Thank You, Roger; District 2 Director Needed

Cooperatives operate according to a set of seven core principles. One of those principles is Democratic member control. What that means is that we are governed by policy-driven initiatives set by a board of directors made up of member-owners. Member participation in electing that board of directors, as well as serving on the board of directors, are key factors in ensuring the cooperative is operated according to the expectations of our member-owners.

In the coming weeks, members of District 2 have a unique opportunity to help your cooperative by serving on its board of directors. Longtime director Roger Diehl has retired from the board after dedicating 40-plus years of service to Nodak, leaving a vacancy on our board. According to our bylaws, the remaining board members must appoint a replacement to serve in director Diehl’s position until the next election in April 2017. Accordingly, the board is asking interested parties to let their interest be known.

Your board of directors fulfills many vital roles for the cooperative that can be both challenging yet rewarding. Not only are they the ultimate decision-makers when it comes to setting the direction of the cooperative, they are also the local connection to the cooperative membership. Board members represent our eyes and ears throughout our service area. They bring back member concerns and suggestions, provide a local neighbor for you to discuss cooperative business with and represent your interests at the board table.

In the coming years, the co-op board and management will face many challenges working to provide reliable service at affordable rates while navigating the onslaught of new regulations and a push toward a carbon-constrained world. Your cooperative can only be as strong as the people who actively participate in it, so your board of directors is looking for someone with a strong commitment and a desire to help Nodak through the challenges that lie ahead.

If you are a Nodak member residing in District 2, meet the qualifications to be a director and want to help shape Nodak’s future, please let us know. Send us a letter expressing your interest and explaining your unique abilities for serving as a Nodak director. For more information regarding the requirements and process for submitting your letter of interest, refer to the notice on page 2 or go to our website at

And finally, I want to express our heartfelt gratitude and thanks to director Diehl for his many years of service on our board and his unwavering support to Nodak Electric and cooperatives in general. He has been a zealous advocate for the betterment of our cooperative and his contributions to making Nodak what it is today will be a lasting legacy. Thank you, Roger.

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Facility charge explained

Undoubtedly, the most unappreciated and misunderstood part of anyone’s electric bill is the facility charge, the monthly fee that is there no matter how much electricity we use. From a rate perspective, it’s one of the most frequent things we get questioned about, so I thought I would use my space here to shed some light on this part of your monthly bill.

There are two basic components to most power bills – the fixed monthly charges and the charges that vary with how much electricity you use. Facility charges are the fixed part of the rate that is there to help ensure equity among ratepayers. If you think about your own property – whether it is a house, farm or business – you will realize that for each of them Nodak has made a significant investment to bring power to that location.

In addition to these site-specific investments to bring power to your home or business, there are also investments needed to serve everyone and are shared by the entire system. All this initial infrastructure cost must be somehow recovered in our rates and be constantly maintained to provide safe, reliable power to our members.

In addition to the electric infrastructure investment, there are a whole host of expenses we incur that have nothing to do with how much electricity each member uses. One very simple example: at the end of each month, we read your meter, calculate and audit your bill, and have it printed and mailed to each consumer. This is a relatively small cost, but illustrates that with some expenses, regardless of how much electricity you use, it costs approximately the same to perform this function for all members in each rate class. Because of this, we include those expenses in the facility charge for each of those rate classes.

If we didn’t include these costs in the facility charge, they would have to be included in the cost of power so Nodak could bring in the proper amount of revenue each month. If we used that approach, the average energy user would pay about the same as they do now, while those who use very little electricity would pay significantly less than their share of the fixed costs of operating the business, and large users would end up paying many, many times more than their fair share of those costs.

I like to think of it in terms of billing you for the power cost in one part of your bill and billing you for what it costs us to deliver the power in another area. The facility charge is meant to cover what it costs to deliver the power to you, and the rest of the charges are meant to cover the cost of the electricity we purchase on your behalf.

