Attend Your Co-op’s Annual Meeting

Most of the people who buy power from Nodak don’t know, or at least don’t think about, the real connection they have with this utility. In the next few months, you will have several opportunities to better understand and participate in your electric utility.

In the last issue of the Nodak Neighbor, and again this month, we are giving notice of the election of three of nine members of the board of directors. You may well know one or more of the candidates running for these positions. Even if you know none of these candidates, it is your right as a member/owner of the cooperative to call them with any questions about the cooperative. It is also your right, and more importantly your benefit, to cast a vote for the person you want to sit on our board of directors and make policy for the cooperative. You don’t even have to leave home as you can cast a ballot by mail after the ballots are sent out with our Annual Report.

On April 8, 2006, you are invited to attend the annual meeting of the cooperative. It will be held at the Alerus Center in Grand Forks. The annual meeting is a short business meeting at which time the current status of the cooperative is reported and time is provided for attendees to ask any questions about the business. The more participation we get at our annual meeting, the better our board of directors and management understand the pulse of our membership. We strongly urge you to attend and participate at this meeting. As a little incentive for your time, we will have numerous drawings for attendance prizes during the meeting, and we will again be serving a great noon meal following the meeting.

During the coming months, we will be issuing capital credit checks based on your past patronage with the cooperative. Each year that you buy power from Nodak you earn a small chunk of equity in the business. You may or may not view this as a great value, but none the less you get this piece of equity quite painlessly. You don’t purchase equity with cash; rather it comes with doing business with the cooperative. I guess it is a little bit like earning airline miles when you use a particular credit card. At a later date, we cash out your oldest equity by issuing you a capital credit check. It’s not an investment on your part, and it does not earn interest. It is simply a tangible benefit that goes along with buying power from Nodak. Keep an eye on future issues of the Nodak Neighbor when we will be notifying you of the next capital credit payment.

In summary, we hope that you always view Nodak as an electric utility that has fair rates and good service. In addition, we hope you have an awareness of the extras that go along with having ownership in the business. These extras include having a voice in the business and earning equity as you buy power from the cooperative.

We look forward to seeing you at the Alerus Center on April 8.

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Rate Structure Revised

January 2006

We had a very good year in 2005, and I would like nothing better than to use this article to talk about it. However, we recently asked the board to do some fine-tuning of our retail rates, and it is more important that we communicate the details of those changes at this time. The rejoicing about our good year will just have to wait until the year-end Annual Report is published later this winter.

The good news about our General Service Rate revisions is that no one will end up paying much more for their electricity than under the old rates. As you will see, many of our members will actually pay a little less under the new rates, and very few will see an increase greater than five percent.

Under our General Service Rate, there are three sub-categories that are referred to as Rural Rate, Urban Rate, and High Density Rate. The first two are pretty self-explanatory as they apply to members served in a rural setting or an urban setting. The High Density Rate applies to developments which are not urban, but in fact somewhat resemble an urban setting due to unusually high density.

The nature and purpose of our revised General Service Rate is to cause all three sub-category rates to have exactly the same charge per kilowatt-hour. The only difference in the new rate structure will be in the monthly facility charge. The reason for different facility charges is because the actual cost to serve accounts varies with different levels of density.

In all three cases, we have lowered the first step of our charge per kilowatt-hour to 6.2¢. This change in itself will result in a lower overall cost for most of our members. We have offset the loss of revenue by increasing the monthly facility charge and moving the lower cost second step out to apply to all kilowatt-hours over 4,000 kilowatt-hours per month.

The accompanying graphs illustrate the percent change under each of the rates for various levels of monthly consumption. For example, a rural General Service account using 1,500 kilowatt-hours per month will see a reduction of about 1.1% with this rate change. Similarly, a rural account using 2,000 kilowatt-hours per month will see an increase of just over 1%. The average monthly usage for our General Service accounts is around 1,700 kilowatt-hours per month, and a large majority of our members’ usage falls somewhere between 500 and 2,000 kilowatt-hours per month.

The second major rate revision we made will increase our Off-Peak Rate for dual heating systems from 3.1¢ per kilowatt-hour to 3.4¢ per kilowatt-hour. The rate for short-term control was increased from 4.3¢ to 4.4¢.

