A Look at Financial Highlights for 2022

By Caroline Mashia, VEC Chief Financial Officer

The year 2022 was one of multiple challenges for VEC. A range of interrelated national and even global forces came together to put significant pressure on our finances.

In 2022, the Co-op faced:

• Rising energy costs – Driven by a shortage of natural gas exacerbated by the war in Ukraine, power supply costs escalated to unprecedented levels during 2022. The energy we procure for distribution to our members represents over 40 percent of our annual operating budget. While our revenues increased $3.3 million over Fiscal Year 2021, the cost of energy increased $5.9 million over the same period.

• Inflationary pressures – Post-pandemic inflation peaked in 2022 at a 40-year record high of 9.1 percent. VEC faced increased costs in every aspect of our business from rising interest to increases for fuel, equipment, and the cost of subcontractors.

• Supply chain disruptions – a national shortage of materials needed for VEC to grow and maintain our electric system was, and continues to be, a significant challenge. The result has been a sharp increase in our cost to procure these materials. One example: severe shortages of key electrical equipment notably transformers – both pad mount and pole mount – has stymied our ability to promptly change or expand service for members. We expect these shortages to last well into this year.

• Severe weather – the co-op was not immune from severe weather events in 2022. Winter Storm Elliot struck the region just in time to cause significant sys­tem damages and multi-day outages around the Christmas holiday period. The severe wind and snow event caused VEC to incur approximately $1.7 million in damage costs. We worked closely with Vermont Emergency Management and officials from the Federal Emergency Management Agency (FEMA) to request a disaster declaration be authorized by the President, which was authorized March 20. VEC is now eligible to receive 75 percent federal reimbursement of eligible restoration costs.

Also on the financial front, in 2022 the Board of Directors authorized $1.65 million of member capital to be returned to our members. Member capital, sometimes called “patronage capital,” represents members’ share of earnings after the co-op pays operating expenses, and is a key characteristic of the coop­erative model. On an annual basis, net operating earnings of the co-op are al­located to members based on the member’s energy billings of the same period. Each year, the Board of Directors determines whether the co-op is in a strong enough financial position to return a portion of this capital to our members.

While we faced significant financial challenges in 2022, our talented and com­mitted team in departments across the co-op leapt into action, coming together to put mitigation measures into place to retain our financial strength without sac­rificing reliability. Where possible, we reduced or postponed expenses to offset increased cost burdens. At the end of the year, our net operating results came in approximately $2 million less than budget. The good news is that we remain a fiscally strong organization and by contending with these challenges, we expect to emerge over the coming year in an even stronger financial position.