By Mylo Einarson, President & CEO
With my first entry in Perspective, I’d be remiss if I didn’t take a few lines to extend a heartfelt “Thank You” to George Berg for his 37 years of service to Nodak. George worked tirelessly over the years to ensure that our members received reliable, safe electricity at the lowest price possible and for that we are all very grateful. I want to wish George good luck in his retirement from all of us here at Nodak. It’s been well deserved.
In the November 2009 issue of the Nodak Neighbor, your then President and CEO George Berg announced the addition of a 0.5 cent per kilowatt-hour surcharge on all retail rates. That surcharge was a direct pass through of a 0.5 cent per kilowatt-hour surcharge from our power supplier Minnkota Power Cooperative.
You may not recall, but as George explained in his article, that surcharge was necessary to offset significant losses Minnkota was experiencing due to their investment in renewable energy. Minnkota is subject to a renewable energy mandate in the state of Minnesota and a renewable energy objective in the state of North Dakota. To meet these new renewable energy goals, Minnkota entered into 25 year agreements to purchase wind energy from large wind farms near Langdon and Valley City, ND. While it was necessary to secure this renewable energy to meet the mandates, only a small amount of the electricity generated is actually used to meet our member needs. The balance of this energy is sold into the regional markets at somewhat unpredictable prices. Prior to 2009, much of this excess power could often be sold at a profit, which helped to keep our rates low. Since the economic downturn, Minnkota has been forced to sell the excess power at a significant loss, in many cases for less than half of the contracted price to purchase the energy. For the past two years, the 0.5 cent surcharge has been used to off-set those losses.
The good news I have to share with you is that at their December meeting, the Minnkota board of directors set in motion a reduction of the 0.5 cent surcharge to 0.3 cents effective from now until March 2013. Your Nodak board of directors quickly followed suit and reduced the surcharge you will see on your monthly bill to 0.3 cents as well. While this is a modest decrease, it is welcome news. For someone using 1,500 kilowatt-hours per month, this will result in a reduction of $3.00 to their monthly bill. An electric heating customer using 20,000 kilowatt-hours will see a reduction of $40 in their annual heating costs.
At this time, it is still unclear if any other adjustment will have to be made to our retail rates for 2012. We are hopeful that with the projected growth in sales and no unexpected expenses, we can avoid the need for a rate increase this year. As you can probably imagine, a warm dry December and record high temperatures in the first part of January make meeting those projections difficult. These relatively balmy winter conditions can result in lower-than-projected revenues and a higher wholesale power cost per kilowatt-hour. Your Nodak board and staff are closely monitoring the situation and are committed to doing our part to keep expenses in line. A decision will be made in the next couple months about what we’ll have to do with our rates, but Mother Nature will undoubtedly have a great deal of input into that decision. Until then, enjoy the warm winter and the lower monthly bills.