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.