Finding the proper blend of resources for our wholesale power mix can be a delicate task. Each source has pros and cons associated with it, such as varying costs, reliability, availability and environmental impacts. That is one reason we believe the best approach for our membership is what’s been termed an “all of the above approach.” Each of North Dakota’s various natural resources has unique benefits that the others may not, so utilizing all types of North Dakota’s bountiful natural resources, including coal, wind, natural gas and hydroelectric has long been our approach. This diversity in generation sources helps to insulate us from the impact of targeted environmental rules, unplanned outages and changes in market conditions.
Elsewhere in this report, you will see that 42 percent of our wholesale power mix now comes from renewable sources. At the end of 2016, our wholesale power provider, Minnkota Power Cooperative, commissioned an additional 100 megawatts of wind capacity from the Oliver III wind farm near
Center, N.D. With the addition of these 100 megawatts, wind now accounts for 34 percent of the generation capacity, hydroelectric from the Garrison Dam makes up another 8 percent and another 55 percent comes from North Dakota lignite coal. To take advantage of this diversity, we have begun offering our Infinity Renewable Energy Program to those members who would like to purchase up to 100 percent of their energy from these renewable sources.
The addition of more wind energy is in part a response to the strong federal government push away from coal. Although we believe that North Dakota’s bountiful coal deposits provide a great resource for clean, affordable electricity, the environmental push toward a more carbon-constrained world is a stark reality and one the nation will move toward. To keep rates low, reliability high and North Dakota’s economy strong, coal needs to remain part of the nation’s resource mix for the long term. The new administration’s approach to environmental regulation gives us hope that the Clean Power Plan regulation implemented under the Obama Administration will be redrawn in a more thoughtful, deliberate way, so we can maintain our “all of the above strategy” into the future.
When we look back on 2016 from an operational perspective, I think we would characterize it as one of mixed results. One of the warmest winters on record and a cool wet summer in parts of our service territory helped keep kilowatt-hour sales lower despite healthy growth in new services. Although we posted a net increase of 329 new members and 373 new service locations, we ended 2016 with kilowatt-hour sales down 2.3 percent from 2015. Consistent growth in membership leaves us optimistic that sales will be robust when weather patterns return to something we would consider more North Dakota normal.
In April 2016, we adjusted our rates by 5 percent in response to a wholesale power cost increase from April 2015. Since the end of 2014, we have been using our Revenue Deferral Plan to help stabilize your rates. Through long-term planning, we’ve been able to delay the impacts of millions of dollars in wholesale power cost increases to our membership. With wholesale power now accounting for more than 84 percent of our total expenses, managing how these costs are passed along is a critical part of keeping your rates affordable.
Technology is one of the ways we continue to work to provide better service at a reduced cost. Consequently, we are excited about the introduction of SmartHub in 2016. SmartHub is an app that allows member access to account information 24 hours a day. With SmartHub, members can now view and compare hour-by-hour usage, pay bills or interact with your cooperative right from your phone, tablet or computer. The availability of this data helps members analyze their own energy usage to confirm when and why power was used.
Cost is one of our most important performance measures; however, reliability is also an important aspect to providing a good value for membership. In this vein, we are happy to report that our wholesale power provider, Minnkota Power Cooperative, is planning $1.4 million in blink mitigation updates to their transmission system in Nodak’s service territory during the first quarter of 2017. These updates will help lessen the number of interruptions our membership have due to lightning activity and wildlife contacts.
In closing, we just want to point out that while 2016 wasn’t a record year by most measures, it certainly was a good one. We met all our financial requirements, we kept rates affordable, kept the power on and sent everyone home from work without serious injuries. Thank you for your patronage this past year and more importantly, all your support on issues important to your cooperative. It’s been an honor and a privilege to serve and work with you this past year.