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.