Load control and wind energy

March 2008

By the time you receive this issue of the Nodak Neighbor, hopefully, we will be past the subzero weather for another winter.

For everyone, this winter has put a strain on the cost of heating homes and businesses. For those who have off-peak heating systems, there is always concern about how often we implement load management and require you to switch to a backup heating system. As it turned out, we had a rough time out of the chute this heating season. Scheduled power plant maintenance didn’t go well, and an eight week planned maintenance project turned into an 11 week project. Worse yet, the power plant was out of service when the heating season was getting into full swing, and we had to use load control much more than expected during that period.

Some of you who have off-peak heating systems may have noticed that the amount of load control dropped off substantially after the first of the New Year. You may also be aware that our power supplier, Minnkota Power Cooperative, brought a large wind farm online about the same time. I have been asked more than once whether or not there is a correlation between the wind farm and less load control. The short answer is, yes, the addition of the 100 megawatt wind farm definitely helped to reduce the need for load control. The next question, obviously, is why don’t we build more wind generation and reduce further the need for so much load control. Minnkota will, in fact, build more wind generation, but it can’t be for the purpose of reducing load control hours. The problem with that logic is price.

While we are getting wind energy delivered at a very good price from the Langdon wind farm, it is still higher priced than what we are charging you for off-peak heating. Wind energy isn’t valuable to Minnkota because we can resell it as interruptible power; it is valuable because it is often less costly than what can be purchased from the regional market. It is also valuable if the wind turbines happen to be generating during peak conditions. There is much more likelihood this will happen during the winter season than the summer season. We often experience peaks in the winter when it is cold and the wind speed is high. In the summer, we often experience peaks when it is hot, humid, and no wind.

Prior to the first of the year, we had a lot of load control related to power plants being out of service. The Langdon wind farm was not online and not available to help us out. However, even if it had been online, it may not have helped because power plant downtime has nothing to do with wind conditions.

The good news is that our total amount of load control this season, even with the rough start, will be pretty much as expected. The projection from Minnkota for load control this heating season was about 350 hours for a dual heating system. Even though things didn’t go as planned, it doesn’t appear the total hours will be much higher and will likely be around 400 hours for the heating season. With that level of load management, a typical homeowner is still getting about 85% of his/her heating requirements from electricity at a very low rate.

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Your role in the director election process

January 2008

Each year in this issue of the Nodak Neighbor, we begin the process of the Nodak director election. You will note we have included a list of members who have been appointed to the director Nominating Committee. This committee will accept nominations for three positions open on the board of directors. This process represents one of the most important differences between an electric cooperative and other forms of electric utilities.

Each year, the door is open for you and every other member of the cooperative, to take an active role in the election of the board, which governs your utility. Your role may be as little as simply making a commitment to vote during the director election in April. You might want to go to the next step and actually attend the annual meeting of the cooperative on April 12, 2008 and vote in person. If so, in just three hours, you will learn quite a lot about Nodak, participate in the election process, have a chance to win one of many door prizes, and eat a great noon meal served by the Alerus Center. When it’s all over, you still have half the day left to do a little shopping in Grand Forks. If you haven’t been to one of our annual meetings, I would encourage you to give it a try.

The ultimate involvement in the director election process is to step up and run for one of the three director seats, which are open each year. Being nominated is easy. You can contact one of the members of the Nominating Committee, or you can have 15 fellow members sign a petition, and you are on the ballot.

Probably, the biggest change to the director election process in recent years has been the option to vote by mail. The obvious advantage of doing this, of course, is that all members have the opportunity to vote, even if they are unable to attend the annual meeting. There are a few disadvantages, however, with this option. First, there is some added expense for the cooperative, even when we have included the ballot as a “tear out” in our Annual Report. Second, it is nearly impossible to have a true secret ballot without adding even more expense. We have been criticized for requiring that the ballot be signed, but of course, we need to know who votes by mail so they don’t vote more than once. Third, voting by mail causes a bigger challenge for candidates as far as campaigning for the position. No longer can a candidate simply come to our annual meeting and sell himself/herself to the voters before the election. With mail-in ballots, most of the votes have already been cast before the annual meeting. The election is finalized by collecting those ballots at the annual meeting and then counting all of the ballots cast.

