EPA wages war on coal

If you have read these articles, or attended any Nodak meetings over the last several years, you have probably heard us talk about the Environmental Protection Agency (EPA) and its assault on coal. Lately, that assault has become more of an all-out war on coal.

North Dakota electric cooperatives own about 90 percent of the coal-based generation in the state, and more than half of the electricity you and I receive as Nodak members comes from these coal-fired power plants. Most of these plants were built in the 1970s at a time when the federal government passed the Fuel Use Act, which prohibited generating power with natural gas. Since that time, North Dakota’s electric cooperatives have invested more than $2 billion to protect the environment by installing emission control equipment on their plants and annually spend an additional $100 million to operate the equipment. This environmental stewardship has helped North Dakota become one of only seven states in the nation that comply with all federal ambient air quality standards.

That’s a quick little bit of history. Now, the rules are changing again. The EPA and our president, through a series of executive orders, are placing unattainable limits on carbon dioxide emissions in an effort to force us to abandon the clean coal foundation of our generation fleet in favor of that very fuel source that was prohibited in the ’70s – natural gas.

Aside from the fact that as a rule of thumb, natural gas is a more expensive fuel source than coal, what is even more concerning is the volatility of its price and the capability of the nation’s pipeline infrastructure to deliver the product.

According to the U.S. Energy Information Admin-istration, the price for natural gas used to generate electricity in the U.S. has increased nearly 70 percent in just the last 12 months alone, and more than 100 percent in the last two years. Add on top of that the fact that during times of highest demand, the current natural gas delivery system is incapable of servicing the need, and you have a recipe for disaster.

I’m sure you all remember last winter’s polar vortex, that period of extreme cold weather across the entire nation. As we were experiencing those 30-plus degrees below zero, power delivery was becoming very difficult across the nation. Locally, we had 30 percent of our generation mix from wind turbines provide absolutely nothing when we needed it the most. Obviously, wind turbines don’t produce when the wind doesn’t blow, but they also don’t work when it’s 30 below zero, whether the wind is blowing or not.

On a wider scale, during the polar vortex natural gas generation was dropping offline as utility operators out East had trouble finding enough natural gas to keep the power plants running. The wholesale price of electricity rose to more than 20 times the retail price consumers usually pay, and utilities with purchase power clauses in their rates were passing those high costs on to their consumers. The Los Angeles Times recently reported that homeowners in parts of Pennsylvania received bills in January as high as $1,250 for the month because their utility had to purchase replacement power in an outrageous wholesale market.

The point of this discussion is this: as coal-fired plants shut down across the nation and there is a shift to more expensive, less reliable sources, there is a growing fragility in the U.S. electric system that is likely to create price shocks. Now, as members of the energy-consuming public, we have two options available to us. We can stand idly by as costs escalate and electricity becomes less reliable and complain about it to those who will listen. Or, we can engage ourselves and tell the EPA we want all energy resources to be used in meeting our energy needs rather than all resources but coal.

The EPA has already issued carbon dioxide emission limits for new power plants that effectively remove coal as an option for new plants. Soon, the EPA will release CO2 emission limits for existing plants, including the ones that operate within the Nodak Electric Cooperative system. Once these proposed regulations are released, we need everyone to tell EPA we aren’t interested in volatile pricing and questionable reliability. We want North Dakota lignite coal to remain the foundation of our power mix as it has for 70-plus years.

Keep an eye out in our publications, on our website and on Facebook for news on these new regulations and what you can do to help.

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Message to our Members

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.

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2013 was a very good year

As I write this article, we are in the process of closing our books for 2013. When that process is complete, indications are that we will end what has proven to be a very good year.

The term “good year” can mean a lot of different things. Our financial statements will show that December’s extreme cold weather and heavy grain drying brought on by a late, wetter-than-average harvest pushed sales numbers to a new record high. That is definitely one way we could describe 2013 as a good year.