Obviously, the cost to deliver power to members can vary significantly. In high-density urban areas, we typically have multiple accounts fed off the same transformer, and we use much less distribution line per metering point than we would for a rural account that has its own transformer and significantly more dedicated distribution facilities. Conversely, some of our largest accounts have an entire substation dedicated to a single account because they have such large power requirements. For this reason, we have different monthly facility charges for the various rate classes based on the cost we incur to deliver power to members of that rate class, independent of how much power is consumed.

Consequently, urban accounts pay a lower monthly fee than rural accounts do, while commercial accounts require a higher monthly fee due to the more expensive metering and large transformers required for those accounts. All this is done in an attempt to bill each rate class an amount closely resembling what it costs to serve that particular rate class.

Hopefully, you can see that a lot goes into designing rates that are both fair and equitable among our members and between different rate classes. Nobody really likes the facility charge, but it is necessary to ensure we have rate equity.

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Staying Connected

When we gather to celebrate the 76th annual meeting of Nodak Electric Cooperative, you’ll see the theme chosen for our event is “staying connected.” As members of an electric cooperative, staying connected is an important notion. Staying connected with your cooperative by attending the annual meeting, participating in cooperative governance and using the latest technology to do business with your co-op are all ways to assist in ensuring Nodak provides the level and quality of service you desire as an owner.

Staying connected with the other member-owners of your cooperative through meeting attendance, political action committee membership and social media engagement brings us all together as a grassroots advocacy group that has strong influence with lawmakers in Bismarck and Washington, D.C. This co-op connection is an important resource for us as we continue to advocate on behalf of our membership to state and federal leaders and regulators.

In 2015, the EPA issued what’s being considered its most far-reaching environmental regulation ever, the Clean Power Plan. Enacted at the direction of the Obama Administration, the Clean Power Plan calls for reductions in carbon dioxide emissions from existing fossil fuel power plants averaging 32 percent across the United States. Each state was given a target level of reduction to collectively achieve the President’s goal. North Dakota was saddled with one of the highest reductions across the entire country at 45 percent! In light of the fact that more than 30 percent of the power we serve to our members already comes from renewable wind and hydroelectric resources, we feel this federal push away from coal goes too far. Nodak has always supported a resource mix that uses all of North Dakota’s bountiful natural resources in a thoughtful, deliberate way. That is why we continue to fight on your behalf and support the 28 states and dozens of others who are litigating this overly burdensome rule.

Another way we work on your behalf is our efforts to keep rates affordable through sound planning for the future. At the end of 2014, we embarked on a long-range plan to help stabilize your electric rates by creating a revenue deferral plan. Through this plan, $4 million was placed in an account to be used in future years to ease the effects of wholesale power cost increases. In 2015, our wholesale power provider put in place a 5 percent rate increase that would ultimately raise the cost of our wholesale power by $3.1 million in 2015. Half of the revenue deferred from previous years was brought back onto our operating statement in 2015 to help delay the need to pass along that wholesale rate increase to our members. Wholesale power costs make up 85 percent of our total operating costs, so being able to soften the effects of wholesale power cost increases is only possible through this long-term planning. Your retail cost of power from Nodak did not increase in 2015.

Technology continues to play a key role in our efforts to provide information and interaction with our membership. In 2015, we added the pay-by-phone feature where members have 24-hour access to account information and payment options right over the phone. We also added our interactive outage map to our web pages so in the event of service disruption, members with Internet access are able to assess the extent of the problem. These new features are just a few examples of how we continually strive to make connections with your cooperative easy and informative. For quite some time now, members have been able to view and pay bills online, sign up for services, read The Nodak Neighbor and much, much more. Of course, you can always pick up the phone or stop into our office and we will be happy to serve you the old-fashioned way – face to face.

The future looks bright for your cooperative. Although weather created a small dip in sales for 2015, we grew by almost 500 new services and our crews installed more than 210 miles of new line. Steady growth in our membership is the key to keeping costs in check. As costs escalate over time, the ability to share those among a larger, more diverse group benefits everyone. On behalf of the board and the staff at Nodak, we want to thank you for the opportunity to serve the membership and manage our growing cooperative.

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New payment option available

New payment option available

On page seven of this month’s Nodak Neighbor you will see an article announcing the rollout of our newest option for paying your Nodak Electric bill, Pay-by-Phone. This is the newest of the many options members have for paying their bill. We brought this new service online for a number of reasons, but security and convenience top the list.

