HB 1454 soundly defeated

April 2003

For the fourth consecutive legislative session, Xcel Energy and Montana-Dakota Utilities have tried to take service territory away from electric cooperatives through the legislative process. This year, HB 1454 was introduced, which, if passed, would have forced us to give up half of our service territory immediately outside the city limits of Grand Forks. For this month’s article, I am reprinting the testimony that I presented to the House Industry, Business, and Labor Committee regarding this bill. We are also pleased to report that the bill was soundly defeated in the House of Representatives by a vote of 59 to 32.

The investor-owned utilities (IOUs) are suggesting the North Dakota Legislature resolve their concerns about future growth opportunities by taking away territories the electric cooperatives have served for decades — areas the IOUs previously would not serve. The bill would result in a transfer of growth area from Nodak Electric to Xcel Energy. The purpose of my testimony this morning is to illustrate to you that a) as the saying goes, we’ve been there, done that, and b) we can ill afford to solve Xcel Energy’s growth concerns at our expense.

With regard to the first point, before the adoption of the Territorial Integrity Act in 1965, Nodak and NSP had an Area Service Agreement. In this agreement 3,700 acres of undeveloped land outside the City of Grand Forks was reserved for growth for NSP. Even after the Territorial Integrity Act was passed, Nodak honored the Area Service Agreement and declined to serve any new accounts requesting service in the above-described area.

In the years following the Territorial Integrity Act, we watched with envy the growth enjoyed by NSP as the city grew. During these years, the medical park was developed, the Columbia Mall was built, and thousands of residential services were connected in NSP’s new territory. Ironically, many of these residential services were thanks to a migration of people from our service area into Grand Forks. It should be noted that NSP did not suggest at any time the two utilities share the growth of Grand Forks fifty-fifty. Instead, NSP enjoyed virtually all of the growth of Grand Forks, and we could only hope that some day the City would grow through these thousands of acres of undeveloped land, and we would finally enjoy some urban spillover into territory we had already been serving for three decades.

In later years, we began to benefit from the expansion of Grand Forks, as parts of the City grew into our service area. We have invested heavily in underground distribution facilities including switches and two-way redundant feeds. Since the Territorial Integrity Act was passed, our power supplier, Minnkota Power Cooperative, has invested millions of dollars adding three substation delivery points around Grand Forks to guarantee the best service possible for our existing and new customers in this growth part of our service area. So, when I say we have been there, done that, I mean that we have long ago given up part of our potential service area to allow growth potential for NSP/Xcel Energy. They have and continue to experience growth in electric sales because of our past agreement. In addition, they have and continue to enjoy 100% of the natural gas growth in and around Grand Forks.

The second point of my testimony is that Nodak can ill-afford to resolve Xcel’s growth concerns at our expense. I believe you will understand our position as you compare our business to that of Xcel Energy. Nodak is fairly large geographically, but like all electric cooperatives, we are tiny in the electric utility industry. Our biggest challenge is that we serve a predominantly rural area, which is declining in population. We own nearly 8,000 miles of distribution system, which poses enormous maintenance and service reliability challenges. Over that system, we deliver power to less than 13,000 customers.

A typical strategic planning session for Nodak entails more planning for decline than for growth. The harsh reality is that 90% of our distribution system serves areas that have fewer people each year. Compounding the impact of decades of migration from rural North Dakota to urban communities, Nodak was adversely affected by the removal of the Minuteman Missiles from Grand Forks Air Force Base. In our entire service area, which covers all or part of ten ounties, we have only one area that shows consistent growth over the last ten years. This is the area around Grand Forks.

In contrast, Xcel Energy is a huge corporation that sells electricity and natural gas in 12 states. They presently have 3.2 million electric customers and 1.7 million gas customers. Annual revenue for the sale of electricity and gas is reported to be $11.6 billion. I would expect Xcel Energy is the opposite of Nodak Electric in that it enjoys growth in most of its service areas in their sale of electricity or gas, or both.

Xcel has come to the legislature asking you to help them resolve their growth concern. They describe the solution as one of fairness and compromise. If the proponents of HB 1454 are successful, Xcel will increase their total $11.6 billion sales by a tiny and insignificant fraction. It’s unlikely you will notice the change in their annual report. If the proponents of HB 1454 are successful, Nodak Electric may not grow at all in the future. Losing half of our growth area around Grand Forks may leave us with less than what is needed to offset decline in the rest of our service area. For sure, you will notice the change in our annual report as it will be the most important issue we will be reporting to our members — an issue that will directly affect our retail rates.

Clearly, this bill is not about fairness and compromise. It is not fair when the results are that a small utility like Nodak is significantly harmed so a huge utility like Xcel Energy will receive minimal gain. It is not compromise when only one side gains and only the other side loses.

Please vote DO NOT PASS on HB 1454. Thank you.