For those who read my article last month, you may recall that the purpose of increasing the Off-Peak Rate is to help curtail the amount of load control from what we have had in recent years. One way to have less load control is to buy power from the regional market in lieu of implementing load management. We have, and will always do this when the market prices are low. This winter, the decision was made to purchase more power from the market, even when the prices are slightly higher, knowing that this action will help to reduce the overall hours of load management. The extra cost to purchase more power from the market in lieu of load control is being passed on to the off-peak customers in the form of a slightly higher Off-Peak Rate. The theory is that to a point it makes sense to charge you a little more for your off-peak electric rates if it results in less control time and consequently, less use of backup fuel.

These changes to our retail rates were approved during our December board meeting and will go into effect on January 20, 2006. In this regard, you will not actually see the effects of these rate changes until you receive your February billing some time in March. If you would like to get more detailed information about the effects of these rate revisions, you may want to visit Nodak’s website at After you get to our website, if you look under the section which is headed “About Nodak Electric” and click on “Electric Rates,” you will get comparative information where you can compare the old rate to the new rate for various levels of electric usage.

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Future Changes in Off-Peak Heating

November 2005

If you are one of the 40% of our members who heat their homes using an off-peak system, you will be interested in this article. If you are one of the other 60% of our members who are considering options to heat their home in view of high fuel oil and propane costs, you may also be interested in this article.

The good news to report is that the near-term outlook for Nodak’s electric rates is very good. We are having a good year in 2005 and do not foresee the need for a general rate increase at least through the end of 2006. We do not need an increase in our Off-Peak Rate, and we wouldn’t even be talking about the rate except options exist which can reduce the hours of total load control during the winter heating season.

To understand where we are going with our Off-Peak Program, it is necessary to recall the fundamental purpose of having the option in the first place. Our power supplier, Minnkota Power Cooperative, offers the Off-Peak Rate incentive for the “privilege” of shedding load during times when they exceed their economical generation capability.

An alternative to load control is to buy power from the regional power market. When power is available at a reasonable price, Minnkota will do that. Prior to about four years ago, there was very often cheap power available, and consequently, very little load control was necessary. In recent years, this supply of cheap power from the market has “dried up,” and as a result, the hours of load control have increased substantially.

With the high price of fuel for backup systems, most members want us to keep the total hours of load control at an absolute minimum. As we analyze the market, it appears there are times when it would be better to have Minnkota buy power from the market and add the extra cost to the Off-Peak Rate than to have you burn fuel in your backup system. It gets to be a tradeoff between paying just a little more for your Off-Peak Rate and in turn buying a little less fuel oil or propane for your backup system.

This winter heating season, we are going to move in the direction described above. We have requested that Minnkota purchase power from the market up to a given level if the added purchase means less off-peak control. In rough numbers, they will probably spend between $1 million and $1.5 million, and the added cost will probably increase our Off-Peak Rate by two to three mills. A three mill increase would mean our Off-Peak Rate would need to be increased from 3.1¢ to 3.4¢. We need to qualify this decision as somewhat of an experimental attempt to reduce the overall amount of winter load control hours. The actual amount of the rate increase and the timing of the increase will be announced some time after the start of the new year.

The amount of hours that can be reduced is uncertain and depends partly on the day-to-day price of power available from the market. Based on recent history, we feel we can eliminate 150-200 hours of control with the level of spending that has been set. If we are successful in reducing the number of hours of load control by 150 hours or more, and if the price of alternative fuels remains at the present level, this plan will prove to be a good move for the homeowner. The amount saved in backup fuel will be greater than the added cost of a two to three mill increase in the Off-Peak Rate. If any of the variables are different than expected, we then need to re-evaluate the plan to determine if it is worth continuing.

As always, we are interested in your feedback. Please let us know by mail, by e-mail, or in person how you feel about the concept of a slightly higher Off-Peak Rate in exchange for reduced hours of load control.

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Facility Charge is a Fairness Issue

September 2005

There are about 900 electric distribution cooperatives in the country and they vary greatly in size and demographics. The smallest electric cooperative has less than 1,000 service locations and the largest has over 200,000 service locations. Nodak provides power to about 13,000 members at roughly 16,300 locations.

Each year, we receive statistics which compare our system to all of the other electric cooperatives in the state and the nation. One of the statistics which stands out is our average investment in utility plant per consumer. Nodak presently has an average investment in plant of $6,098 per consumer. This is a little less than the state average, but is much higher than the median investment of all electric cooperatives nationwide. The median investment per consumer across the country is $3,830 per consumer.

