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into a contract to bridge the gap between current contracts and the LS Power contract. Sloan said he did an exhaustive
search for a power supplier and felt "very lucky" to have landed the deal with LS Power.
"I contacted everybody who is anybody," Sloan said. "I mean I contacted people all the way in Texas and Oklahoma, Kansas,
Kentucky, Indiana and Mississippi. I contacted just about everybody who is anybody to see if they had any power available to
sell us."
Sloan said he found the prices to be very high. He said one supplier quoted him a price that was triple SWECI's current
contract rate, making him all the happier with the deal he finally landed.
While AmerenIP entered into short-term contracts to buy electricity, the SWECI exec said he thought the smart thing to do
was to lock in rates for as long as possible.
"We can sit here and roll the dice and try to do a five-year deal each and every time," said Sloan, "and I know some
co-ops and municipals have done that and are still planning on doing that, but we just feel like that is placing too much
risk on our customers. We found through surveys that the No. 1 thing that our customers want - as far as pricing from us -
is stability. Stability, not necessarily the lowest rates in the world, but just don't be coming along with an 8 percent
rate increase every year. That's what we were shooting for. And we are still going to be below the average national price
for power, even with a 20 percent increase or there about," he added.
Sloan said that the SWECI office was deluged with calls from customers when the news broke about AmerenIP's rate hike. He
said people figured if big companies like Ameren were hiking rates 50 percent or more, then a little cooperative like SWECI
was really going to get hurt. Sloan said his customers were delighted when they learned their rates were only going up 20
percent and maybe even less than that.
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According to Sloan, the 78 megawatts per day that SWECI is purchasing via the agreement is more than what is needed to
service its customers.
"The icing on the cake for us is that we have extra power to sell," he said. "Let's say today we only need 50 MW and
we're going to have 78 MW under contract, well that 28 MW that we're not using we're going to sell to Ameren or ComED, and
we're going to make a little money on that. And when we do, we're going to turn right around and give that profit to our
customers. So if we make anything off of that, then our rate increase may only be effectively 10, 12 or 15 percent. That was
our strategy on it anyway."
SWECI's customers have not seen a rate increase in 20 years - and, according to Sloan, there have been years when they've
received months of free electricity. "When we have more money than we need to do business, we give it back," Sloan said.
The contract with LS Power provides for a small escalation of the rate each year, but Sloan says he thinks the growth in
usage caused by new development in SWECI's territory will more than take care of that rate inflation. He expects that after
the initial rate jump, SWECI customers will see little increase over the next 30 years
"The growth that's taking place in our company with adding more customers increases our revenue," said Sloan. "That
growth is going to be enough to offset what we'll call a nominal increase per year in the power costs. We might end up
having to have like a 1 percent increase per year going forward. Any utility - or any company, for that matter - has ongoing
increases in wages and medical care costs and things like that. The fact that Ameren is expecting a 40 to 50 percent
increase, we're pretty pleased that we're only going to go up 20 to 25 percent."
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