For those members who don’t have a computer with Internet access, or for those who do but prefer to transact their business over the phone, this option is for you. Once your account is set up, Pay-by-Phone allows you to make a payment to Nodak without giving any of your information to a live person. In this method, the entire transaction is done directly with computerized prompts, quickly and easily, 24-hours a day, seven days a week, totally secure.

Now, if paying by phone isn’t exactly your cup of tea, we have a host of options for you to choose from. Signing up for electronic billing will get you the opportunity to view your bill online, pay by credit card or electronic check, print a receipt, review previous months’ bills, etc., all online. Once a month, you will receive an email reminding you that your bill is ready, and you simply log on to our website and pay it over the Internet.

For those who prefer to have the entire process automated, as I do, Auto Pay Bank Draft is for you. When you sign up for this automatic payment plan, your payment is automatically drawn from your checking or savings account on a certain day each month. You still receive a paper “copy” of your bill for your review reminding you of when the payment will be taken out of your account, and for how much. The rest happens all by itself and you don’t have to worry about remembering to pay the bill, write a check or mail it in. It’s very simple.

Of course, you can always drop a check in the mail as folks have done for many years, pay in the drop box in our parking lot or stop into the front desk during business hours and take care of it face-to-face with one of our customer service representatives.

Offering multiple options to transact your business is important to us because we want to make it as convenient as possible for you, our member-owners. We also want to ensure the highest level of security and dependability in each of the options we provide. All of our payment methods employ the highest level of safeguards available, so rest assured your information is safe with us.

Of course, we are always happy to see our members who stop into the headquarters in Grand Forks. In fact, we look forward to it. So, if you are one of the folks who prefers to take care of business in person, stop in and say “hi” the next time you’re here. If you prefer one of the more high-tech options, check out one of the many alternative payment methods we have to offer. You’ll be glad you did.

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Seeing ‘the light’

Have you had a hard time finding incandescent light bulbs in your local store lately? Since 2007, the United States has been phasing out these inefficient bulbs in favor of more energy efficient models. As part of a move toward reduced energy usage, the Energy Independence and Securities Act of 2007 required approximately 25 percent greater efficiency for light bulbs, which effectively banned the manufacture and importation of the most common incandescent light bulbs. Higher wattage bulbs were phased out in 2012, and as of the end of 2014, 40- and 60-watt bulbs are no longer brought into the United States.

By regulating the incandescent bulb out of use, the government has forced consumers to move toward alternatives that are initially more expensive, but use less energy and are more economical to operate. Compact fluorescent lights, halogen lamps and light emitting diodes or LEDs use considerably less energy than the old workhorse incandescent, so they ultimately pay for themselves over time through reduced energy cost.

When these regulations were imposed, they caused quite a stir among folks who did not want the government dictating their choices in the local hardware store. Now that the phaseout is complete, the general consensus is that the regulators got this one right. Incandescent bulbs will go the way of leaded gasoline and high flow toilets and be looked upon as a low-tech product of a bygone era. Consumers, as a result, ended up with a product that works equally as well and is better for the environment.

As I said, regulators got that one right, but one place regulators got it wrong is with electric water heaters. The U.S. Department of Energy (DOE) recently implemented regulations that ban the manufacture of large capacity electric water heaters of 55 gallons or more in favor of a technology that does not work well in colder climates. What the DOE missed is that when used as part of a demand response program, these water heaters become an extremely valuable tool that helps consumers save money, promotes grid reliability, and helps integrate renewable energy. These large capacity water heaters become an energy storage device by heating the water during off-peak hours for use during peak usage times, thereby reducing the need for additional power plants. Grid enabled water heaters truly are an environmental benefit.

Across the Minnkota service territory, cooperative members have approximately 41,300 total electric water heaters in service. Of that number, approximately 8,300 are large capacity units that operate under a demand response or off-peak program. Thanks in part to the three members of North Dakota’s congressional delegation, on April 30 President Obama signed a new piece of legislation that allows us to continue to use these energy efficient tools in this win-win way. Sen. John Hoeven, R-N.D., recently said in a statement “consumers save money, rural electric cooperatives optimize their energy management and, because the water heaters in the program are energy efficient, the environment benefits.”

