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 www.nodakelectric.com. 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.