Keeping Nodak’s rates equitable

February 2003

The year 2002 was a very good year for Nodak. In a couple of months, we will be sending you the year-end Annual Report. We will be telling you about operating expenses coming in below budget, while sales and year-end margins came in above budget. Our biggest challenge was an increase of 8.5% in our wholesale cost of power from Minnkota Power Cooperative effective last April. We have recently been informed that our wholesale bill will go up an additional 4.5% this coming April. Despite these increases, we do not plan to have an overall increase in our retail rates this year.

The key word in the last sentence is overall. While our budget will be very tight in 2003, we do not believe we will need to increase revenue by increasing rates. However, there are modifications we will be making relating to equity and marketing strategy. These modifications will go into effect in April.

The first change you may notice in our General Service Rate will be a higher monthly facility charge and a lower per kilowatt-hour charge. We will be increasing the monthly facility charge by $3.00 and will be decreasing the number of kilowatt-hours in the first (higher) energy charge from 1000 KWHrs. to 750 KWHrs. This means you will get into the cheaper energy charge sooner. The effect of the change is that accounts using minimal or no power during the month will see a small increase in cost. For those using 900 KWHrs. or more, this change will result in a rate decrease. (The savings in energy will more than offset the higher monthly facility charge.)

If you have off-peak heating and also have your water heater under load management, you will notice another change in the future. Our present incentive for load control on your water heater is a $3.00 per month credit on your electric bill. In the future, this incentive will be changed to give you a discount of 6 mills per kilowatt-hour on the first 1000 KWhrs. purchased during the months of October through March. Since most homes with an electric water heater use at least 1000 KWHrs. per month, the discount will be essentially the same amount per year. However, unlike the old plan, if a member does not buy power during a particular month, they will not get the discount.

We will continue in 2003 to phase out of an incentive rate for air conditioning. More than 20 years ago, we offered an Off-Peak Rate for air conditioning if you had and used a qualified off-peak heating system. It was a marketing strategy to encourage off-peak heating, and was possible because we had virtually no summer peaking concerns. In recent years, our system load and the summer energy market has changed. We now have a summer peak demand charge in our wholesale rate structure. Because of this change, we cannot continue to offer discounted off-peak rates for air conditioning. We will be increasing the rate for accounts that still have air conditioning on the off-peak meter from 4¢ per kilowatt-hour to 4.5¢ per kilowatt-hour. Eventually, this incentive will be eliminated completely, and the air conditioning sales will be placed under our General Service Rate.

All of these rate modifications are necessary to keep our rates equitable, but in reality they are not overly significant. What is significant is that our basic retail rates will remain stable despite a very large increase in our wholesale cost of power. In our upcoming Annual Report, we will talk about the changes we have made to help us keep a lid on our retail rates.