Another way to define it would be to point out that we were lucky enough to escape Mother Nature’s wrath and the crippling storms that some of our counterparts in North and South Dakota experienced this season. We had our share of smaller weather events but managed to avoid the extreme weather that causes widespread outages. Because of that, we were able to continue to provide the same level of reliability you’ve come to expect. I think we could look at that as being a good year.

Wholesale and retail rates stayed steady throughout 2013. In these times of increasing costs and a tightening regulatory environment, a year where we can hold the line on rates is surely a good year.

Certainly, we can also point to the fact that our linemen spent thousands of hours performing an extremely dangerous job, and in all cases were able to avoid any serious injuries. Bringing our line crews home safe at the end of the day is our highest priority and our number one obligation. We can also say 2013 was a good year because we accomplished that important goal.

Regardless of how you would describe a good year, there are several ways we can look back on 2013 and characterize it as such. On Thursday, April 3, 2014, our 74th annual meeting will be held at the Alerus Center in Grand Forks. Along with plenty of good food, fellowship and our annual Board of Directors election, we will detail the events and results of 2013. I would urge all of you to come participate in this important part of your cooperative’s year.

I also want to use some of this space here to make you aware of a change you will soon see on your monthly bill. For quite some time, your service has been billed based on a mid-month billing period. Beginning in April, Nodak will be migrating to a calendar month billing cycle. We’re doing this in part because of a similar change by our power supplier, Minnkota Power Cooperative, which implemented the new billing period January 1, and also in part because it will make communication with our members better.

The cooperative will now have accurate information for monthly and yearly totals without the need to make adjustments based on estimates. Our members will now be able to have monthly usage totals instead of blending two months together, as well as billing periods that may coincide more closely with things such as monthly leases, etc.

Nodak will fully transition to calendar month billing during the April 2014 billing period that begins with the bill our members receive the first part of May. To facilitate this change, the April billing statement will include the new billing period of April 1 through April 30, plus the additional partial month from March 20 through March 31. Subsequently, meters will be read on the last day of each month with payments due by the 25th of the following month.

If you have any questions or concerns about the upcoming change in billing cycles, please give our office a call so we can help you work through this time of transition. Until then, we are looking forward to April and the warmer weather that is likely to come with it, and hopefully see you at our annual meeting.

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Holiday season reminds us to work together – the cooperative way

We are all warmed by fires we did not build, and we drink from wells we did not dig. That was a sentiment expressed at a recent cooperative meeting I attended. It’s based on the notion that a significant part of the cooperative’s mission is to enrich the lives of our member-owners through community support. When this issue of the Nodak Neighbor hits your mailbox, the holiday season will be in full swing. However, as I write this article, Veteran’s Day has just passed, and I can’t help but think how that sentiment embodies the spirit of our country’s veterans.

Veteran’s Day is the federal holiday that celebrates the service of all men and women who have served in the U.S. Armed Forces. Across the country, veterans are honored by parades, special ceremonies and services. Federal offices are closed, mail is not delivered, and school is not in session. Many of us may attend one of these events, just enjoy the day off from work, or take a moment to reach out a handshake to a serviceman or servicewoman and thank them for what they do. To me, Veterans Day serves as a reminder that every day our veterans deserve our gratitude for the fires they’ve built and the wells they’ve dug on our behalf.

Volumes have been written on the sacrifices of our brave men and women in the military, and the freedom that is provided, or at least maintained on their watch. In the U.S., we are rich with personal rights and freedoms. These freedoms were bestowed on us by our founding fathers when they developed a government controlled by the citizens rather than a government that is served by its people. These freedoms are routinely denied by other governments around the globe, and in many cases they seek to limit our personal liberties and our way of life. Although they were initially granted by our forefathers, much of our personal freedom is maintained only through the service and sacrifices of our veterans. I have never served in the military, but my father was a World War II veteran. Like most servicemen of that era, he did his duty and asked for little in return. He was proud of his service, but also very stoic about any accolades. He experienced the ravages of war, but never spoke of it and genuinely hoped no one would ever have to endure them again. Even in his final days, he seemed more concerned for “our boys over there” as he called them, then he was about his own wellbeing. I’m thankful I got the chance to express my gratitude to him before he passed away, and it reminds me that veterans are good examples of service and citizenship for all of us to follow.

