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.