So, what does this mean with regard to doing business in North Dakota versus other parts of the country? It means that on average, we need to do a fair amount of business per consumer to simply pay for our investment in distribution plant. For example, if you were to borrow $6,098 at five percent interest over 35 years, the payments would be about $375 per year. If you are in the business of selling electricity with this distribution plant, you need to average $375 annually in margins (growth profit) just to pay for your investment. This provides nothing to pay for labor, taxes, maintenance, and many other operating expenses. Certainly, these statistics are important in understanding the challenge to provide affordable electricity in a sparsely-populated rural service area. It also helps to explain the need for the monthly facility charge which is necessary but not always popular.

The monthly facility charge is a flat fee that is charged to each customer whether or not any power is used. It is frequently the cause of resentment on the part of our customers, especially those who use little or no power on a monthly basis. The reason that a facility charge is necessary is because of equity and fairness among all members of the Cooperative.

An electric distribution system is expensive to build and maintain. We have that cost regardless if anyone buys any power. It would be unfair if some members had access to the system “just in case” they wanted to buy some power while all of the ownership costs are being paid by the other members who are buying power. On this basis, it is appropriate to get some of our needed revenue “up front” in the form of a monthly facility charge with the majority of our revenue coming from the actual sale of electricity.

If we eliminated the facility charge, we would simply need to increase the charge for each kilowatt-hour we sell. The result would be the same for the Cooperative and some members would see very little change in their total monthly bill. However, those who use little or no power each month would be getting a free ride as far as paying for the distribution system that is in place. Their share would be picked up by those members who use more than average amounts of electricity each month at a slightly higher per-kilowatt-hour rate.

The bottom line is that when you pay an electric bill, part of what you pay is to have the delivery system in place and ready to sell you electricity, and part of what you pay is the actual electricity which is delivered.

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Minimum Charge Provision

July 2005

Up until last month, all of our rate schedules included a provision for an annual minimum charge. The large majority of you have never been affected by the minimum charge provision as even a relatively small user of electricity will purchase more than the minimum requirement.

The minimum charge provision was a rather complicated calculation that could affect you in one of three different ways. You had a minimum usage requirement based on:

  1. The transformer size serving your account,
  2. The length of tap line serving only your account; and
  3. The original investment required by the Cooperative to serve your account.

Recently, your board of directors amended our rate schedules to eliminate the minimum charge based on either transformer capacity or length of tap line. The only minimum charge remaining on our rate schedules is that which is based on our investment to serve a new account. We require a new account to be subject to an annual minimum purchase requirement for the first five years after we have made service available. The annual minimum requirement is $800 for a single-phase account and $1,600 for a three-phase account. This gives the Cooperative some protection from someone asking us to make an investment in a line extension and then elect not to purchase electricity at that particular site. Clearly, the requirement is much less than is typically used, and it is not common that a new account is impacted by this provision.

The transformer and tap length minimums also were in place to help ensure that the Cooperative would recover investments to serve specific accounts. However, in recent years, we have increased the monthly facility charge, which actually serves the same purpose. Also, we have tightened our Line Extension Policy limiting the amount the Cooperative will spend on a new account to $4,000 for single-phase service and $8,000 for three-phase service. Any cost over this amount is paid by the owner. This again protects the Cooperative from installing long expensive line extensions which never can be recovered through normal sales of electricity.

The vast majority of Nodak’s service area is rural. Almost all of this rural area is declining in number of active accounts. When we extend lines to a new account, it is seldom that the investment will be useful for a second or third service in the future. On this basis, it is necessary to make sure we do not spend more to serve a new account than can possibly be recovered over time through the sale of electricity. In this regard, we try to deal with the issue up front at the time the line extension is made. One of the results is that we feel comfortable eliminating the use of minimum charges after five years of continuous service.

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What the Grand Forks Air Force Base means to Nodak

May 2005

The Base Realignment and Closure (BRAC) Commission recently made public the list of recommended military installations for closure. By now, everyone in the region is probably aware that Grand Forks Air Force Base is one of the military bases that is scheduled for realignment.

