Vol74-6 June 2024

Member newsletter for Southern Maryland Electric Cooperative

In 2023, the cooperative continued its efforts to upgrade and enhance the system’s infrastructure, taking care to maximize the value of every dollar spent while still maintaining the level of reliability and quality customer service SMECO members expect and deserve.

Safety and reliability

The cooperative has a demonstrated track record of providing safe and reliable electricity for its members. The Maryland Public Service Commission (PSC) tracks the cooperative’s reliability metrics and SMECO regularly exceeds the PSC’s standards.

While every employee at SMECO has an integral role in achieving the cooperative’s mission for its members, when it comes to getting the power restored in the wake of a storm or repairing, updating, and installing electrical equipment on the transmission and distribution systems, the utility line crews are some of the most visible members of the team.

Electric lineworker is ranked as one of the 10 most dangerous jobs in the country. SMECO’s linemen work near high-voltage electricity rain or shine—in often challenging conditions—to ensure members have power. Move just the wrong way or lose focus for a split second, and it could be deadly. A job this dangerous requires thousands of hours of hands-on training to ensure that crews are able to do their job well and safely.

Maintaining an adequate number of experienced lineworkers requires consistent hiring and training efforts. In May 2023, Apprentice Group 22 graduated from SMECO’s Apprentice Lineman Training Program to become the cooperative’s newest journeymen linemen. The four-year training program includes over 8,000 hours of training. In May, SMECO also welcomed Apprentice Group 25. This apprentice class will follow the same path as the groups that came before them. They will progress through eight levels that last six months each, passing tests of their knowledge and skills in line work to move up to the next level.

Safety at SMECO is everyone’s responsibility—not just team members working in the field. Employee training includes initiatives to improve and enhance career-related skills, ensure safe work practices, and promote diversity and inclusion. SMECO’s entire workforce also maintains active certification in CPR and first aid. Whether it is within the workplace, at community events, or in public spaces, equipping more than 500 individuals with the skills to respond confidently to medical emergencies promotes increased public safety. It not only saves lives in emergencies, but also promotes a culture of preparedness and empowerment within the community.

Maintaining a skilled and well-trained workforce is one critical component in providing reliable service; ensuring the electric grid can support the growing Southern Maryland population is another. More and more people are moving to this region and the number of devices using electricity to power daily life increase, as well. It is imperative that the cooperative’s system remain robust, resilient, and redundant. To meet the growing demand for electricity, the cooperative methodically monitors the system, replaces aging infrastructure, reroutes the flow of energy to balance the load across the system, and constructs new lines and substations as appropriate.

Providing our members with options

SMECO signed an agreement to privatize Naval Support Facility (NSF) Indian Head, including main base Indian Head and the Stump Neck Annex in Charles County. SMECO will own, operate, and maintain NSF’s electric system for 50 years beginning in October 2024.

Affordability​

The costs to provide the reliable service SMECO members have become accustomed to—and deserve—continue to rise because of the same inflationary pressures that have caused food prices and other household bills to increase.

A typical residential SMECO bill is comprised of three parts:

1. 1. Standard Offer Service (SOS)
   2. Distribution Services
   3. Regulatory, State, and Local Taxes

The SOS energy charge is the cost of the electricity supply used by the member in that billing cycle. SMECO does not own any generating facilities, so the cooperative purchases the vast majority of energy needed to fulfill its supply obligations from the market using forward contracts with power supply counterparties. The SOS reflects the price SMECO pays on the wholesale market. The cost of energy is a direct, pass-through cost; SMECO doesn’t mark it up in any way.

The wholesale market is constantly shifting. In an effort to provide greater bill stability for its members, the cooperative bills for the residential SOS in two parts: the Energy Charge and the Power Cost Adjustment (PCA). The residential energy charge is a flat rate set to cover the cost of energy purchased. This number remains stable on a member’s bill and only changes when certain triggers are met. SMECO’s PCA is a variable rate put into place to even out the impact of fluctuating energy prices. If SMECO’s PCA hits a trigger of more than 5 percent (up or down) of the residential energy charge for three months in a row, SMECO files to adjust the energy charge to absorb the overage reflected in the PCA and bring the stable price closer to the actual price of power.

In 2023, SMECO members saw the SOS energy charge decrease over 16 percent between January and December because of lower wholesale market prices.