Even with the inherent disadvantages of voting by mail, it is the consensus of the board and management that these disadvantages are still outweighed by the importance of giving everyone a simple and painless way to participate in the election process.

We encourage you to take a good look at the candidates running for these director seats when you receive your Annual Report in the mail in early April. You may then either cast a vote by mail, or better yet, come to our annual meeting on April 12 and cast a vote at that time.

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Off-peak heating program is still best heating option

November 2007

If you are one of more than 5,500 Nodak members who heat your home with off-peak electricity, you are in better shape than most entering the heating season. Short of cutting and burning wood, it is pretty hard to find a lower cost heating alternative at this time.

If you have been taking advantage of our off-peak heating program for more than five years, you probably know that it was even better in the past. It’s not that our rate for off-peak electricity is much higher today than in years past, but what you know is that the hours of control time are much greater now than prior to 2003.

During the upcoming heating season, you can expect to have load control and revert back to your backup heating system between 300 and 375 hours. For the majority of our off-peak heating accounts, it makes little difference whether we control 50 hours or 500 hours during a heating season. If a dual heating system is working properly, a home should be just as comfortable when the backup system is operating as when the primary electric system is operating. The only difference is that the backup fuel – usually propane or fuel oil – may be more expensive than off-peak electricity. This will cause the total heating bill for a home to be higher than in past years.

As we have reported frequently, the change in hours of control results from market forces out of the control of Nodak, or our power supplier, Minnkota Power Cooperative. Prior to 2003, in addition to having excess generating capacity, we also had the luxury of buying inexpensive power from the regional market. As a result, when load control would have been necessary, we instead bought affordable energy from the market. This was a win-win decision as we sold more energy to our off-peak customers, and they, in turn used less fuel in their backup systems.

About this time of year, we are frequently asked if we are going to again have hundreds of hours of load control, or are we going to go back to the good old days. The good old days were, of course, when a customer could enjoy a low-cost, interruptible rate and yet have almost no interruption. We regret that the answer is that it is doubtful the regional market will ever allow us to return to that mode of operation.

My coined answer to many individuals the past few years regarding load control is that our off-peak heating option isn’t quite as sweet as it once was. Still, our off-peak heating program is probably the best option available for heating a home or business.

The price of fuel oil, propane and natural gas have all increased dramatically over the past five years. It is not uncommon to hear of people using these fuels whose annual heating costs have doubled over this period. Our off-peak rate in contrast has increased only 16 percent over the same five-year period. As it has been for decades, off-peak electric heat remains the best option with regard to both price and stability.

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Conserving electricity makes sense

September 2007

A friend asked me recently if I thought there was a significant movement in the area of energy conservation with respect to electricity. My non-scientific answer was that on average I didn’t think there was much being done by the consumer, at least in this part of the country. If I am at all right in this assumption, there are a couple of reasons this may be true.

First, the average cost of electricity for a residential consumer in North Dakota is cheap compared to the rest of the country. In 2006, North Dakotans paid on average 6.5¢ per kilowatt-hour compared to 17.6¢ in Massachusetts, 16.3¢ in New York, and 13.5¢ in California. Even our close neighbors in Minnesota paid on average 8.14¢ per kilowatt-hour in 2006 – 25% more than in North Dakota. When electricity is this cheap, consumers don’t have the will to be bothered by something as boring as energy conservation.

A second reason little is being done in North Dakota to conserve electricity may be that there hasn’t been a recent rise in electric rates like other forms of energy. Compared to gasoline, fuel oil, propane, and natural gas, electricity prices have been incredibly stable.