As we enter the holiday season and give thanks for our blessings, take a moment and think about the fires and the wells that have been provided to us by our nation’s veterans. Then, ask yourself if you are doing your part to provide for those who can’t provide for themselves, or for those that follow behind us. The old cliché of many hands makes light work is the cooperative way. Together, we can make a difference.
In a perfect world, people and nations would just get along, and we wouldn’t need armaments and veterans. Unfortunately, that’s not the way of the world, and we will continue to have unrest. As this holiday season falls upon us, we would like to wish you all peace and joy in your families, in your backyard, and across the world. From our family to yours, Happy Holidays.

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A safety lesson from Lee and Ashley

The kids are finally back in school, and for me that signifies the end of summer. With the passing of the summer season comes a flurry of fall activities and that gets me thinking about safety – especially safety around the power lines during harvest.

I want to share a pretty amazing story with you. It involves two teens from Indiana named Lee and Ashley who were riding down the road when their car started to fishtail and slid into a utility pole. That pole came down – lines and all – right on top of the car.

Most people faced with this situation would do what comes naturally – get out of the car, but Lee and Ashley knew better. Only a week earlier they had seen a safety demonstration at their school sponsored by their local electric co-op. One of the key messages relayed was “Stay in your car if it ever hits a power pole. That’s where you’ll be safe from any electrical current.”

The two did just that, and kept their family members at a safe distance once they arrived. As a result, everyone walked away with just a few minor injuries. However, without a basic knowledge of electrical safety, the outcome that night could have been much different.

The electricity Nodak provides day-in and day-out is a phenomenal resource, powering our modern lifestyles in a safe, reliable and affordable way, but electricity must be respected. If safety isn’t made a priority, what changes our lives for the better could change them for the worse in an instant.

Lee and Ashley know this from experience, and we’re striving to keep you informed of electrical safety so you don’t have to learn a similar lesson the hard way.

Safety has been a part of the fundamental culture at Nodak since day one. Being an electric line worker is ranked by the U.S. Department of Labor as one of the top 10 most dangerous jobs – on the same list as fishermen, loggers and military servicemen. We take great strides to ensure that not only those linemen out in the field, but employees at all levels, make safety a top priority.

As part of our safety commit-ment, we want to encourage you to take time to learn how you can be safe around electricity. Spending just a few minutes with some helpful resources like www.SafeElectricity.org can make all the difference when you’re faced with an unsafe situation.

I hope there won’t be any stories about Nodak members getting into sticky situations this harvest season, but if there are, a few minutes spent studying safety today could ensure a happy ending. Have a safe and bountiful harvest season!

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Carbon tax would be costly

The Obama Administration recently announced its intention to further regulate carbon dioxide (CO2) emissions from coal-fired power plants. Last year, emission limits were targeted for all new power plants. This new proposal is a presidential directive to move the Environmental Protection Agency toward including all power plants in the CO2 emissions standards. This latest move will present some significant challenges for North Dakota as regulations come out that exceed the capability of currently available technology.

The technology for capturing CO2 emissions is largely under-developed and not yet commercially available, so a likely outcome of this move would be a tax on carbon emissions. A so-called carbon tax could significantly raise the cost of producing electricity from coal to a point where the energy industry may abandon the inexpensive abundant resource in favor of a more expensive alternative. That would be a significant blow to the North Dakota economy.

As a member of Nodak Electric Cooperative, approximately 42 percent of the power you consume comes from renewable sources such as wind and hydro. The balance comes from North Dakota lignite coal. A byproduct of the coal combustion process is CO2. With more than half of our power coming from coal, any limitation on CO2 emissions could have significant impacts.

There are a lot of unknowns with this announcement from the administration. We won’t know until at least next year what will be considered acceptable emission limits or implementation timelines. One thing is certain, though. Without commercially available and economically feasible technology to capture CO2, these regulations will drive up the cost of electricity on North Dakotans and across the country.

