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.