Considering the low cost of electricity in North Dakota, we may even ask the question, “Does it make any sense for us to get excited about conserving electricity?” The answer is, yes, it probably does make sense. Even though the economic benefits are not as great here as in other parts of the country, we are probably making a mistake by not being more aggressive as consumers to conserve electricity. The stable, low electric rates we enjoy will not be here forever.

Based on growth patterns across the country, every utility will need considerably more generation to meet our increasing future demand. Most of our existing generation is more than 25 years old. The new generation will be much more costly and will certainly drive up the cost of electricity for all consumers.

From an economic standpoint, consumers who take action now rather than later will get a jumpstart on saving money. This will give them an early payback on whatever investment they have made. They will also be part of a movement, which will help to reduce the amount of new generation needed in the future.

There are, of course, many ways to conserve energy, and information is readily available on the Internet. Maybe the simplest and most effective action for a homeowner is to replace existing incandescent light bulbs with compact fluorescent light bulbs (CFL). The CFL bulb uses roughly 25% as much electricity as a comparable incandescent light bulb. CFL light bulbs have now gotten so reasonably priced that the homeowner actually saves on the cost of the bulb, as well as the energy savings. A CFL bulb may cost five times that of an incandescent light bulb, but it will last ten times as long.

We are fortunate we don’t have the economic stimulus for conservation that exists in many states with extremely high electric rates. This shouldn’t be a reason to be complacent. We will still do ourselves a favor if we start now to conserve our use of electricity, as well as any other form of energy.

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Keystone Pipeline

June 2007

Hundreds of landowners in our service area have been in contact with representatives from Keystone Pipeline in recent weeks. The Keystone Pipeline is being built to bring crude oil from Alberta, Canada to refineries east of St. Louis, Missouri. I can appreciate how gut wrenching it might be when a company is proposing to bury a 30” wide pipeline on your land, which for all practical purposes will be there forever.

I read recently where someone opposed to the pipeline stated there would be no benefit to North Dakota as far as he could see. In this regard, I need to go on record that the pipeline will be of tremendous value to Nodak and consequently, to all of our member/owner ratepayers.

With the final routing in place, Nodak will have the privilege to serve three of five pumping stations along the North Dakota segment of this line. These pumping stations will be in Walsh County near Edinburg, in Nelson County near Niagara, and in Steele County near Luverne. The total annual power requirements for these three pumping stations are expected to be in the neighborhood of 140 million kilowatt-hours. There is potential for additional pumping requirements at these sites in the future. To put this into perspective, we are budgeted to sell about 757 million kilowatt-hours in 2007. When these pumping stations come online, they will increase our total sales by nearly 20%. There has been no event that has had this magnitude of impact on our sales since Grand Forks Air Force Base was built over 50 years ago.

The reason this is so important to Nodak is that in the electric utility world, we are relatively small to begin with; however, by nature, our business is high in fixed costs, which must be paid regardless of the amount of power we sell. If we can increase the volume of energy we sell, we can spread the cost of fixed expenses over more kilowatt-hours. This results in a lower cost per kilowatt-hour for everyone.

It is my understanding the pipeline will be of incredible value to the region due to the property taxes, which will be paid on an annual basis. Much of the region where this pipeline will be located would have little hope of attracting industry that would pay the amount of property taxes comparable to this pipeline. In view of the huge issue the property taxes were during the last legislative session, the timing could not be better.

One of the biggest reasons this pipeline is good for North Dakotans has nothing to do with how much we pay for our electricity, or how high our property taxes are. The most important issue is that this country has a serious problem with some of the countries we do business with for the energy we need. Canada is certainly not one of those countries. We, as citizens, should be ecstatic whenever we can buy oil from a country that is not harboring people who are trying to kill us. This doesn’t mean the landowners in eastern North Dakota shouldn’t be treated fairly. It only means we don’t have a long list of choices to displace Arab oil, and it is important to capitalize on every one of them.