In the next few months, we can react with gloom and doom, or we can move forward in the most positive manner possible. Any change at Grand Forks Air Force Base is, of course, serious to Nodak as it is to many businesses in the region. First, we sell 65 million kilowatt-hours annually to the Base, which is nearly 10% of our total sales. Second, we provide service to many residences in the region that are owned or rented by military families or civilian workers who make a living on the Base. Third, we sell power to many small businesses who in turn depend on Grand Forks Air Force Base for all or part of their success. We can only assume some of these small businesses will not survive if they are totally dependent on the Base for their business.

Obviously, we all would have been much happier if Grand Forks would have been left off of the list. However, at the other extreme, we would have been a lot more depressed if the Base had been scheduled for closure rather than for realignment. Our disappointment at this stage is that the realignment appears to be a drastic downsizing with regard to military and civilian jobs compared to the flying mission that now exists on Base.

We now have roughly three and one-half months during which time state and local leaders will build a case that the flying mission should be retained at Grand Forks Air Force Base. If this effort fails and the military presence is in essence downsized substantially, the result could clearly have an adverse effect on Nodak. Not knowing the nature of the realignment, nor the energy requirements of the new mission, it is difficult to estimate what the final financial impact would be on our business. Fortunately, we have a lot of diversity in our membership, and we do not expect the effect would be devastating. The Base is a very large load that is rightfully served with a special low margin rate. In that regard, the loss of residential accounts, which are scattered out over our distribution system, might be more serious than the loss of the Base itself.

Nodak is a business that is accustomed to dealing with change which adversely affects our sales. Serving a rural, agricultural region, we have experienced severe changes to our demographics over the past few decades. If we lose a significant amount of sales to the Air Base, we are optimistic we can deal with this change as well. We hope, however, we prevail in our effort to save the flying mission at the Base, or the realigned mission turns into something that will grow and some day return the Base to its old form with regard to military and civilian job opportunities.

Last Friday, the 13th, the day the list was made public, was a cloudy and gloomy day. We can only hope that things will look a lot brighter next September when the final list is turned over to the President for acceptance.

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Estates and capital credits

March 2005

During the past North Dakota legislative session, a bill was introduced and voted down which would have forced electric cooperatives to pay 100% of all outstanding capital credits to an estate of a deceased member. The sponsors of the bill stated they had received numerous criticisms from electric cooperatives regarding this issue. Most electric cooperatives will pay out outstanding capital credits after the death of a member, but the payment is less than the full amount allocated to the member. Nodak is one of these cooperatives that discounts capital credit payments to estates.

To understand why we do what we do, it is important to remember a couple of facts. First, when a member dies, we are no longer dealing with fairness to the member, but rather fairness to someone who is the heir to the former member’s assets. Second, capital credits which are paid out in a lump sum have a greater value than if they are paid out over many years in the future.

With the above understanding, let’s look at a real situation. Suppose a long-time member dies, and he/she has capital credits that have been allocated over the last 18 years. (I used this term since that reflects our current situation.) Is it fair that the estate is treated better at this point in time than the active members of the cooperative? What would justify why the estate gets paid in full today while the live members have to wait until their capital credits are paid out over many years? Furthermore, there is never a guarantee that capital credits will ever be paid out. Why should the estate get to avoid any risk of further payments not being made? As a live member, you have that risk as slight as it might be.

There is, of course, a logistics-related reason that it is good to “clean up” additional capital credits at the time an estate is being handled. Still, it is not necessary to give the estate a financial benefit. By discounting the amount paid out, the lump sum payment can be made to be equitable with the stream of smaller payments that the membership is expected to receive over the next 18 or so years.

Some may say that paying out 100% of outstanding capital credits to an estate is the “right thing to do.” More than once, I have heard the comment that since we all will die sooner or later, every member will be treated equally if their capital credits are paid in full upon death. Actually, this statement is far from true. Thousands of our members leave the system and live long enough to receive all of their capital credits under a normal rotation. Paying out capital credits to estates in full value may be the right thing to do if the objective is to be perceived to be the nice guy to those receiving the payment. It is not the right thing to do if the objective is to be fair and equitable to all members of the cooperative. The right thing to do is to compute the present value of the accelerated payment of capital credits and pay that amount to the estate.

It was interesting that the issue got so far as to be introduced into the North Dakota Legislature and was narrowly defeated. The bill, if passed, essentially would have resulted in a state mandate that we give preferential treatment to estates. Clearly, the support for this bill was due to a combination of emotional response to criticism and a lack of understanding about equitable treatment of capital credits.