The Distribution Services charge covers the cost of delivering the electricity supply from the wholesale market to members’ homes or businesses. The facilities charge and the distribution charge on the bill cover the costs of cables, poles, substations, vehicles, office buildings, and employees, and more. SMECO’s investment in these facilities doesn’t change with the weather or the amount of electricity customers use.

SMECO reinvests the money from the distribution services charge back into the local economy by supporting local businesses where possible. In 2023, site preparation began for a future substation that will be built near Trinity Church Road and Route 6. Site construction required fill dirt as part of the grading process, so SMECO contracted with small local business J. Calvin Wood Jr. Inc to move unused dirt from the grading and construction of the cooperative’s Engineering and Operations Center to the new substation site. This one small project reflects the overall commitment to reinvest in local businesses.

The cooperative is also committed to building a more sustainable future for its community and the planet. One consistent effort is how SMECO handles its transformers that have been taken out of service.

Before their production was banned in 1979 for posing a risk to human and animal health, polychlorinated biphenyls (PCB) were used as an insulating fluid in transformers and other electrical equipment.

The cooperative’s newer transformers contain mineral-based insulating oils, which are less toxic to humans and the environment.

When SMECO replaces a transformer on its system, the unit’s manufacture plate is checked for its PCB content. If the nameplate doesn’t clearly state that the unit is filled with non-PCB insulating fluid, it is tested for PCBs.

Oil samples are collected in SMECO storage yards to test the transformer oil for traces of the chemicals. Testing on site protects both SMECO and the environment. Under federal rules, a retired transformer is still officially in service—and still the utility’s responsibility—until the unit arrives at the testing facility.

Once the results come back, the units are collected for disposal. The chemicals in the PCB-contaminated units are safely and properly decommissioned, mainly by incineration. Non-PCB units are recycled or rebuilt. Units are drained of their oil, and copper and other metals are removed. Usable transformers are rebuilt and SMECO puts them back into service.

The cost of rebuilding a transformer is significantly less than buying new, saving money for the cooperative and its members.

While the cooperative works hard to reuse, recycle, and repurpose—maximizing the value of every dollar spent—SMECO doesn’t cut corners on its investment in reliability. And the cost of reliability increased exponentially in 2023.

For example, the costs and lead times for necessary infrastructure needed for the electric distribution system have skyrocketed.

1. 1. Breakers for the transmission lines that feed the substations cost $36,000 in 2021. These same breakers are now $65,000 (an 80 percent increase) and the lead times are now 80-plus weeks.
   2. Steel used for steel poles has increased by more than 40 percent since 2021.
   3. Labor and construction costs, coupled with equipment and maintenance
      costs for the cooperative’s workforce and fleet, have increased dramatically since 2021.
   4. Pad-mount transformers—the transformers used in neighborhoods for homes and businesses—cost $2,200 in 2021. Today, those same transformers cost $6,600—a 200 percent increase.

As costs increase, SMECO’s management continues to take the steps necessary to ensure the continued financial wellbeing of the cooperative. In an ever-changing economic landscape, financial responsibility remains paramount to the cooperative’s success and longevity. Through prudent financial management, sound investment strategies, and transparent governance practices, SMECO upholds its fiduciary responsibility to its members, ensuring the continued stability and resilience of the cooperative for generations to come.

The Distribution Services portion of the bill also contains the EmPOWER Maryland Charge, which covers the state-mandated energy efficiency and demand response programs administered by SMECO.

In 2008, the Maryland General Assembly passed the EmPOWER Maryland Energy Efficiency Act, creating a statewide goal to reduce per capita electricity consumption and in-peak demand 15 percent by 2015 based on 2007 levels. By the end of 2015, utilities had achieved 99 percent of the consumption goal and 100 percent of the peak demand goal. In 2022, the General Assembly passed the Climate Solutions Now Act, which shifted the electricity savings goal to 2.25 percent of total electricity sales in 2025 and 2026, and to 2.5 percent beginning in 2027.

The EmPOWER Maryland program runs in three-year cycles and provides a number of opportunities for cooperative members to save energy and money using various rebates and incentives. The fifth program cycle came to a close in 2023 and the continued impact of EmPOWER Maryland is evident in the energy savings being realized each cycle.