CEO and general manager report

If Basin Electric sticks with what it’s good at, it will remain successful for generations to come.

Basin Electric Power Cooperative - October 31, 2011
Ronald R. Harper, CEO/General Manager - published in the Nov-Dec 2011 Basin Today magazine

Happy Birthday Basin Electric! This 50^th year certainly has been an unusual one for the cooperative and the Missouri Basin region. We had a long, harsh winter with heavy snowfall, spring and summer flooding, and therefore an inordinate amount of hydropower was available in the area market.

The hydroelectricity in the system teamed with the addition of new generation facilities brought online made access to surplus markets a higher level of concern. With the difficulties we were facing in getting surplus energy to other markets, we recognized a need in late fall of 2010 to adjust our rate schedule. I communicated that to you and the board took action in July, so the new schedule would become effective Oct. 1.

The average member rate for the rest of 2011 and 2012 increased about 5 mills per kilowatt-hour from 45.4 mills per kWh to 50.5 mills per kWh. Raising the rates puts us on the path of meeting our board’s fiscal policy of achieving a before-tax margin equal to 3 percent of all revenue and other rate covenants of our indenture. While no one wants to raise rates, the board’s action is indicative of their sense of responsibility to the cooperative’s owners, but also shows the flexibility the cooperative business model offers to adjust to changing operational and economic conditions.

Basin Electric has power surplus to its member requirements today because of economic and other external issues negatively impacting generation levels. This is temporary and our generation will be needed to serve the burgeoning oil development in northwestern North Dakota and elsewhere as the economy improves. However, Basin Electric and its members need additional transmission to deliver it to the oil fields. So, while construction of new large generation projects is winding down, we continue making transmission improvements and are currently planning a 345-kilovolt transmission line to support this development. This line will help assure our nation’s energy security and will strengthen the transmission system is this area, which would not be possible without the oil development. We are also investigating the placement of distributed generation in the area to help serve the load.

In the meantime, we are evaluating what we can do to get access to outside electricity markets for both the selling and buying of power. Marketing of surplus electricity has changed greatly since the last time Basin Electric had surplus power. This is due to the Energy Policy Act of 1992 and the Federal Energy Regulatory Commission orders in 1996 and 2000 requiring transmission-owning utilities, including nonpublic utilities under their jurisdiction, to place their transmission facilities under the control of a regional transmission organization (RTO).

We need to gain access to other markets or manage without it; however, we must avoid making any knee-jerk reactions on joining an RTO. We need to carefully consider our options, so that we know exactly how it could affect us long-term.

Environmental regulations continue to be a concern

Since Congress has failed to put together a meaningful comprehensive energy policy, the Environmental Protection Agency (EPA) continues its march to implement a rulemaking agenda. If EPA continues unabated, I’m convinced this country will lose a large amount of generation fueled by coal because retrofitting facilities will make them too costly to operate.

We would support legislation that maintains a viable path for future coal use to protect consumers and to maintain domestic energy security. I think it is currently unlikely EPA regulation will leave open a reasonable pathway for coal.

People often say, “I wish I knew then what I know now.” It’s a particularly appropriate phrase for me now because I have wondered if today I would recommend to the board we install scrubbers on Leland Olds Station. However, you make the best decisions with what you know at the time. It is those types of economic decisions we, as an industry, will have to make if EPA goes unabated. It’s irritating that EPA can propose regulations and then tell energy producers they have two years to meet them.

There is simply no way an entire industry can put in place the technologies they’re recommending in such a short time frame. We don’t have the skilled labor force or the materials for all the plants that could be affected. It’s also possible the EPA may require installation of a technology at extreme cost that won’t work. I think the nation’s economy could begin to move forward if Congress advanced a reasonable energy policy with a sound and achievable regulatory process. We need a national energy policy that will give this nation some certainty with its energy future.

As you already know, I will be retiring at the end of this year. Basin Electric is a much bigger and more complicated cooperative business than I ever imagined it would become, but I’ve enjoyed the experience immensely. Together we have accomplished much and I am humbled to have been a part of this great organization’s history since April of 2000, and I thank you for that opportunity.

I am proud we diversified our resource portfolio, giving us more balance so we may successfully manage new regulations. We helped establish wind generation in the Dakotas that otherwise, in my estimation, would have been more difficult for others to develop, because we are able to use it locally. We finished the revenue-sharing program with the U.S. Department of Energy, which was part of the purchase agreement for the Great Plains Synfuels Plant. I took great pride standing in front of the Secretary of Energy, our Congressional delegates and others, representing Basin Electric’s members and employees, when I delivered those checks. It told everyone that when Basin Electric makes a commitment, we honor it.

My parting thought, as this is my final written report to the membership, is that if Basin Electric sticks with what it’s good at, which is providing cost-effective wholesale energy to rural America, and stays connected with the person at the end of the line, it will remain successful for generations to come.

Top of page