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Reflections of 2004

January 2005

As the year comes to an end, we generally look back and evaluate what we liked about the year and what we wished could have turned out differently. We are constantly in a strategic planning mode, and this is the time of year that financial reports and other year-end summaries are indicators of success or failure.

We always declare success when we can report that we completed another year without a serious accident involving our employees or the general public. We run a business that has an inherent danger with high voltage electricity. Our distribution system consists of roughly 7,700 miles of mostly 7,200 volt lines. Operating this system safely doesn’t happen without a constant focus on proper operating procedures and public awareness.

It was not a highlight of the year when we needed to increase our retail rates by roughly five percent. There is some consolation in knowing that we have avoided a general rate increase for nearly a decade. We also are keenly aware that many of our members have low income, and any increase in cost of electricity takes cash that would otherwise go to something else. We don’t like increasing rates, and we will do everything we can to delay the next increase as long as possible.

The low-interest rates seem to be the main reason for growth in our residential classification. We had a banner year for new services, especially in the Grand Forks area. Like any business, increased volume of sales helps to spread the burden for covering our fixed costs. In recent years, we have averaged about two percent growth per year in sales. This has been a major contributor in accomplishing our goal at avoiding rate increases.

One of our biggest challenges the last three years has been the change that has evolved with our Off-Peak Heating Program. For over two decades, we were able to offer a bargain off-peak heating rate, and yet we seldom needed to control the customer’s primary electric heating system. This was possible partly because cheap electricity was more often than not available from the regional utility market. Our power supplier, Minnkota Power Cooperative, would purchase this cheap power rather than implement load control when they needed extra capacity.

In recent years, the energy market took a major turn. For various reasons, the supply of cheap surplus power in the market dried up. Almost over night, it was necessary to implement load management in many situations that earlier could have been avoided. As a result, our off-peak program changed. The cost of off-peak electricity is still very low; however, an off-peak user must count on many more hours of load control over a heating season, and consequently, will purchase more alternate fuel for a backup system. This doesn’t make our off-peak option a bad option. It means that overall it will be more costly than in previous years.

As we look back on 2004, there was much more good than bad on which to reflect. Our margins for the year were higher than expected, and we are not currently anticipating the need for a rate increase in 2005.

On behalf of our board of directors, we extend our best wishes for the New Year.

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Concern about mercury emissions

September 2004

You may have heard or read something recently about mercury emissions in coal-fired power plants. If you have, it won’t be the last time you hear about this issue. If you are a little bit confused, don’t feel bad. You are in the majority in that regard.

The Environmental Protection Agency (EPA) is now drafting new regulations requiring coal-fired power plants to cut their emissions of mercury. The final rules will most likely be put in place some time in 2005, and utilities will be given a few years to bring existing power plants into compliance.

The primary reason for concern about mercury is clear and easy to understand. Coal-fired power plants are one contributor of mercury in the environment and are blamed for contaminating fish in waterways near the power plants. The most severe and frequently discussed problem occurs when pregnant women eat large amounts of contaminated fish during pregnancy. Excessive amounts of mercury have been found to cause damage to the nervous system of unborn babies. When confronted with this type of scenario, no sane person would dismiss the issue of mercury contamination as a non-important issue.

What is not so easy to understand is the level of risk that is present with the existing level of mercury in the atmosphere and in our waterways. Most of us will never have an understanding of what level of risk we are really exposed to. Maybe it is something we should be extremely concerned about, or maybe it ranks low in comparison to all of the risks we live with every day. It really doesn’t matter though because the EPA has determined that it is a risk that needs to be dealt with, and we will deal with it in the near future.

Important to us at this time is the extent that EPA will go to when removing mercury from power plant emissions. Over 50 percent of the electricity generated in the United States is from coal-fired power plants. Over 90 percent of electricity generated in North Dakota is from coal-fired power plants. Removing mercury from the emissions of these power plants will cost billions of dollars, and the cost will be paid by the consumers when they buy electricity. Regardless of what you hear from environmental extremists, this is not an issue about “selfish, irresponsible utilities.” This is an issue about a mandated government solution to a health risk that is being done on behalf of society and will be paid by society.

