JUNE 2025
THE MESSENGER A Publication for North Arkansas Electric Cooperative Members
Working for You; Caring for Our Communities For more than 85 years, North Arkansas Electric Cooperative’s directors and employees have worked to improve the quality of life of those we serve — our more than 30,600 members. The co-op does this in a multitude of ways, including: • By maintaining more than 5,000 miles of electric line in portions of eight counties to ensure reliable service and public safety. • By delivering fiber-optic internet to more than 21,500 subscribers as well as the economic, educational and entertainment benefits high-speed access affords. • By returning more than $27 million in capital credits to members in the past 10 years and distinguishing NAEC from investor-owned utilities. • By upholding the cooperative principle of “concern for community” and supporting our 12 public school districts, area chambers of commerce, county fair associations, first responders, city ball programs and local nonprofit organizations. This includes our scholarship program, Youth Tour for juniors to Washington, D.C., and athletic shoes for every thirdgrade student. Our cornerstone is providing members reliable, affordable and responsible electricity while ensuring the co-op’s financial stability for decades to come. NAEC operates as a not-for-profit but must generate sufficient electric operating margins to maintain certain debt-toincome ratios as set by our lenders. We must cover operating costs, investment and maintenance of our electric infrastructure, capital credit retirements to members and principal on long-term debt while maintaining sufficient equity. In 2023 and 2024, operating margins from the electric division were negative, $1.1 million and $2 million, respectively. This caused a significant decline in the operating times interest earned ratio (OTIER). With that downward trend expected to continue, NAEC would be in
danger of violating a loan covenant with the federal government, NAEC’s largest lender. The downward trend in electric margins and OTIER prompted the coop to have engineering consulting firm Toth & Associates conduct a cost-of-service study, which recommended a retail rate increase of 9.4%. The proposed increase was reviewed and approved by the Arkansas Public Service Commission (APSC) and went into effect with the May bills. (APSC regulates electric cooperatives and investor-owned electric utilities in the state, and rates cannot be changed without its approval.) Since the proposed rate adjustment was published in the January Arkansas Living, NAEC has received questions that we would like to address.
• Present electric safety to first responders and students • Discuss NAEC and NEXT careers at high schools • Hang Christmas decorations on poles for cities • Give employees’ time and talents to chamber and local nonprofit boards • Join STEM events at schools • Set up booths at county fairs • Enter floats or bucket trucks in local Christmas parades • Staff the gates at Coulter Celebration of Lights • Help replace/repair lights at area ball fields • Allow each employee 8 hours to volunteer with a nonprofit or school of their choice
Why does NAEC need a rate increase?
ORGANIZATIONS NAEC SUPPORTS FINANCIALLY
Until the 9.4% retail rate adjustment with the May billing, NAEC’s retail rates had not changed since 2021 and were based on 2019 costs. In the years since, we’ve been through a pandemic, and the cumulative inflation rate has increased approximately 23%. We’ve also had limited membership growth and increased electric costs. Those increased costs include right-ofway maintenance, materials, insurance, equipment, labor, etc. For example, right-of-way maintenance increased from $1.8 million in 2019 to $4.5 million in 2024. That’s a $2.7 million increase, or 153%. Some members have pointed to NAEC’s 2023 Annual Report stating total margins of $7.7 million. Of the $7.7 million in margins, $6.6 million was proceeds from our fiber division, which includes NEXT, Powered by NAEC. Total electric division margins were just $1 million with negative electric operating margins of $1.1 million driving down overall electric margins. Of the $7.7 million in total margins, NAEC retired $5.7 million in capital credits that year to our members in cash or in bill credits (if less than $50).
NAEC AT WORK IN OUR COMMUNITIES
• City/county law enforcement • School districts’ athletic programs • School districts’ FFA, Beta and other clubs • Chambers of commerce • Volunteer fire departments • Summer ball programs • County 4-H associations • Schools’ robotics programs • Area counties’ cooperative extension programs • Area fireworks displays • Local libraries • Ozarka College • Arkansas State UniversityMountain Home • Spring River Innovation Hub • Baxter Health and its support houses • VFWs and other veterans’ associations • Ozark Gateway Tourist Council • Arkansas State Police Troop I • Arkansas Game & Fish Commission North Central Office • Food Bank of North Central Arkansas • Cave City Watermelon Festival • Red White & Blue Festival • Fulton County Homecoming • Dogwood Days + Many More!