New technologies are best developed by attracting investment in research and development necessary to find solutions rather than artificially drive up the cost of doing business through regulations and taxes. What we need is a thoughtful, deliberate approach that empowers all sectors of the energy industry to work toward new ways of utilizing all of North Dakota’s abundant resources.

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Message to our Members

When we look back at 2012, one way we like to describe it is: eventfully uneventful. There was the hustle and bustle of a growing cooperative with many new faces and exciting new projects and challenges. The one notable thing we didn’t see was a significant storm. Although we had one relatively minor storm event that caused outages for some of our members, we were lucky enough to escape the severe storms that all too often cause widespread outages, severe damage and huge restoration costs.

One of the exciting things we have to share with you is that Nodak reached a notable milestone in 2012. For the first time, Nodak sold more than 1 billion kilowatt-hours (kWh) in a single year, which represents a 3.7 percent increase in total kWh sold. We started the year with reduced sales from an abnormally warm winter, and also witnessed the closing of the ADM ethanol facility in Walhalla, N.D. However, robust increases in purchases by TransCanada and overall strong sales in the fourth quarter were enough to overcome the slow start.

While sales growth was a significant factor in a positive financial result for Nodak, that was not the typical case for the rest of the Minnkota system. In fact, nine of the 11
co-ops and all 12 municipals that comprise the Minnkota Joint System experienced losses in sales in 2012. In aggregate, Minnkota’s sales to Joint System members fell by 1.7 percent from 2011 to 2012.

The good news is that despite these losses our wholesale rate stabilized in 2012. The new Minnkota budget does not include a wholesale rate increase for 2013, and current projections for 2014 show a similar trend. With wholesale rates finally leveling off, we look forward to some predictability in our costs and therefore our rates.

After several months of careful planning and preparation, we deployed our iPad project in spring 2012. Each of our electrical teams was given an iPad with up-to-date maps of our system and member account information. This innovative use of technology allows our line personnel to access real-time data, enhancing their ability to manage outages as well as streamline many of our processes so we can provide better service to our member-owners.

This constant evaluation of our business practices and scrutiny of our cost of operation is what allows us to be successful on such thin margins. Only a dozen years ago our cost of wholesale power accounted for 58 cents of every dollar our members paid to Nodak. In 2012, 83 cents of every dollar was sent to Minnkota for wholesale power, leaving only 17 cents for the rest of our operation. Finding ways to meet your expectations more cost-effectively is one of our highest priorities here at Nodak – right behind keeping our line crews safe and keeping the lights on.

Another notable event in 2012 was the energizing of the Devils Lake East End Outlet. In June, the massive outlet that consists of five large pumps and a 5-mile pipeline began pumping Devils Lake water into the Tolna Coulee. These pumps will help ease the decades-long flooding that has finally started to show signs of letting up.

Another bright spot for Nodak in 2012 was the continuation of our business relationship with TransCanada and the Keystone pipeline. We saw significant increases in kWh sales during the year to TransCanada, which is now our largest member and represents almost 20 percent of our total sales volume.

From a distribution perspective, I would say 2012 was an excellent year. We accomplished all of our goals with respect to system improvements and line maintenance and our off-peak heating program continues to provide financial benefits to our members.

We encourage you to review the accompanying financial statements along with the report from Secretary-Treasurer David Hagert. We hope you’ll agree that Nodak ended 2012 in sound financial position and that we fulfilled our mission throughout the year by efficiently providing you with quality electric service while keeping you, the member-owner, in the highest regard.

On behalf of the entire Board of Directors and all the employees at Nodak, we want to thank you for your patronage in 2012 and for the opportunity to serve you. We hope to see you at our annual meeting at the Alerus Center in Grand Forks on Thursday, April 11, 2013.

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Consider running for a director seat

Be a part of your cooperative’s leadership – Consider running for a director seat.

