Will You Benefit From Electricity Deregulation? UNIVERSITY PARK (Centre Co.) The imminent deregula tion of the electricity industry could have a significant impact on Pennsylvania companies and con sumers, and people will need to be ready for the changes deregulation will bring, said an agricultural engineeer in Penn State’s College of Agricultural Sciences. In December, Pennsylvania Governor Tom Ridge signed a law to deregulate the generation of electricity in Pennsylvania, mak ing it a competitive industry. Pre vious deregulations have involved GLENN A. SHIRK Extension Agent - Dairy Lancaster County LANCASTER (Lancaster Co.) Dairy herd profits are affected greatly by the price, the quality and the availability of feeds. Thus, feed inventories can be thought of as good business insurance, a form in insurance that can also be util ized and converted to income. One good way to manage your business risks is to lock in the kinds and quality of feed you need for the next year at reasonable prices. The best time to do this generally is at harvest time; that’s when the selection of feeds is greatest and prices are generally more reasonable. Basically, you have two choices; growing your feed or purchasing it. Growing Your Own Feeds Growing your own feed can be economical, but not in all cases. To be sure, you need to carefully consider ALL costs, cash and non cash, including labor, feed stor age, land charges, interest, taxes, repairs, field and storage losses, as well as the obvious production costs. When you consider all these costs, your home grown feeds may be more expensive than you think. If you grow your own feeds, you have several management op tions: 1. Grow all your forages and grains. 2. Grow all or part of your for ages, but purchase your grains, especially if you are short on land and if you can purchase grains cheaper than you can grow them. Also, be aware of the fact that for ages produce more feed nutrients per acre than grain. This translates into higher milk yields per acre and more income per acre. 3. Do all the field work your self. 4. Hire a custom operator to do all or some of your Held work in order to reduce your cost of own ing, operating and maintaining ex pensive field equipment It also reduces the demands on your own labor so you have more time to manage the herd and perform other critical tasks. S. Share field machinery with your neighbors in order to reduce machinery investment costs. trucking, airline travel, natural gas and long distance telephone service. “In 1996, Pennsylvania con sumers spent $lO billion for electricity,” said Dr. Dennis Buffington, professor of agricul tural engineering. “If the price of electricity drops to the national average because of deregulation, then Pennsylvania consumers will save $1.5 billion per year. The savings could rise to $2.5 billion per year if rates drop to the antici pated competitive prices when deregulation is fully im- Purchasing Feeds If you are purchasing feeds, you also have several management op tions. 1. Buy feeds at harvest time or as you need them. If you buy feeds at harvest time and lock in their prices, you can take delivery im mediately, or at a later date. To take immediate delivery you as sume the cost of storage and the risk of storage losses. If you take delivery at a later date, expect to compensate someone else for these costs and risks. Either way, you tie up capital for several months, but the interest on this capital can be peanuts when compared to the potential savings in feed costs and to the peace of mind of knowing that you have secured the feeds you need to and at a known cost. That’s good business! If you take out a loan or note to make these early feed purchases, the loan payments may begin immediately before you start generating income from the use of these feeds. Therefore, to protect your cash flow, you may want to ask your lender about lines of credit and other forms of crea tive financing. 2. Work with your feed com pany, your boker, or your supplier and lock in supplies and prices of feed supplements and commodi ties when prices become favor able. 3. Buy in bulk to take advantage of bulk discounts. If beneficial, cooperate with neighbors to as semble bulk orders. 4. Shop and negotiate for favor able prices. Strive for early pay ment discounts. If appropriate, hedge feed prices, and rely upon the advice and service of experi enced brokers if necessary. 5. Remember, when you buy di rect. you are in charge of quality control. Be sure you get the qual ity and weight you paid for. Col lect representative from EACH delivery. Accurately identify and label these samples and set them aside for future testing if circum stances dictate that you do so. cir cumstances such as: poor herd performance, residues in meat and milk, etc. Also analyze samples for moisture and nutrient content so you can balance rations more accurately. plemented.” One-third of all residential, commercial, and industrial cus tomers must have freedom of choice in selecting an electricity provider by January 1,1999. Two thirds of all customers must have choice by January 1,2000, and all customers must have it by January 1, 2001. Deregulation will result in many changes, and utility compa nies already are establishing pilot programs to gain experience with the deregulated environment. ‘The state Public Utilities Com mission currently guarantees investor-owned utilities the op portunity to make a profit,” Buf fington said. “In the competitive environment, these companies will no longer be guaranteed a profit. Rural electric cooperatives have never been guaranteed a profit, since they are operated as nonprofit cooperatives.” Wanted Within 60 miles from Lancaster, PA. 1000-2000 head - early wean nurseries. Remodel existing buildings or build new one. v We offer: * A contract you can count on * Positive cash flow & Depreciation write-offs * Quality Service Personnel * PIC Genetics (mmm) IRRIGATION SEASON IS COMING We specialize in irrigation desig If you are looking for sprinkler traveling guns, a drip system or system, call us. We will design system for you Travelers AG-Rain Cadman Evergreen ABI Sprinklers & Guns Rainbird Nelson ZIMMERMAN IRRIGATION INC.i RD #3, Box 309, Miffllnburg, Pa. 17844 1-800-452-5699 Electricity pricing will change. “Today, pricing options are lim ited and relatively easy to under stand,” Buffington said. “In the deregulated environment, there will be many pricing options and some may be very complex.” Customers also will have more choices. “Today you buy just your electricity from your designated utility company,” Buffington said. “Soon, utility companies will offer many products and services, which may include propane diesel fuel, energy services, financing, equipment and maintenance.” In addition, many organizations will be vying for your business. “You can expect pesky phone calls just when you are sitting down to enjoy supper,” Buffing ton said. “If that happens, investi gate offers that sound too good to be true. They probably are.” Consumers should begin to become better informed in order Pumps Kifco Caprari Cornell Monarch Marlou Power Units John Deere Cat. rw to respond to the upcoming dere gulation. First, become aware of your own electricity needs. “Document how much electricity yoli use and when use it, then identify what equipment or opera tion uses the most electricity,” Buffington said. “If you’re a fanner, document how much electricity you use, both in kilowatt hours and dollars, to produce 100 pounds of milk, one dozen eggs, one pound of meat, one flat of bedding plants or one bushel of fruit,” Buffington said. “After you have carefully documented how and when you use electricity, then you will be able to negotiate effectively to get the best buy for electricity.” More informaiton about dere gulation is available from your utility company, trade journals, the Pennsylvania Public Utility Commission, or from Agricultural and Biological Engineering Ex tension, The Pennsylvania State University, 246 Agricultural Engi neering Building, University Park, PA 16802. in stock to fabricate any part you may
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