This month's question: How would a law that allows electric cooperatives to reprice their RUS loans help your members?
Answer: Menard Electric has been an RUS borrower since its 1936 incorporation. We now hold $25.5 million in RUS debt, all of which was utilized for system upgrades and construction. Last year after the reality of the pandemic set in and the dire consequences for our members became apparent, we joined with NRECA and others to support the Flexible Financing for Rural America Act. By allowing borrowers like Menard Electric to adjust the interest rate and/or terms of a qualified RUS loan without penalty, it provides a level playing field with other critical infrastructure utilities. At that time, about 15% of our residential members were out of work, and a majority of our large commercial members had slowed or stopped operations. Despite Illinois' recent reopening and the ability for many members to get back to work, some large commercial services continue to struggle. It goes without saying that a 2021 rate increase would be ugly for our membership. We estimate savings of $2.3 million in interest payments if the RUS bill passes. For our small cooperative, this amount matters. We continue to support the proposed legislation and were elated in June when our state's senior senator, Dick Durbin, announced his co-sponsorship. Joining him are six members of our House delegation. We hope the bill keeps gaining traction and helps put the pandemic in the rearview mirror.
Answer: We have about $60 million in RUS debt. We used the money for construction and maintenance—replacing poles, transformers, that kind of thing. We’d like to refinance about $50 million. With new interest rates of around 2%, we could save $5 million to $10 million. It’s real money. In my mind, we’re not asking for special treatment. We’re just asking to be able to do what every other business is able to do and what homeowners are able to do when they refinance their mortgage. We’re getting ready to aggressively replace old infrastructure. Just allow us to refinance, and we’ll put 100% of it back into the infrastructure. Our plant is getting pretty old. We would replace the parts built back in the ’50s and ’60s. The savings would make it possible for us to enhance the reliability, and maybe the capacity, of our system. And we could do it without raising rates. With all the talk in Washington, D.C., about the importance of improving infrastructure, it seems like perfect timing for this RUS bill to pass. They need to make sure they don’t forget about the electric grid as they focus on infrastructure.
Answer: We have about $88 million in RUS debt. Right now, if we try to refinance, the penalty is so high that it's not worth it. Depending on when this bill passes, we could save $27 million to $40 million. With interest rates going up, we need this legislation to pass ASAP before repricing becomes a moot point. All the co-ops in Florida have a total of $1.7 billion in RUS debt. Repricing it at lower interest rates could save about $400 million over the life of the loans. For Talquin, passage of the bill means we would not have to do a rate increase, and it would possibly allow us to lower our rates this year. Some of the poorest people in the state live in our territory. I would love to do a downward adjustment to help our membership. However, without the ability to reprice our debt, we'll most likely have to raise rates next year. Both of our Florida senators and Talquin's two U.S. representatives support the bill. It seems like such a no-brainer for Congress to pass it. Every other business in the country gets to refinance their debt at lower interest rates without penalties. Why does everybody else get to do it besides us? Does the government really need to make money off of rural electric cooperatives?
Answer: We currently have just under $87 million in RUS debt, which is largely attributable to our 6% ownership in the state's only nuclear generation station. If the proposed RUS debt refinancing aspects of the Flexible Financing for Rural America Act are approved, we estimate our potential savings would be $20 million to $25 million over the remaining life of these loans, or about $1 million a year. When considering all of the co-ops in Kansas who are RUS borrowers, the estimated total savings to rural Kansans is about $100 million. Any savings we can achieve would ultimately go back to our 16 member-owners, greatly assisting with our ongoing rate stabilization efforts. While our average member rates over the past couple of years have been the lowest in over a decade, all other aspects of our business being equal, we could keep our rates stable and maybe even lower them. To date, we've had great support from the Kansas congressional delegation. Our two senators are both co-sponsors of the RUS legislation, and on the House side, several have signed on as well in recent months. We continue to advocate strongly for this important legislation, as having the opportunity to refinance and take advantage of lower interest rates, as other business owners and homeowners have been able to do, would be a benefit to the many lives co-ops proudly serve in rural America.