Most important at this juncture is the percentage of mercury that will be required to be removed from power plant emissions when the new regulations are in place. With the technology available today, the cost will increase dramatically as this percentage is increased. The extreme view in this regard is to remove as much mercury as is technologically possible regardless of the cost. If this view is accepted, the already high cost of compliance will be increased dramatically. For example, the cost of removing 80 percent of mercury from emissions will be much higher than removing 70 percent, but the reduction of health risk might not be much different.

We will be watching closely as EPA comes out with the final rules on mercury emissions. It is no longer a questions of “if” but rather of “when and how much.” For electric consumers in North Dakota, it will result in higher electric rates. Most of us will never know if the actual health risk justified the action that is being taken. We can only hope that the Environmental Protection Agency will use sound judgment when finalizing these rules.

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Wind development

July 2004

There are few issues that I get more questions about than our Infinity Wind Generation Program and other related renewable generation issues. It has been especially common this spring and summer with the high frequency of wind in the area to receive comments about how well the Petersburg or Valley City turbines are doing. I often refer people to the Minnkota web site on the Internet at where they can actually view the current performance of these generators.

This past winter, our Statewide Association of Electric Cooperatives conducted an opinion survey of North Dakota residents. Some of the questions in the survey related to the development of wind energy in the state. Those surveyed were asked what level of agreement they had with the statement “North Dakota electric utilities should use wind to generate part of their electricity even if it costs more than coal generation.” Of those surveyed, 34% strongly agreed with the statement, and 38% somewhat agreed.

At first glance, the research indicates the majority of our electric consumers want us to generate power with wind despite the higher cost, which will result in higher electric rates. This may be a true conclusion, but we also know that we have to be a little careful with survey results.

One of the questions that comes up about this particular survey result is whether or not the respondent typically related the higher cost of generation to higher retail electric rates. Sometimes there is the perception that big business, such as electric utilities, can and should absorb higher operating costs for the good of society, and that these costs will not be passed on to the consumer. In reality, if generation with wind costs more than with coal, the added expense will indeed increase the final retail cost of the electricity generated.

When Minnkota Power Cooperative and the 11 distribution cooperatives decided to offer Infinity wind energy, we first surveyed our members to determine what interest existed at the time. In the survey, we asked our members how many would be interested in purchasing wind generated electricity in blocks of 100 kilowatt-hours per month if it costs them more than the current retail rate. The survey results showed that roughly 26% of our members would be interested in purchasing a portion of their needs through the Infinity Wind Energy Program under those terms.

The next step in the process was to actually sign people up with commitments prior to building the first wind turbine near Valley City. When the actual sign-up forms were sent out, less than 2% of the members in the 11 distribution cooperatives signed up for the program. The sign-up was sufficient to fund the added cost of generating power with wind at the Valley City site; however, it demonstrated that research results may not be accurate for various reasons.

We recognize that the overall interest in generating electricity with renewable resources is increasing. We also know that some of the interest is influenced by information dominating the media from strong wind advocates that is not always complete or not always accurate. Coupled with the complexity of the electric utility business, it is almost impossible for the average consumer to really know if it is a good idea to generate more electricity with wind in North Dakota. On this basis, responses to the survey may be more based on emotion than understanding.

Some people criticize Minnkota, Nodak, and the other distribution cooperatives for having a go-slow approach to wind development. We, in fact, think our approach is just right in view of all of the uncertainties which still exist relative to wind generation. We believe we are doing the right thing by being cautious with an option that is still higher in cost and questionable in value. We need to continue to evaluate wind as an option just as we need to evaluate clean-coal generation technology.

In the end, we need to meet the increasing demand for electricity, we need to be good stewards of the environment, and we need to recognize that the overall cost of electricity in North Dakota is an important and real concern.

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Mail-in ballot option

May 2004

If you were one of the 400+ people who attended our annual meeting on April 17, chances are you were generally pleased with the event. At least that is the overwhelming response from the meeting survey and the comments made to our directors and staff that Saturday morning.

The meeting consisted of a short but informative business session, which included an election of three directors and a necessary change to our Articles of Incorporation. It was concluded with a complimentary lunch which was very well prepared by the Alerus staff.

Of particular interest was a modification in our process for election of directors. For the third year, the option of voting by mail prior to the meeting was made available. Each year, we have made changes to the procedure, not to make life confusing for you, but in an effort to improve deficiencies noted from the previous year.