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Line worker profession is a great opportunity

May 2007

We have just gotten through the graduation season, and there are a new bunch of high school graduates who may or may not have plans for their future. We older folks know very well that the decisions they make and things they do over the next few years will have a profound effect on the rest of their lives.

One option for young adults is to consider a profession in the electric utility industry. Little research is necessary to find out that the average compensation in the utility business is very good regardless of where you live.

Opportunities in the electric industry have always been good, but they may be at their best in the near future. This will be especially true if you have an interest in being a line worker, or an interest in working in one of the trades associated with power plant operation.

I will talk mostly about the line worker’s profession, because that is the business Nodak is in being a distribution cooperative. For starters, the opportunities will occur because Nodak and many other electric utilities have an existing workforce with an unusually high average age and years of service. We are a small utility with only 67 full-time employees at this time. Of those 67 employees, 15 have over 30 years of service and another 16 have over 25 years of service. We expect that roughly 50% of our workforce will retire over the next 10 years. In addition, we occasionally have employees leave the organization for other jobs, or because their spouse has found a better job in another location.

The point here is that Nodak is not alone in this situation. Most electric utilities are facing similar succession planning issues, which is expected to put a strain on availability of trade workers such as journeymen linemen. Likewise, the power plant industry also has an aging workforce, coupled with the fact that many new power plants will be built over the next couple of decades.

So, you might ask, “what does it take to be a journeyman lineman?” In Nodak’s case, we generally hire people for these positions who have completed a lineman’s course at a trade school. There are excellent programs available at Bismarck State College and in Wadena, Minnesota. The lineman program takes less than one year and is very affordable. When we hire someone who has completed this course, they begin their employment as an apprentice. The Apprenticeship Program continues for another three years after being hired. During this period, the apprentice line worker’s salary increases until they are certified as a full journeyman lineman.

The lineman’s profession isn’t for someone who wants to always work 8:00-5:00 and never wants to work in inclement weather. If, however, you want a great profession with a relatively modest investment in education, this is it. If you are, or if you have in your family, a young graduate who is looking for a plan for the future, you may want to find out more about the lineman profession. A good start is to go to the Bismarck State College website on the Internet and click on “academic programs.” Follow the path to the Line Worker Program, and you will find information about the curriculum, as well as a contact person. A second thing you might do is find a journeyman lineman and talk with him. We can steer you to one if necessary, and I guarantee you will find they will be more than willing to talk to you about this great profession.

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Electricity is a good value

March 2007

I’m glad three years have elapsed since I had to write a column such as this one. I wish it were longer.

Effective with our April billing period, we will be increasing our retail electric rates by about 5.3%. This will coincide and offset an increase we will pay for our wholesale power from Minnkota Power Cooperative. Our Wholesale Rate is in fact going up by 8.5% at the same time. Since our wholesale power bill makes up about two-thirds of our total operating expense, we can get by with a smaller percentage increase in our retail rate.

The good news today is exactly the same as the news I conveyed three years ago. That is, even though the cost of electricity from Nodak is going up, the increases have been minimal for several decades. If you adjust for the value of the dollar, you are paying considerably less for electricity today than 15 years ago. As an example, a rural residential account using 1,200 kilowatt-hours in a month in 1992 paid $94.80. With our new rate going into effect in April 2007, the same account will pay $103.50. That amounts to a 9.25% increase over 15 years. In contrast, the Consumer Price Index has increased by more than 40% during this same period of time.

We haven’t included a lot of detail about the new rates because the increase is pretty even across the board. That means, each rate class received the same increase, and in fact, each component of each rate class will be increased by roughly the same amount. For that reason, it doesn’t matter how much power you use or which rate class (residential, commercial, or industrial), your cost of power will go up by about 5.3% in April.

We don’t anticipate the need for any further rate changes at least for the next couple of years. In 2009, Minnkota will be phasing in the cost of expensive environmental upgrades on their power plants. We may incur additional wholesale increases at that time, which will again affect our retail rates. Hopefully, the adjustment at that time will again be minimal.