Hopefully, by now, you have noticed a couple of entries in this issue of the Neighbor on the subject of the upcoming board election. Every election is an important one because it’s your chance to appoint the leadership of your cooperative, but this election holds something that is fairly uncommon, at least here at Nodak. Two of the three director positions decided in this election will not have an incumbent in the race.

We have three districts in our service territory with three directors elected from each district for a total of nine board members. All board members are elected for staggered three-year terms, so each year we have one position in each of the three districts up for election. This year, we have the unique situation where two directors are retiring from service on the board and not seeking reelection.  District 1 Director Bruce Fagerholt and District 3 Director Donna Grotte have both made it known that their intention is not to seek reelection to the board of directors. Director David Kent will be running for reelection to his seat in District 2

Your board fulfills many vital roles for the cooperative.  Not only are they the ultimate decision-makers when it comes to policy-driven initiatives for the cooperative, they are also the local connection to the membership. Board members represent our eyes and ears out in the service area.  They bring back member concerns and suggestions, provide a local “neighbor” for you to discuss cooperative business with, and represent your interests at the board table.

If you have ever considered serving your cooperative through board governance, those of you living in Districts 1 and 3 have a unique opportunity. While board membership can be very challenging at times and certainly shouldn’t be taken lightly, it can be a very rewarding experience. Your cooperative can only be as strong as the people who actively participate in it, so if you have a strong commitment to Nodak and a desire to serve, I would encourage you to consider running for a seat on the Nodak board.  A position on the ballot can be obtained through nomination by the Nominating Committee, or by submitting a petition to the corporate offices. Please call the Grand Forks office if you would like more information on the process.

Also, please take note of the changes we’ve made to this year’s Annual Meeting.  For quite some time, the Annual Meeting has been held on the morning of the first Saturday in April. This year, we are moving the meeting to a Thursday evening. I know how schedules can be difficult to coordinate, especially with today’s busy lifestyles. Undoubtedly, moving the meeting to Thursday night will make it difficult for some that usually attend, but hopefully it will also open the door for others to attend that have not been able to come on Saturday.  Most importantly, we want as many of you as possible to come and participate in the Annual Meeting this year.  I’m looking forward to seeing you all in Grand Forks this April.

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Federal Funding Critical for Disaster Recovery

As I sat down to begin writing this column, millions of people along the eastern seaboard were without power as a result of Hurricane Sandy.  Pictures and reports of the widespread devastation were just beginning to filter their way through the national media, and the size of the recovery effort has now become apparent.

A natural first reaction when seeing this kind of devastation is one of disbelief. It’s hard to comprehend the enormity of the job that lay ahead for those involved in the cleanup.  It will be days before line crews get power restored, weeks before transportation is running adequately again, months until the debris is all removed, and probably years before life returns to normal in that part of the country.

One thing is certain when it comes to these types of disasters – the cost of rebuilding critical infrastructure is almost always too great for the local entities to withstand without the involvement of the Federal Emergency Management Agency (FEMA). FEMA assists in returning destroyed areas to pre-disaster condition. Without this federal assistance, 100% of the cost of the recovery would be funded by local taxpayers, businesses, and utility ratepayers.

FEMA has been involved in assisting local not-for-profits like Nodak for decades.  When we have had major storm damage, FEMA has assisted in the cost of reconstruction, thereby lessening the burden on our members. Like a lot of federal programs, improvements need to be made in the delivery of FEMA’s mission during and after presidentially-declared disasters. In fact, I would argue that in many respects, FEMA needs to be retooled and overhauled. However, FEMA’s public assistance program delivers much needed assistance to electric cooperative consumers restoring electric services and it needs continued funding and support from our federal government.  Without it, those of us living in disaster-prone areas would face additional burdens of longer waits for service restoration and most certainly higher rates.  As the election passes and a new congress takes over, encourage your elected leaders to pass a federal budget that continues strong support for this important mission.  Without it, recovery from these natural disasters would be almost impossible.

