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Stability in a climate of change

Stability in a climate of change, that's what we're striving for in these uncertain times, and we've been doing quite well. The economic downturn and the resultant chilling effect gripping the nation have slowed electricity usage and load growth. This has enabled us to continue our construction program at a more manageable pace, to delay financing requirements, and to work on the legislative, policy and technology issues that are of utmost importance to the future direction of Basin Electric.

Basin Electric Power Cooperative - October 13, 2009

Ron Harper, Basin Electric CEO and
general manager, and Wayne Child,
Basin Electric president.

Stability in a climate of change, that's what we're striving for in these uncertain times, and we've been doing quite well.

Last year Basin Electric was primarily focused on getting electric generating and transmission infrastructure built to meet the projected electric load growth of the members. The economic downturn and the resultant chilling effect gripping the nation have slowed electricity usage and load growth. This has enabled us to continue our construction program at a more manageable pace, to delay financing requirements, and to work on the legislative, policy and technology issues that are of utmost importance to the future direction of Basin Electric.

Even with the economic slowdown and the trend toward consumer belt tightening, Basin Electric's summer peak demand for 2009 was nearly the same as in 2008. The region's summer weather in 2009 was cool in comparison to average conditions, so if we'd have had average conditions, our summer peak would have continued to rise. Therefore, we believe member loads are still growing, but at a less aggressive pace.

Many of Basin Electric's future resource development efforts are dependent on the actions of Congress on energy and climate change. Basin Electric has committed to support reasonable climate change legislation that does not significantly harm our membership. The U.S. House has passed a climate change bill. While this bill is better than an earlier version of climate change legislation, much work remains. With the Environmental Protection Agency (EPA) poised to move forward with regulations to address climate change, we are working very closely with senators representing our region to improve their version of the climate bill.

Cooperatives across the nation have worked together to come up with three points to bring to delegates in the U.S. Senate, which would make a climate change bill more supportable. They include the following:

Legislation should be national. Legislation must preempt states and the EPA from imposing redundant carbon controls through regulation under the Clean Air Act.
Allocations of emissions allowances should be based solely on carbon emissions to protect consumers who are impacted by the increased costs of control. The language in the House version allocates 50 percent of the allowances based on retail sales and 50 percent on carbon emission levels. This means utilities that produce electricity from nuclear facilities, for example, which don't emit carbon, would still receive allowances.
Establish a guarantee that costs to consumers increase no more than a postage stamp a day. This is the amount the Congressional Budget Office has indicated the bill will cost.

Basin Electric has also worked closely with our Class A members, statewide rural electric association managers, and surrounding investorowned utilities to develop a series of provisions that should be included in any climate change legislation that Congress considers.

Resource development progress
Dry Fork Station was about 75 percent complete at press time and is progressing on schedule to start up in spring 2011. As we look to the future and recognize the challenges to our planning efforts for additional coalbased resources, it is readily apparent we need a clearer vision with respect to energy policy and climate change regulation. That must come from the U.S. Congress.

As for our own efforts to prove carbon capture technology at the Antelope Valley Station, we are in the process of selecting a technology partner and are working on a term sheet to proceed with a front-end engineering and design study.

In the meantime, we are forging ahead with other strategies to meet member electricity requirements including conservation and efficiency, renewable resources and natural gas projects. We are working on efficiencies at all of our facilities, and the board of directors approved an energy efficiency and conservation program in the form of matching grants to those members who choose to implement them.

The program provides incentives members can match and pass on to the end-use consumer to reduce the cost of upgrading to energy efficient appliances.

New renewable resources The renewable resources planned or under construction include:

Three new wind projects, owned by our PrairieWinds subsidiaries, including two projects totaling 120 megawatts (MW) in North Dakota and one 151-MW project in South Dakota scheduled for completion in 2009 and in 2010, respectively;

A 49.5-MW NextEra Energy Resources wind project addition near Wilton, ND, projected to be complete this year;

Contracts to purchase the energy output of two additional 5.5-MW recovered energy generation units along the Northern Border Pipeline, bringing the total to eight units or 44 MW by late this year; and

A 99-MW NextEra Energy Resources wind project in Day County, SD, scheduled for completion in 2010.

New natural gas resources

The natural gas resources planned or under construction include:

A new 91-MW simple-cycle gas generating unit at Culbertson, MT, to be completed in 2010, and
A combined-cycle gas plant of 300 MW near White, SD, to be completed in 2012.

While energy efficiency and conservation are prudent measures, and the projects mentioned above are helpful additions to our resource portfolio, we believe strongly that our country needs to use all of its resources, including coal and nuclear, to ultimately provide for our growing nation's thirst for reliable and affordable energy.

Average member rate

Overall, the 2010 forecasted average member rate will be 42.5 mills per kilowatt-hour, a 3.7 mill increase from the 2009 forecasted average member rate. The increase can be attributed to the financial commitment required to build new resources. However, we believe the rate continues to be competitive compared with those across the nation and in the region.

Basin Electric welcomes a new member

In August Basin Electric members voted to amend the bylaws that made it possible for Corn Belt Power Cooperative to join as a Class A member, which we believe to be beneficial to both Corn Belt Power and the members of Basin Electric. They bring about 370 MW of generating resources to Basin Electric. They also bring 11 member distribution systems, expanding our membership footprint. Most importantly, we are philosophically aligned, working toward the same mission of providing value to our members. A big thank you goes out to the staff of both cooperatives who worked on that effort under very tight time constraints to make the transition smooth. Again, we welcome Corn Belt Power as a Class A member.

Dakota Gasification Company

Natural gas prices have dropped to levels not seen in years this summer, which is once again challenging the operation of the Great Plains Synfuels Plant. Those low prices can be attributed to the economic downturn, the season, new large gas finds, and new and better ways of natural gas extraction. Dakota Gasification Company has instituted an aggressive cost containment and efficiency program to maintain a cost of production at the plant of $5/dekatherm or less into the future.

With so much change in our world, the human tendency is avoidance or overreaction. A key to Basin Electric's success in this climate of change is to make certain we work closely with our members to understand and meet their needs, to take measured steps, and to guide with a steady hand.

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