Between lost power load and unpaid utility bills related to COVID-19, electric cooperatives could take a financial hit of approximately $10 billion through 2022, according to a new report from the National Rural Electric Cooperative Association.
"The economic health of electric co-ops is directly tied to the wellbeing of their local communities," association, or NRECA, CEO Jim Matheson said in a media statement. "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."
Through 2022, the trade group anticipates electricity sales will fall by 5%, resulting in sector operating revenue losses of $7.4 billion. NRECA based its estimate on the correlation between a country's economic output and domestic electricity sales.
"As GDP growth falls below pre-COVID-19 projections, electric co-op electricity sales are projected to decline," NRECA noted.
No official U.S. GDP figures have yet been published for the first quarter of 2020, although the U.S. Bureau of Economic Analysis is expected to release them on April 29.
S&P Global Ratings recently revised its GDP forecasts for the U.S. and the global economy in 2020, saying the fallout from the coronavirus pandemic has become "longer and more intense" than previously estimated as countries extend restrictive measures imposed to contain the health crisis.
The rating agency flipped its global GDP estimate for this year to a 2.4% contraction from the 0.4% growth projected in March. The forecast for the U.S. was revised to a full-year GDP slump of 5.2% from a 1.3% contraction.
High rates of utility bill delinquency could reach $2.6 billion, exacerbated by service disconnection moratoria in 46 states and a surge in unemployment, the group said.
NRECA based its modeling of unpaid bill-related losses on the assumption that the domestic unemployment rate will go as high as 20% in the second quarter of the year before it "gradually declines to the 5% range by the end of 2022."
In service territories operated by its member-utilities, NRECA anticipates that about 2.5 million jobs in at-risk industries — including travel, transportation and extraction — could be lost.
As more ratepayers fall behind on their bills, the group anticipates that the unpaid amount will "peak at $1.8 billion in 2020, before declining to $640 million and $160 million in 2021 and 2022, respectively, as the unemployment rate improves and moratoriums are lifted."
Co-ops under pressure to maintain operations
Electric cooperatives already have called for assistance in bridging what they say will be an extraordinary gap between operational expenses and revenues. As member-owned entities, those businesses do not maintain large financial reserves and they return excess revenues to ratepayers.
"Lost revenue can severely constrain the ability of certain electric co-ops to meet the needs of their community," noted an April 22 NRECA press release on the report. "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."
In an April 6 letter addressed to top U.S. lawmakers, Matheson wrote that his group's members need help if they are to "continue delivering safe, reliable and affordable electricity to more than 20 million American homes, farms and businesses."
"Electric bill nonpayment is increasing nationwide and electric load from commercial and industrial users has dramatically decreased," Matheson told Sen. Mitch McConnell, R-Ky., Sen. Charles Schumer, D-N.Y., Rep. Nancy Pelosi, D-Calif., and Rep. Kevin McCarthy, R-Calif.