Details for rate revision

April 2004

In the last issue of the Nodak Neighbor, we announced the need for a retail rate increase in April. This month, we are going to give the details of the rate revision.

The bad news is that our wholesale cost of power from Minnkota Power Cooperative has been on the rise. Our wholesale rates were increased by 8.5% in 2002 and by 4.5% in 2003. We will see a third consecutive wholesale price increase of 8.4% in April, 2004. Compounded, these three wholesale rate increases amount to a 23% increase in our wholesale cost of power.

The good news is that we are increasing our retail rates by only 5%. Most of the increase comes up front in the monthly facility charge. The remainder of the increase is in the per kilowatt-hour energy charge. The new General Service Rate, which applies to the vast majority of our members, is printed in this issue of the Nodak Neighbor. All of our retail rates can be reviewed on our web site at

The obvious question with this issue is how can we get by with only a 5% rate increase when our wholesale cost of power has gone up 23%? The answer consists of three parts. First, we are fortunate to have steady growth in our service area. This growth, which is primarily in the Grand Forks region, averages about 2 to 3% per year. Second, we have taken significant steps to make our organization more efficient. Some of these steps, which include our merger with Sheyenne Valley Electric Cooperative, the closing and realignment of many outpost facilities, and the discontinuance of a “free” North Dakota Living” Magazine, have not always been popular, but they have contributed to savings in your cost of electricity. Third, we will be operating on a lower level of margins in 2004 than in previous years. This will have some consequences in our level of debt, but will not have serious adverse effect on our overall financial condition.

Proposed revision of Articles of Incorporation

Our Annual Meeting will be held at the Alerus Events Center in Grand Forks on Saturday, April 17, 2004. You should be receiving a copy of our Year-end 2003 Annual Report very soon if you have not already received it. Please pay special attention to the Notice of the Annual Meeting. In addition to the normal business at the annual meeting, we will need to ask the membership to make an important change to our Articles of Incorporation.

The Articles stipulate that “The Cooperative is authorized to borrow money with the total indebtedness not to exceed Seventy-Five Million Dollars.” While most of us would interpret this to mean that our total indebtedness at any given time cannot exceed $75 million, the federal government interprets it differently. Rural Utilities Services, which approves our access to low-interest federal loans, looks at the original note value of each outstanding loan rather than the outstanding balance of each loan when computing our total indebtedness. In that regard, our present long-term debt is less than $34 million, but the total original value of these loans is in excess of $68 million. For this reason, we need to increase the debt limit in our Articles of Incorporation, or we will soon be ineligible to take advantage of low-interest federal loans through the Rural Utilities Services. The official notice of this proposed change to the Articles of Incorporation will be in the Annual Report, and it will be voted upon by the members at the annual meeting in April.