All of our retail rates are available on our website at www.nodakelectric.com. We invite you to visit our website for that information, along with much more about your electric cooperative.

We also invite you to attend your annual meeting at the Alerus Center in Grand Forks on Saturday, April 14, 2007.

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Looking ahead at the Year 2007

January 2007

In a couple of months, we will be publishing our 2006 Annual Report. Along with the financial statements, we will be giving a very positive summary of a year that went very well. I won’t cover all of the details at this time, but I can say that we had a year with no electrical accidents to our employees or the public, no serious ice storms, no rate increases, and we had operating margins above budget. In short, we wish we could clone last year and repeat it every year in the future.

In 2007, we have a number of issues that will need much of our attention. First of all, this is a legislative year, and we may have bills submitted that need our support or opposition. The last four legislative sessions, there have been bills introduced by the investor-owned utilities to change the Territorial Integrity Law and thus take away our service area around cities. In all cases, these bills have been soundly defeated or withdrawn when it was obvious they had no chance of passing.

We expect there will be proposed bills this session that address the development of renewable energy. We are very supportive of further development of renewable energy, especially wind energy, provided it can be done in a responsible manner. To us, responsible essentially means that the risk of higher electric rates for our members is kept as low as possible.

In 2007, we will be required to hold a public hearing to comply with the new Federal Energy Act. During this hearing process, our board of directors must consider adopting net metering and time-of-use rates. During this public hearing, members have the opportunity to intervene and provide testimony in support or opposition to these issues. Notice of this hearing has been published in the newspapers and in our Nodak Neighbor. There is also information about the hearing available on our website www.nodakelectric.com. When you reach the home page on our website, you only need to click on “PURPA Notice” to access this information.

One of the differences in 2007 from the previous years is that we will almost certainly need to have a small rate increase. Our wholesale power costs from Minnkota Power Cooperative will be increasing by about 10% effective April 2007. With no other changes, we will need to increase our retail rates by 5% to 8% to cover the added cost of our wholesale power. It will be our goal to keep the rate increase as close to the 5% level as possible. We will be able to give you better information about this in the March issue of the Nodak Neighbor.

We hope that one year from now we can give you a year-end summary that is at least close to the one we have for 2006. We know already we won’t be able to match the “no rate increase” statement, but there is more to our service than the cost. We hope you will feel our overall service meets your expectations.

Happy New Year and Best Wishes for the coming year.

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The value of scrap metals and stolen copper wires

November 2006

The soaring price of copper and other metals has had a dramatic effect on Nodak in two ways. One of the two is somewhat costly, but mostly annoying. The second is very costly.

With higher costs for metals, the value of scrap metal has increased proportionately. Scrap copper today brings roughly twice what it did only two years ago. Because of this, people are more diligent in salvaging and selling copper and other forms of junk metal. Some are way beyond being diligent in that they are stealing copper wires from uninhabited farmyards. In some cases, the power has still been energized at a vacant farmyard when the wires have been cut down and removed. Needless to say, the thieves are taking some risk by cutting wires that have power flowing through them. Some of the wires being cut down from vacant farms belong to Nodak, while some are wires owned by the property owner. In either case, the cost to replace the stolen property is many times the relatively small value of the scrap copper. This, of course, compounds the frustration for both us and the property owner.

In one case, when a thief was caught by the property owner, he told the owner he was from Nodak and he needed to replace some bad wires. He, in fact, had already cut down some of the wires which were the owner’s property. He said he would return later with the new wires, which of course never happened. In this case, the pickup which the thief was driving was green and looked somewhat like the green vehicles driven by Nodak employees.

The second and more costly impact to Nodak with soaring copper prices is the price we pay for our conductor and transformers. By year-end, we will have installed roughly 1.7 million feet of underground conductor. The price of this conductor is $.70 per foot more than two years ago. As you can see, the added extra cost for conductor alone is over $1 million for the year 2006.

