Nodak’s concern about reduced growth

October 2002

During the last two North Dakota legislative sessions, senate bills have been submitted that would in effect rescind the Territorial Integrity Act. The current act places restrictions on investor-owned utilities if they wish to serve customers outside their franchised territory. It also gives jurisdiction to city governments as to whom they want to franchise within their city limits.

With the current Territorial Integrity Act, the City of Grand Forks has the right to extend a franchise to Nodak as an electric supplier within the city limits. The franchise we requested and were granted allows us to continue to serve areas within the City as they are annexed. This is called a limited franchise, as it only is applicable to specific areas near the edge of Grand Forks. We never have requested or would expect to receive a franchise to serve areas that were being served by Xcel Energy (formerly NSP). In fact, when we requested our first franchise within the City of Grand Forks, we intentionally left out hundreds of acres of undeveloped land adjacent to the city limits of Grand Forks. Based on service agreements prior to the Territorial Integrity Act, we viewed this land as being growth area for NSP as the city expanded. On this basis, we have never requested any of this land be included in our limited franchised area as it was annexed, even though such a request would be permitted under current law.

Over the 37 years since the Territorial Integrity Act was passed, the City of Grand Forks has constantly expanded, and NSP has enjoyed growth in sales and customers because of this expansion. It has been especially good for NSP, as much of the expansion occurred in areas we have elected not to request a franchise.

In recent years, some of the expansion of Grand Forks has extended into areas that have been served by Nodak since our beginning in 1940. We have continued to serve new customers in these areas after they are annexed in accordance with state law and our limited franchise with the City. Herein lies the concern of the investor-owned utilities, including Xcel Energy. They want to change the present law such that the City of Grand Forks would be prohibited from giving Nodak a franchise to serve any new customers within the City of Grand Forks. With this change, we would effectively be “kicked out” of our service area when it is annexed, and the territory would be given to Xcel Energy. We, and a large majority of the state legislators, see this proposal as being unfair and devastating to cooperatives like Nodak.

In recent testimony to the Legislative Electric Industry Competition Committee, a representative from Montana-Dakota Utilities made the following statement: “The current territory served and available for service from an investor-owned utility in our state’s largest cities is almost totally developed. The result is growth in our electric distribution businesses is slowing dramatically and in some instances, it is completely static. Any businessman knows, if you cannot grow, or cannot even hope to grow, your existing business, the eventual result will be the decline and stagnation of that business.” I have little disagreement with the observation made by this MDU representative; however, our concern is almost identical, even though our territories and corporate structure differ.

In contrast to the MDU concern about reduced growth, we have been experiencing decline in most of our service area for years. The area around Grand Forks is the only part of our large geographic service territory that has consistent growth. If our territory around Grand Forks is given to Xcel Energy, we will certainly decline in future years. We would then be precisely in the position described by the MDU representative in his testimony. The result for us would be as he described “decline and stagnation of our business.”

The word on the streets is that the investor-owned utilities will make another attempt to change the Territorial Integrity Act during the upcoming legislative session. Since this issue is so critical to our success, we will again do everything we can to inform our legislators about the adverse effect this proposed legislation will have on Nodak. Most important is that you as a Nodak ratepayer understand the issue, and that you contact your local legislator when the next territorial bill is introduced.