Our hats are off to the many volunteers giving their time to rebuild the devastated areas of our country. A special thank you and congratulations goes out to the many brave men and women that braved the storm, floods, fires, etc. to protect our fellow citizens and help restore their lives to normal.  Much of this work is done in horrible conditions and without any fanfare, but their efforts are greatly appreciated.

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Voting is your ‘civic duty’

Fall is in the air and with the change of seasons comes many changes in our lives.  Some have kids going back to school or young adults off to college.  Local schools are brimming with activity as concerts, plays, and sporting events are scheduled. Others have gardens to attend to, fields to harvest, or seasonal interests that need to be winterized and stored away until spring. The one thing that happens this time of year that affects all of us though is the upcoming elections.

Young or old, rich or poor, the election will have an impact on all of us because it will determine who sets the policies that shape our daily lives. Some of their decisions affect us directly, like tax or energy policy, and some are more indirect like environmental regulations. Collectively, these decisions made by our elected officials determine the environment in which we live and do business. You would think that every eligible voter would want to share their opinion about whom they want making those decisions on their behalf, yet almost half of us won’t cast a ballot this November.

Voting is often referred to as our “civic duty” and speaks to the idea that it’s our future, so we need to play a part in shaping it. Voting is our chance to do something to benefit our society through the democratic process, but it doesn’t stop there.  What’s equally important is what we do to engage in the political process after the election.

Once our elected officials have been chosen, they need to hear our concerns.  Elected officials run for office, not for fame and fortune but because of a strong desire to help mold the future. They can only do that effectively if they know what the people they represent want.

I would like to encourage everyone to embrace their duty to participate in the political process as an opportunity to be part of building the environment in which we live and work. Thomas Jefferson said, “We do not have a government by a majority of the people, we have a government by a majority of the people who participate.”  Be a part of your own future by calling your senator, writing your city council member, or visiting your co-op’s board members.  They’ll listen to your concern and value your feedback, and in the long run we will have elected officials doing the will of the people rather than what they think may be the will of the people.

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Reliability is a top priority

Decades have passed since electric cooperatives brought light to the rural parts of North Dakota. In the mid-1930’s, nine out of 10 rural homes in America were without electricity. By 1953, more than 90 percent of U.S. farms had been electrified. That was a long time ago, and as every day goes by, fewer and fewer members remember what it was like when the electric cooperative improved their lives by bringing light to the farm. It meant they no longer had to depend on kerosene lamps and wood stoves to accomplish daily tasks.

In this bygone era, members were grateful that they were able to get service from an electric cooperative and had certain expectations about price and reliability. Today, those expectations are decidedly different. Today’s member not only expects the lights to come on when they flip the switch, they expect the power to stay on so electronics, computers and high-tech devices work properly. This expectation we believe is very reasonable.

A high level of reliability is one of the main objectives cooperatives strive for in today’s market. Outage minutes are tracked and statistics with acronyms like SAIDI (system average interruption duration index) and ASAI (average service availability index) are used to compare system performance with expectations. When we compare Nodak’s ratios to other cooperatives in the U.S., we fare very well in these areas. Last year, our average member saw service disruption for 107 minutes out of a total of 525,600 minutes available in the year. This is less than half of the average interruption of 230 minutes other cooperative members across the U.S. saw last year.

Looking at it a little differently, our members had power available to them 99.98 percent of the time (ASAI), which places Nodak among the highest performing one quarter of U.S. cooperatives. That statistic in itself is something to hold out as a success story, but when you look at it a little deeper, the significance is apparent.

It’s important to first think about what causes disruption in service. Most frequently, outages are caused by things like trees contacting a power line, wildlife getting somewhere they shouldn’t be, equipment failure, storms, etc. The co-op’s exposure to these kinds of disruptions is proportional to the number of miles of line we have, the age of our system and how well the system is maintained.

At the end of last year, Nodak had 7,932 miles of power line in service. Out of the 814 electric cooperatives in the U.S., Nodak ranked No. 40 in terms of total number of line miles. The median value for all U.S. cooperatives was only 2,602 miles, or roughly one-third as many as Nodak. With more than three times as much line exposed to the elements as the average cooperative, one could assume that our service interruption would be much higher than average, yet it was less than half.