Many thanks to our congressional delegation for all their hard work in helping the DOE see the “light” on this important piece of legislation.


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Message to our Members

With this annual report, we close the books on 75 years of member-owned energy delivery, and celebrate the growth and prosperity that our cooperative business model has afforded us over those many years. We’ve come a long way since our first meter was energized at the Percy Donnelly farm on Dec. 23, 1939. At the close of 2014, we had 18,646 metered locations spread across 8,040 miles of energized distribution line. That sort of success was again fueled by a good year in 2014.

While 2014 certainly was not ideal for those of us braving the long cold winter, or for our farmers who struggled through a short growing season, it was a good one for electric sales. The frigid winter held on long into spring and returned early in November. A wet start to the harvest also bolstered crop conditioning sales. Those two things, coupled with robust growth in industrial and general service sales, pushed kilowatt-hour deliveries up 5.9 percent over last year to create a new all-time high for energy sales of 1.16 billion kilowatt-hours.

The fiscal impact of this steady growth is reaping benefits in our rates. In November, our power supplier, Minnkota Power Cooperative, announced a 5 percent increase in its rates effective April 1, primarily due to the completion of a 250-mile long transmission line needed to serve the growing energy needs of the Minnkota system. At the cost of $354 million, this line is now officially part of our transmission system backbone and will serve our needs over the next 30-plus years.

The good news is that the strong financial performance of your cooperative has allowed us to establish a revenue deferral plan. By deferring revenue from 2014 into 2015, we are able to absorb, or at least delay, passing along Minnkota’s rate increase through 2015.

Setting aside dollars from 2014 to help mitigate and flatten out rate adjustments is one way your cooperative works to keep dollars in the pockets of our ratepayers. The year 2014 marked a continuation of stable retail rates. We had no general rate increase last year beyond the addition of a one mill pass-through of Minnkota’s renewable energy market adjustment. That’s three years without a rate increase. At some point that will change, but our goal is to make them as small and predictable as possible.

The year 2014 was a nonlegislative year in North Dakota, so our focus was trained more on the national and regional political arenas. In June, the Obama Administration and the Environmental Protection Agency (EPA) outlined a plan to restrict CO2 emissions from existing power plants over the next decade. That draft rule came under heavy scrutiny during its comment period, and many of you were part of the 1.2 million people who filed formal comments on our behalf at the cooperative action network, We are hopeful our grassroots army sent a message loud and clear that we want a common sense solution to energy regulation across America. EPA’s final rule is due in summer 2015.

Closer to home, the Minnesota Public Utilities Commission delayed the construction of a crude oil pipeline through its regulatory siting process. This proposed project would carry Bakken crude oil from western North Dakota through our service area into Superior, Wis. When constructed, this pipeline will add to the growing number of pumping stations we have on our system that already comprise 22.8 percent of our total annual sales. With a projected in-service date of 2017, we look forward to this project getting off the drawing board and pumping oil soon.

At various points throughout last year, we migrated all of our members to calendar month billing. As of now, all member bills begin on the first of each month and end on the last day of each month. We understand that for some members this required a period of adjustment, but this small alteration in our billing cycle has helped tremendously in areas of member communication, accuracy and cash flow. We want to say thank you for your patience and cooperation on this matter.

In keeping with our longstanding philosophy of returning member equity as soon as we can, those of you who were members in 1996 received your share of $1.5 million in capital credit retirements last year. Each year, your share of the cooperative’s margin is allocated to your member account. Those dollars are kept at Nodak and used for financing and operational needs. When your board of directors deems it appropriate, those dollars are deducted from your equity account and sent back to you. In 2014, capital credit retirements averaged $153.07 per member.

Something introduced in 2014 I want to point out is our Electric Heating Rebate Program. In 2014, Nodak teamed with our power supplier, Minnkota Power Cooperative, to provide rebates for new or replaced off-peak electric heating systems. In the short time between May and December, we provided our members with more than $35,000 in rebates as part of this program. This successful program continues into 2015, so if you’re planning a new heating system, make sure you call our Energy Services Department for details.