In 2003, we sent out a special mailing, which included a mail ballot to each member with information about the director election, and a return ballot envelope and mailing envelope. The system worked very well, and we had a record number of members vote in the election that year. The concern we had following the election was that the process was very expensive in printing, stuffing, and postage costs. While we have as an objective to get more members to participate in the election, we also have as an objective to minimize operating costs which are eventually paid by you in your electric rates.

This year, we decided to include the mail ballot option in our Annual Report, which is mailed to each member. We reduced the cost of the mail ballot option by about $20,000, and still gave every member the option to vote by mail. It seemed like a very common-sense solution to accomplish both objectives of offering a mail ballot as well as minimizing operating costs.

We were disappointed this year when we received only about half the number of mail-in ballots as in 2003. In analyzing the process, we quickly realized that we had made a mistake in thinking that a typical member when receiving the Annual Report would see it with the same importance as a special mailing. In fact, many members have told us that they did not look at the Annual Report when it first arrived at their home. When they later got around to looking at the report, it was too late to vote and return the ballot in time for the election at the annual meeting.

We think two things will help to correct the problem caused by our oversight in future years. First, we will make sure we label the outside of the Annual Report in a manner to alert you that a ballot is enclosed. Second, we believe that by consistently using the annual report as a means of distributing ballots, you as a member will become accustomed to looking for the ballot each year when the report is sent out. In short, we intend to quit confusing you with change in the process each year.

Our board of directors believes that the mail-in ballot is a great method of giving more members an opportunity to participate in the cooperative business. We would prefer to see a larger crowd at our annual meeting, but we understand that many of you have conflicts which make attendance very difficult. By taking the time to vote in the director election each year, whether by mail ballot or in person, you are participating in the business in a very important way.

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Details for rate revision

April 2004

In the last issue of the Nodak Neighbor, we announced the need for a retail rate increase in April. This month, we are going to give the details of the rate revision.

The bad news is that our wholesale cost of power from Minnkota Power Cooperative has been on the rise. Our wholesale rates were increased by 8.5% in 2002 and by 4.5% in 2003. We will see a third consecutive wholesale price increase of 8.4% in April, 2004. Compounded, these three wholesale rate increases amount to a 23% increase in our wholesale cost of power.

The good news is that we are increasing our retail rates by only 5%. Most of the increase comes up front in the monthly facility charge. The remainder of the increase is in the per kilowatt-hour energy charge. The new General Service Rate, which applies to the vast majority of our members, is printed in this issue of the Nodak Neighbor. All of our retail rates can be reviewed on our web site at

The obvious question with this issue is how can we get by with only a 5% rate increase when our wholesale cost of power has gone up 23%? The answer consists of three parts. First, we are fortunate to have steady growth in our service area. This growth, which is primarily in the Grand Forks region, averages about 2 to 3% per year. Second, we have taken significant steps to make our organization more efficient. Some of these steps, which include our merger with Sheyenne Valley Electric Cooperative, the closing and realignment of many outpost facilities, and the discontinuance of a “free” North Dakota Living” Magazine, have not always been popular, but they have contributed to savings in your cost of electricity. Third, we will be operating on a lower level of margins in 2004 than in previous years. This will have some consequences in our level of debt, but will not have serious adverse effect on our overall financial condition.

Proposed revision of Articles of Incorporation

Our Annual Meeting will be held at the Alerus Events Center in Grand Forks on Saturday, April 17, 2004. You should be receiving a copy of our Year-end 2003 Annual Report very soon if you have not already received it. Please pay special attention to the Notice of the Annual Meeting. In addition to the normal business at the annual meeting, we will need to ask the membership to make an important change to our Articles of Incorporation.

The Articles stipulate that “The Cooperative is authorized to borrow money with the total indebtedness not to exceed Seventy-Five Million Dollars.” While most of us would interpret this to mean that our total indebtedness at any given time cannot exceed $75 million, the federal government interprets it differently. Rural Utilities Services, which approves our access to low-interest federal loans, looks at the original note value of each outstanding loan rather than the outstanding balance of each loan when computing our total indebtedness. In that regard, our present long-term debt is less than $34 million, but the total original value of these loans is in excess of $68 million. For this reason, we need to increase the debt limit in our Articles of Incorporation, or we will soon be ineligible to take advantage of low-interest federal loans through the Rural Utilities Services. The official notice of this proposed change to the Articles of Incorporation will be in the Annual Report, and it will be voted upon by the members at the annual meeting in April.

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