,404	NA	$426,736	NA
G&T capital credit	$375,900	NA	$222,055	NA
Other capital credits	$199,001	NA	$263,369	NA
Net margins or patronage capital	$1,333,358	NA	$957,889	NA

Comparative Statistics

2020 Board of Directors