We encourage you to review the accompanying financial statements, along with the report from secretary-treasurer Luther Meberg. I’m sure you’ll agree that Nodak ended 2014 in sound financial position. We will provide you with more detail about our year during our annual meeting Tuesday, March 31, 2015, at the Alerus Center in Grand Forks. Until then, I hope you enjoy the walk down memory lane provided in the following pages. The last 75 years of Nodak’s history are chronicled in those pages from the time Franklin Roosevelt created the Rural Electrification Administration and our first meter was energized through the major events of the past eight decades.

On behalf of your board of directors and the employees of Nodak Electric Cooperative, we want to thank you for your patronage in 2014 and for the opportunity to serve you. We hope to see you at our annual meeting on March 31.

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Reinvesting in your cooperative

From time to time, I’ve used this space to tout the cooperative business model – the one where the dollars left after paying our expenses are allocated back to our members and eventually returned as capital credits. That cooperative business model has served Nodak and its members well over the last 75 years and again shows a bright spot in 2014 and 2015.

The year 2014 was a good year for your cooperative in terms of net margin, those dollars left over after we pay all of our expenses. In fact, we believe it to be the best ever in that regard. In the world of investor-owned power companies, those margins become part of the stockholders’ value and potentially paid out in dividends or higher stock prices. In the cooperative world, we put those dollars to work for our consumers who also happen to be our owners. That is exactly what we are going to do in 2015.

In April of this year, our wholesale power provider, Minnkota Power Cooperative, will have a fairly modest 5 percent rate increase. The good news is because of the successful year we had in 2014, Nodak will not pass along that rate increase to our members, at least for a while. At our January board meeting, your Board of Directors approved a plan to defer approximately $4 million from 2014 revenues into 2015 to offset much of the wholesale rate increase.

What that means is although Nodak has one of the lowest markups on wholesale power cost of any cooperative across the country, at least for part of 2015 it will be even lower.

Eventually, we will have to pass along the rate increase to our members, but that will depend on factors like the weather, member growth and load growth. When our margins fall below target levels, we will then have to raise our rates to cover this increase. That could happen later in 2015 or even into 2016 or later, depending on how things go. For now, we will put our members’ equity to work in holding the line on our retail rates.

Look for the notice to our 75th annual meeting in this publication and save the date. We’d love to have you join us to celebrate and be our guest for supper.

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Save the date: March 31, 2015


Save the date: March 31, 2015

I hope you all had a chance to read the save the date notice on the previous page for our annual meeting March 31, 2015. Every annual meeting is a special day for us at Nodak as that’s when we get the opportunity to get reacquainted with old friends and meet our new neighbors. Our next annual meeting brings the excitement of marking our 75th year of existence. Seventy-five years ago, when electricity was only available to residents and businesses in urbanized areas, local farmers and landowners banded together, took matters into their own hands and brought the power of electricity to northeastern North Dakota.

Today, few of us know what it was like to live without electricity. We can only imagine the profound impact electricity had on North Dakotans’ way of life, on our economy and on our health. Seventy-five years ago a group of forward-thinking, ambitious, rural residents brought change and shined a light on the need to turn the lights on in rural America.

Now we have a new generation of electric cooperative members. We are owners of the cooperative just like the farmers and ranchers who answered the call to light our area 75 years ago. Much like our founders, today’s co-op members embody the democratic ideals of the cooperative business model of neighbors helping neighbors with the purpose of improving the lives of our members and the communities in which we work and live.

Seventy-five years ago, for-profit electric utilities had determined the urban boundaries they wished to serve, and decided against extending their lines into the rural areas of North Dakota. These profit-minded utilities considered our low population density a poor investment and concluded it was not in the best interest of their investors. Because of the bold initiative of our founders, today Nodak members not only have the power of electricity in our homes, we enjoy the benefits of the cooperative business model. Because the cooperative is democratic, every member has one vote. Our members control and direct Nodak, not money, not politics and not profits. Any revenue left over after paying our expenses and debt service is returned to our members who purchased electricity, not to a stockholder/investor whose sole motivation is a return on their investment.