There is nothing you as the public can do about our increased cost of construction due to higher metal costs. There may, however, be things you can do to help with the theft of wires from vacant yards. Keep an eye open for things that look unusual. You may want to especially make note if and when you encounter someone at a vacant yard who seems not to belong there. We don’t want you to put yourself in an unsafe situation, but perhaps you can write down their license plate number if possible. You should then give this information to the local sheriff’s department and let them conduct the investigation.

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20/20 Initiative could be costly

September 2006

It appears the voters in the City of Grand Forks will have the opportunity in November to create a mandate for renewable energy in the city. A group called the Citizens for Affordable Renewable Energy (CARE) has been circulating a petition calling for this issue to be placed on the general election ballot in November. The plan is called the 20/20 Initiative. The voters will be asked to vote “yes” to amend the Grand Forks Home Rule Charter to ensure that 20% of the electricity purchased in the city comes from renewable sources. That percentage is increased to 30% by year 2030.

Nodak is one of two electric power suppliers franchised in the City of Grand Forks. The other is Xcel Energy. If this measure passes, we will need to comply with the mandate in order to have our franchise renewed. As this issue comes up for a vote, it will be our job to provide factual information to the voters about the Initiative. No doubt one of the questions asked will be whether or not this action would have a significant effect on the price of electricity for the residents of Grand Forks. While the honest answer to the question is, we don’t know, we can at least describe what some of the challenges will be to comply with the renewable requirement if passed.

One of the most problematic features of the Grand Forks Inititive is that it creates a mandate that renewable energy be delivered to a specific location, namely Grand Forks, without consideration to cost. Many utilities today, including Nodak’s wholesale supplier, Minnkota Power Cooperative, are generating a small portion of their energy with renewable sources with very little, if any, effect on their retail rates. However, if utilities were required to generate 20 or 30 percent of their energy with renewables, the rate impact would probably be more than most consumers would appreciate. Most research indicates that the public is generally interested in renewable energy even to the point they are willing to pay more for their electricity if it is generated with renewables. The question, of course, is how much more are they willing to pay and are they willing to establish a mandate, which may drive the cost up a little more than they had anticipated.

If this proposal does reach the ballot in Grand Forks in November, the voters will be making a decision that carries a lot of uncertainty. They will not know the final cost of meeting this requirement in 2020 and 2030. They will not know if the cost will have an adverse effect on their electric rates, and if so, the significance of the added cost. Even though there is a growing interest in renewable energy, this proposal will put the voter in a difficult position to cast an intelligent vote.

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Wind Subscription Cost Eliminated

July 2006

Over the past five years, roughly 600 Nodak members have volunteered to pay a slight premium for some of their electricity for the purpose of promoting renewable energy. This month, the extra charge is being eliminated as it is no longer necessary to sustain the program.

In January 2002, Minnkota Power Cooperative, our wholesale power supplier, built the first of two large commercial grade wind generators. The wind turbine is located along Interstate 94 just east of Valley City, North Dakota. The project cost approximately $1.2 million, and the annual output of the 900 KW turbine is approximately 2,800,000 kilowatt-hours. A second turbine of equal size was put up just east of Petersburg, North Dakota later that same year.

The cost of wind energy has become progressively more competitive as technology improves and the size of wind generators increases. Also, the federal government provides a 1.8¢ subsidy for wind generation to help make renewable energy more competitive with other forms of electric generation. Even with these favorable attributes, a wind turbine is very expensive, and the cost of electricity generated in this manner was more than other energy available to Minnkota in 2002. Because of this, Minnkota created a wind subscription program to help pay for the generator.

Nodak and the other 10 distribution cooperatives who buy power from Minnkota advertised for members to participate. We asked members to volunteer to pay 3¢ per kilowatt-hour extra for blocks of 100 kilowatt-hours per month. Each block, therefore, cost $3.00 per month, and the added revenue was used to offset part of the cost of the wind turbine. This was a way of equalizing the cost of renewable energy with the other energy available to Minnkota either from their coal-fired generator, or from the regional energy market.