I don’t point this out to boast about Nodak or pat ourselves on the back. I bring it up to show that we take the issue of reliability very seriously and despite the enormity of the task at hand, we do a pretty decent job of keeping the lights on as compared to other electric providers.

Our reliability track record is something we are proud of, but it is an area where we continue to strive for improvement. Service interruptions can be just a nuisance for those of us who have to reset a digital clock now and then, or they can be something very serious for someone with a medical condition or a business with sensitive computer-driven machinery. All these are reasons we work hard to deliver power with a reliability level that meets our members’ expectations.

Some interruptions are largely beyond our control, so there’s not much we can do but keep our fingers crossed hoping Mother Nature will be kind to us. What we can do is continue to commit resources for maintenance and constantly improve our system to minimize the outages we can do something about. That is something we will do.

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Board approves rate adjustment

May/June 2012

By Mylo Einarson, President & CEO

In the latest Nodak Neighbor and in this year’s Annual Report, I alluded to the fact that several factors were putting significant pressure on our rates and that we may be forced to increase them sometime this year. I wish I had better news to pass along, but after closely monitoring the situation through the first four months of this year, it’s apparent our rates need to be adjusted. Beginning with the power bill you receive in late June or early July, all rate components and all rate classes will be increased by 3%.

There are a number of reasons we find ourselves in the unfortunate position where we need to raise rates. The largest factors are the increased power cost due to last year’s wholesale rate adjustment, lagging general service and heating sales, and losing one of our largest members due to a plant closure.

It’s been pointed out several times in our publications that the 30% rate increase in 2011 from our wholesale power provider, Minnkota Power Cooperative, was matched with a 17% retail rate adjustment by Nodak. Based on our cost of power, to fully recover that increase in power cost, the retail rate adjustment would have needed to be in the 22 – 23% range. Load growth across the system was slated to provide the extra revenue needed to make up the difference. While we have seen robust growth from some of our largest members, sales from the balance of our membership is down by over 15% for the year. Compound that with the fact that our second largest member, ADM’s ethanol facility in Walhalla, closed its doors in April, and it’s obvious a rate increase is necessary.

The bright spot in this is when you factor in the two mill reduction in the renewable energy surcharge we passed along in January, depending on your rate class, average member rates will be only slightly above or slightly below where they were at the end of 2011.

At its April meeting, the board of directors also discussed capital credit retirements. A capital credit retirement is the return or reduction of member equity that members typically see in the form of a check each spring. The board of directors has demonstrated a long standing commitment to retiring these capital credits each year. Over the last four years, the board has sacrificed margins in exchange for passing along lower retail rate increases during this time of rapidly escalating wholesale power costs.  At the same time, the board of directors has continued to distribute capital credit payments, but that has resulted in a decrease in total member equity.

The proper level of equity is an important financial consideration for the board.  Equity levels that are too low increase the cost of capital for the cooperative by way of higher interest rates from lenders. Equity levels that are too high needlessly restrict access to equity dollars by the member-owners. An equity level of 40% is what we feel strikes a good balance between the equity needs of the cooperative and those of the member-owner. For two years now, equity levels have sunk below that 40% target and it appears we will end the year 2012 in a similar situation.  Each year, the board makes budget, rate, and capital credit decisions with a goal to achieve and maintain that 40% target. After several lengthy discussions, the board has decided to take a year off from retiring capital credits in order to help that equity position recover towards that 40% threshold. I have a very high level of confidence that in 2013 our members will see a return to capital credit retirements once again.

We will continue to keep you informed about the status of our financial condition during the year. After this rate adjustment, we are currently projecting wholesale and retail rates to remain steady through 2013. However, projections are little more than a “best guess” and with new loads coming on, existing loads curtailing, and unpredictable weather, power sales can be a moving target. We will be sure to keep you updated on how close we are to hitting that target throughout the year.

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