Over the past 75 years, this business model has served us well. During that time, Nodak has grown from what was initially considered a poor investment by these profit-minded utilities, to one of the larger electric cooperatives in the United States. Today, we provide our members with more than one billion kilowatt-hours annually. We serve members stretching out over almost 9,000 square miles of service area, and do so on 8,000 miles of power lines – all owned by our member-owners.

There’s a lot of history behind that growth, and although the future will not be without challenges, there are bright times ahead. On March 31, 2015, we all will celebrate accomplishments of our forefathers and unite to overcome the challenges ahead. I’d like to encourage you all to save the date and join us for a historical perspective of Nodak Electric Cooperative and commemorate the milestone birthday of Nodak’s 75 years. We hope to see you all then. Until then, I hope you have a happy and safe holiday season.


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Win a trip to Washington, D.C.

Win a trip to Washington, D.C.

I’d like to draw your attention to the advertisement on page 8 announcing Nodak’s participation in the Electric Cooperative Youth Tour. In June 2015, one well-deserving high school student from our service area will join youth from around the state and across the country on a weeklong, expense-paid trip to Washington, D.C.


To apply for this unforgettable experience, students from this year’s 10th and 11th grade classes will submit essays on the subject, “If you were asked to influence other students your age to become more actively involved in their electric cooperative, including attendance at the electric cooperative annual meeting, what would you tell them and why.” One worthy essay will be chosen and its author will represent Nodak in our national capitol next summer.


Fifty years ago, the National Rural Electric Cooperative Association began coordinating youth tours in Washington, D.C. While still a senator from Texas, Lyndon Baines Johnson inspired the idea of the youth tour by suggesting that youngsters be sent to the national capitol “where they can actually see what the flag stands for and represents.” The first years of the tour included approximately 400 young people from 12 states. Today, more than 1,500 students and more than 250 chaperones participate in the youth tour annually.


Youth tour directors from each state will arrange visits with their state’s U.S. representatives and senators’ offices, federal agencies and other educational and sightseeing activities. Student delegates get a chance to see their national capitol up close, learn about the political process and interact with their elected officials, while gaining an understanding of American history and their role as a citizen. They may even have some fun while participating in this valuable leadership experience.


During the youth tour, one student from each state is selected for the prestigious opportunity to serve on NRECA’s Youth Leadership Council. That individual will join the other members of the Youth Leadership Council back in Washington, D.C., again in July to gain a broader understanding of electric cooperatives and the energy industry. During this trip, leadership council members meet with NRECA leaders and youth tour alumni who work on Capitol Hill. One final time, the Youth Leadership Council will gather for about four days at NRECA’s annual meeting the following spring in New Orleans, La.


Since its inception, nearly 50,000 high-achieving students from electric cooperative service areas across America have participated in this program. Many youth tour alumni have gone on to lead companies, serve our country in the highest ranks of government, and to other promising careers.


If you meet the eligibility requirements and are interested in applying to become a part of this prestigious group of young people, send us a submission following the guidelines found on page 8, or call Gretchen Schmaltz at our office with any questions you may have.


Good luck and we look forward to reading your essays.


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Go to and make your concerns known

On Monday, June 2, the Environmental Protection Agency (EPA) reached a milestone in the CO2 debate when they issued proposed rules for limiting carbon dioxide emissions from existing power plants. During the next 120 days, the EPA will accept comments on the draft rules from industry, the environmental community, and folks like you and me. They will then take the next year to evaluate and respond to those comments before issuing a final set of regulations by June of 2015.

The final rules may or may not look much like the initial draft, but there will undoubtedly be changes between now and final passage. Since it’s not likely Congress will be able to act, it will be up to us to make sure the EPA knows how we feel. If you haven’t already done so, please take just a few minutes and go to and let the EPA know you don’t want new regulations that will force an increase in the cost of electricity and erode the reliability of our power supply.

