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Meter Made: Cooperatives’ Chief Looks Two Ways at RevenueLock Icon

5 min read

As a double-barreled CEO, Buddy Hasten sometimes looks at his companies’ 2023 revenue and casts himself as Dr. Jekyll and Mr. Hyde.

As chief of the Arkansas Electric Cooperative Corp., he relates to the demure Dr. Jekyll, looking to keep revenue down. On the other hand, in leading Arkansas Electric Cooperatives Inc., he’s more like the rapacious Mr. Hyde, striving to elevate revenue.

The difference boils down to the goals of the two nonprofit electric cooperative companies, and to where the revenue comes from and where it goes. And revenue trends show that Hasten and his team’s strategic plan is working. Revenue at AECI, which provides services to the state’s 17 local electric cooperatives and owns a transformer manufacturing company, was up 73% in 2023 — $1.99 billion compared with 2022’s $1.16 billion.

Revenue at AECC, which generates and transmits wholesale electricity to the distribution co-ops, was down from $1.254 billion in 2022 to $962.7 million last year.

“I would say that what you are witnessing would be exactly what we want to happen,” Hasten said in an interview. “There are a lot of things going on here at the co-op to lower revenue at AECC and to raise revenue at AECI.”

The results are intentional, but also a bit lucky, said Hasten, a longtime officer in the nuclear Navy before starting civilian utility work. “I’d rather be good and get lucky than just get lucky,” he said.

Odd Talk for a CEO

As AECC’s leader, Hasten may be the only CEO around who tells audiences he’s working as hard as he can to lower top-line revenue.

“What CEO comes in and says, ‘I’m trying to get paid less money,’” Hasten said. “But if you think about what a cooperative is, our mission is to be affordable, reliable and responsible in providing electricity and services to our 17 member owners.”

Every dollar he manages not to take from the local cooperatives keeps their members’ power bills down. Winter Storm Elliott drove costs up in 2022, but no such storm struck last year, prompting Hasten’s comment about luck.

But risks can come with lowering revenue too much, because “you can start to get to a point where the only way you can continue to lower costs is to defer maintenance and make bad long-term decisions.”

Reliability, after all, is one of the cooperative system’s cornerstones.

He said 2022’s $1.25 billion “was the highest revenue we’ve ever collected from our members.” Spiking natural gas prices and problems with coal deliveries drove up generation costs, and the winter storm compounded matters. “In 2023 we had a hot summer but no winter storm. Our plants ran very well in the summer peak. We set an all-time summer peak in 2023, the highest summer peak load we’ve ever had. But our plants performed very well.”

All of AECC’s 335 employees are based in Arkansas.

Fuel strategies began paying off, too, Hasten said. “Natural gas prices were better and coal deliveries recovered.” And he was happy with the company’s overall performance.

Jekyll vs. Hyde

“I’m hesitant to say this, but I do see myself as a bit of Jekyll and Hyde.”

At AECC, the goal is to lower costs and be affordable, reliable and responsible. “But in the other half of my job, as CEO of AECI, I want to grow and do a lot of things to bring in more revenue and benefits. The companies have very different missions. AECI exists to perform services and provide products to its members and other customers.” AECC’s mission is to provide power.

AECI has a utility sales business, selling poles, wires, transformers, breakers, “you name it,” to electric co-ops, municipal utilities and some investor-owned power companies, Hasten said. The company offers products and services like right-of-way maintenance and construction in Arkansas, Oklahoma, Missouri, Mississippi and Louisiana.

“This helps [customers] control the cost of this stuff, because we can charge a much lower profit margin than maybe a different competitor could,” Hasten said. AECI, which has 3,800 workers in all, employs close to 300 in Arkansas. “We do not exclusively do all work for our members. There are many good contractors that work for our members, doing right-of-way and construction services. But I’d say our bidding probably keeps everybody honest.”

Having a strong local workforce also pays off during catastrophes like the Memorial Day weekend tornadoes in northwest Arkansas. “Instantly, we have 300 people that we can deploy right into the storm zone that are familiar with the local co-ops, familiar with the territory, and familiar with the work procedures.”

AECI seeks to grow revenue through volume, not price markups, he said. “Sam Walton, that famous Arkansan, taught us that if you buy things in large quantities, you get cheaper prices to pass on, and everybody wins.”

Building Transformers

One huge advantage for AECI in the present electric equipment market is its wholly owned subsidiary ERMCO Inc. (Electric Research & Manufacturing Cooperative Inc.), which makes distribution transformers. “We have about 3,500 people working there,” Hasten said, taking raw commodities and building them into transformers. “We made nearly 700,000 of them last year,” helping to ease a “massive nationwide shortage.” The company hopes to make a million transformers a year by the end of 2025.

“AECI is the single shareholder, and AECI is owned by our 17 member co-ops in the state,” Hasten said. “America needs transformers, and the lead times on these things are still longer than anyone wants them to be, but it’s starting to stabilize.”

ERMCO, with major manufacturing operations in Dyersburg, Tennessee, managed to spur production in part by acquiring Spire Power Solutions of Athens, Georgia, in December 2022.

“Our utility sales business is growing, and [after the acquisition] they had a record year,” Hasten said. “I couldn’t be prouder of what’s going on at AECI, from our sales group, managing our inventory, and making sure our members and customers have access to supplies.”

Looking Ahead

With fingers crossed, Hasten hopes the cooperatives can continue their string of success. “Well, 2023 was a good year for us, and I’m hoping that 2024 is the same,” Hasten said. “We started out this year with another one of those really cold winters, but while gas prices did spike, our power plants performed as well as I ever could have hoped. We managed to get through that storm without a real super high cost to our members. So I want to beat 2023 this year, but they threw that winter storm in there. So we’ll see.”

Rob Roedel, senior director of corporate communications for AECI and AECC, noted that AECI’s revenue success means that it sends some fairly big checks back to the local cooperatives, allowing them to charge less for electricity. “The key thing is that those funds go back to the consumer at the end of the power line,” Roedel said.

“Ultimately, the owners of the co-op are the 600,000 meters, serving what we think are 1.2 million Arkansans,” Hasten added. “That’s the key to this whole picture.”

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