The first thing Minnkota discovered with their two new generators was that the output exceeded their expectations. With more kilowatt-hours available from the generators to pay for the investment, the subscription rate could be reduced. A more significant finding was that the energy from the wind generators became more valuable each year after they were built. The reason for this was because some of the energy that is made available from the wind turbines comes during periods when Minnkota is forced to buy expensive power from the power market. This may happen during power plant outages, during extreme peak conditions, or other unexpected events.

In recent years, the average cost of power from the market has been on a steady rise. This has caused the “average value” of wind-generated power to be greater. With the above factors considered, Minnkota has twice reduced the wind subscription price for renewable energy. Just recently, it was determined that the subscription charge could be eliminated. Those members who have been paying a little extra for renewable energy are no longer being charged the added subscription price.

First, and foremost, we want to thank those 600 members who stepped up to the plate and helped to make this project work. Because of their involvement, we now have two large wind generators, which we are optimistic will provide competitively-priced energy for many years into the future. Second, this experience gives us reason to believe it may be wise to build more wind generation in the near future. Minnkota is presently studying the feasibility of building several new wind turbines even larger than the ones located near Valley City and Petersburg. We will keep you informed on the development of this project in future issues of the Nodak Neighbor.

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Rate Revisions revisited

May 2006

If you have been paying attention, you are aware we have been making a lot of changes to our General Service Rate schedules over the last five years. We try our best to inform you of not only what changes are being made, but also why the changes are necessary.

There are three primary reasons why you have seen so many rate revisions in such a short period of time. First, we merged two different systems, Nodak Electric Cooperative and Sheyenne Valley Electric Cooperative on January 1, 2000. While the different rate schedules of the two systems were similar, they were not identical. Over a three-year period, we phased out the former Sheyenne Valley rates and moved both members under one of the existing Nodak rate schedules.

Second, we have made a deliberate move to adopt rate schedules which have a higher monthly facility charge and a lower per kilowatt-hour charge. Our Cost of Service studies have shown that under the old rate schedules, small users were not paying their way and were being subsidized by larger users. This change also has been phased in with three different revisions during this period of time.

Third, we needed a small rate increase in 2004 to help offset significant increases in our wholesale cost of power. Fortunately, we were able to absorb most of the increase in our wholesale power and needed only a five percent rate increase at that time.

With all of these changes, I wouldn’t blame you if you were a little bit confused and even if you felt like you have been jerked around. What we do want you to realize is that despite all of these changes, it is unlikely your total electric bill has gone up significantly. This is true not only over the last five years, but in fact over the last 16 years.

The first graph below shows the cost of purchasing 1,500 kilowatt-hours from Nodak under our Rural General Service Rate from 1990 through 2006. As you can see, the total cost has jumped around because of all of the changes we have made. The good news is that you are only paying about $4.00 per month more today than in 1990. Quick math tells you that this is an increase of only 3.5% over 16 years.

As I indicated above, we have deliberately adjusted our rate schedules to have higher monthly facility charges and lower kilowatt-hour charges. The second graph shows how this has affected a customer using only 600 kwh/month over the same 16-year period. While the percentage increase is a little higher, this user is still only paying $7.00 per month more today than in 1990.

The biggest component affecting your electric rates is our wholesale cost of power, which makes up roughly 65% of our total cost. We have been very fortunate to have low-cost wholesale power, which has been generated with coal-fired power plants in western North Dakota. There isn’t a day that goes by that you can’t find information telling you that our future lies in renewable energy. We believe that renewable energy will play a part in our future, but in North Dakota, we are smart if we continue to rely on an abundant source of coal. Coal can in fact be used to generate power in a manner which is kind to the environment and represents our best hope for continued low-cost retail electricity.

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