I’ve written articles before about EPA regulations and their approach to reducing carbon. If you have read any of these articles, you might assume that I’m not concerned about the environment. That couldn’t be further from the truth. Whether our electricity is generated from coal, natural gas or wind turbines, we take our responsibility seriously to provide reliable and affordable electricity while doing our best to protect the environment.

What concerns me more than the current state of climate change is EPA’s approach to regulate a solution in an inefficient and ineffective way that will change little more than the cost of your electric bill. At Nodak, our first priority is the safety of our employees and the public. It always will be. Close behind safety comes reliability and price – two things that the EPA’s new rules could affect greatly.

It’s early in the process, and much work will be needed to wade through the 1,600-page proposed rule. It’s very complex, but it will dictate how we operate our electric system and how we use electricity for the next 16 years and beyond.

What we do know, is that it places different CO2 reduction goals on each state based on a formula meant to identify each state’s ability to reduce its carbon intensity. It then leaves it up to each state to determine how it will meet these new thresholds. With each state having the flexibility to develop their own plans, carbon taxes to renewable portfolio standards and everything in between will be discussed and considered as part of this local solution.

What this means for Nodak and its members is that we all need to be prepared to spend a lot of time talking with our state legislators and regulators in the coming years. For now though, the best thing we can do is to go to and express our concern directly to the EPA. The EPA is trying to remove coal from our power supply, and we need to make sure they know we don’t want that to happen.

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EPA wages war on coal

If you have read these articles, or attended any Nodak meetings over the last several years, you have probably heard us talk about the Environmental Protection Agency (EPA) and its assault on coal. Lately, that assault has become more of an all-out war on coal.

North Dakota electric cooperatives own about 90 percent of the coal-based generation in the state, and more than half of the electricity you and I receive as Nodak members comes from these coal-fired power plants. Most of these plants were built in the 1970s at a time when the federal government passed the Fuel Use Act, which prohibited generating power with natural gas. Since that time, North Dakota’s electric cooperatives have invested more than $2 billion to protect the environment by installing emission control equipment on their plants and annually spend an additional $100 million to operate the equipment. This environmental stewardship has helped North Dakota become one of only seven states in the nation that comply with all federal ambient air quality standards.

That’s a quick little bit of history. Now, the rules are changing again. The EPA and our president, through a series of executive orders, are placing unattainable limits on carbon dioxide emissions in an effort to force us to abandon the clean coal foundation of our generation fleet in favor of that very fuel source that was prohibited in the ’70s – natural gas.

Aside from the fact that as a rule of thumb, natural gas is a more expensive fuel source than coal, what is even more concerning is the volatility of its price and the capability of the nation’s pipeline infrastructure to deliver the product.

According to the U.S. Energy Information Admin-istration, the price for natural gas used to generate electricity in the U.S. has increased nearly 70 percent in just the last 12 months alone, and more than 100 percent in the last two years. Add on top of that the fact that during times of highest demand, the current natural gas delivery system is incapable of servicing the need, and you have a recipe for disaster.

I’m sure you all remember last winter’s polar vortex, that period of extreme cold weather across the entire nation. As we were experiencing those 30-plus degrees below zero, power delivery was becoming very difficult across the nation. Locally, we had 30 percent of our generation mix from wind turbines provide absolutely nothing when we needed it the most. Obviously, wind turbines don’t produce when the wind doesn’t blow, but they also don’t work when it’s 30 below zero, whether the wind is blowing or not.

On a wider scale, during the polar vortex natural gas generation was dropping offline as utility operators out East had trouble finding enough natural gas to keep the power plants running. The wholesale price of electricity rose to more than 20 times the retail price consumers usually pay, and utilities with purchase power clauses in their rates were passing those high costs on to their consumers. The Los Angeles Times recently reported that homeowners in parts of Pennsylvania received bills in January as high as $1,250 for the month because their utility had to purchase replacement power in an outrageous wholesale market.

The point of this discussion is this: as coal-fired plants shut down across the nation and there is a shift to more expensive, less reliable sources, there is a growing fragility in the U.S. electric system that is likely to create price shocks. Now, as members of the energy-consuming public, we have two options available to us. We can stand idly by as costs escalate and electricity becomes less reliable and complain about it to those who will listen. Or, we can engage ourselves and tell the EPA we want all energy resources to be used in meeting our energy needs rather than all resources but coal.

The EPA has already issued carbon dioxide emission limits for new power plants that effectively remove coal as an option for new plants. Soon, the EPA will release CO2 emission limits for existing plants, including the ones that operate within the Nodak Electric Cooperative system. Once these proposed regulations are released, we need everyone to tell EPA we aren’t interested in volatile pricing and questionable reliability. We want North Dakota lignite coal to remain the foundation of our power mix as it has for 70-plus years.

Keep an eye out in our publications, on our website and on Facebook for news on these new regulations and what you can do to help.

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Message to our Members

We are pleased to present you with the 2013 Nodak Electric Cooperative Annual Report. As you find your way through this message and the accompanying financial statements, you will see that we have closed the books on another successful year – a year that was marked with moderate growth, stable rates, and strong financial results.

The year 2013 will long be remembered for the winter that started early and never quit, but as we look back on the calendar year 2013 we are reminded that it began the same way it ended – very cold. These cold winter months, along with crop conditioning brought on by a late harvest, helped push our sales to a new all-time high.  In fact, 10 of the 12 months in 2013 showed higher sales than their corresponding month in 2012.

While the weather for much of the year was extreme, the construction season ended with ideal conditions to complete new line extensions and system improvements late into the year. The extended construction season allowed us to finish the year with over 135 miles of new or upgraded line, bringing our total to over 8,000 miles of distribution lines.

That amount of system improvement requires debt financing, and we are fortunate to be eligible for low-interest financing through the federal government.  During the year, we completed a loan application for financing through USDA Rural Utility Service, or RUS, in the amount of $31.2 million to finance new construction and system improvements over the next four years.

In response to a request for proposals from the federal government, we submitted an offer to take over the electric distribution system on the Grand Forks Air Force Base and Cavalier Air Force Station.  Since we already serve both of these installations with electricity on a bulk basis, we felt it would be a good fit for Nodak to also manage the electric infrastructure for them. Competing for these contracts is a long, drawn out process that has just begun, but we expect to learn more in 2014.

Legislative issues continue to be among the top concerns for our future success. Poorly founded legislation could have dramatic effects on our business and the lives of our member- owners. With this in mind, we closely monitor the agendas of our elected and appointed officials.

In 2013, the Obama Administration announced its intention to regulate carbon dioxide emissions from coal-fired power plants. With 60% of our electricity coming from coal, this is something we keep a close eye on.  New regulations were enacted that effectively halted any new coal plant construction until carbon capture technology is further developed. Regulations for existing coal plants are due out in 2014, and we continue to be your advocate in telling EPA not to over regulate this clean, affordable, abundant resource we have here North Dakota.

Closer to home, taxation issues have been the primary focus of our legislators in Bismarck. Property tax relief that has reduced the tax rates for most individuals and businesses in North Dakota affects investor-owned utilities and electric cooperatives differently. IOUs are taxed similar to other property owning corporations, but electric cooperatives pay an in lieu property tax based on kilowatt-hour sales.  In 2013, the in lieu tax we pay was reduced from one dollar per megawatt hour to $.80.  That reduction will save Nodak and its member-owners over $200,000 per year in property taxes.

In 2013, we continued our practice of rotating member equity back to the members through a capital credit retirement. In March, we issued checks totaling $1.5 million to past and present Nodak members who purchased power in 1995. Earning equity in a cooperative through the purchase of electricity is one of the many benefits of the cooperative business model. When equity is retired and paid back, it reduces your overall cost of electricity.

We encourage you to review the accompanying financial statements, along with the report from Secretary-Treasurer Paul Sigurdson, and we hope you will agree that Nodak Electric ended 2013 in a sound financial position. We will provide you with much more detail about the year 2013 during our annual meeting on Thursday, April 3, 2014 at the Alerus Center in Grand Forks.

On behalf of the entire Board of Directors and the employees of Nodak Electric Cooperative, we want to thank you for your patronage in 2013 and for the opportunity to serve you. We hope we will see you at our annual meeting at the Alerus Center in Grand Forks.

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