Supporting Member Growth
Many forces have come together to enable Basin Electric and its membership to continue to grow and evolve in the face of regulatory and power supply challenges.
In January 2015, Basin Electric’s system hit a new all-time member billing peak of 3,598 megawatts, only 40 megawatts higher than the previous year’s member billing peak, which occurred in January 2014. There wasn’t a prolonged cold spell throughout the entire membership area, so the year-over-year load growth does not seem as significant as the growth from years previously. Over the last five years, Basin Electric’s member billing peaks has increased by about 900 megawatts. The fact that Basin Electric’s system continues to peak year after year shows that growth continues throughout the membership.
In February, Basin Electric’s board of directors approved the cooperative’s 2015, which showed that even with lower oil prices, growth is expected to continue. The updated forecast predicted member requirements to increase by approximately 875 megawatts over the next five years and between 2,220 megawatts and 2,700 megawatts over the forecast period of 2015-2035. The load forecast is a significant input into Basin Electric’s power supply planning, transmission planning, financial forecasting and rate planning processes.
To meet this expected membership load growth Basin Electric has purchased power from the market and the cooperative is expanding its generation fleet.
Construction continues on Phase III of Pioneer Generation Station and Lonesome Creek Station, two natural gas peaking plants in northwestern North Dakota. Phase III of the Pioneer Generation Station project will consist of 112 megawatts (MW) of additional peaking capacity provided by 12 natural gas-based reciprocating engines. Two steel stacks were constructed on the site and the reciprocating engines were moved into place. Commercial operation is targeted for the first half of 2016.
At Lonesome Creek Station, the Unit 4 stack and part of the selective catalytic reduction system, was put in place in September. Commercial operation of units 4 & 5 at Lonesome Creek Station is also targeted for the first half of 2016. A third unit, unit 6, has been permitted for future installation.
On the transmission side, Construction continues to move forward with the Antelope Valley Station (AVS) to Neset transmission project. This new 345 kV transmission line in North Dakota will be approximately 200 miles in length.
It’s on track to be completed by the end of 2017. The project reached a few milestones during the year. The section of line from Antelope Valley to Charlie Creek was energized in early fall, and the line from Charlie Creek to Judson was energized late in the year. The AVS and Charlie Creek substations are scheduled for final completion by May 2016, at which time the full reliability benefits of the Antelope Valley Station to Judson project will be realized.
After the Antelope Valley to Judson section is done, construction will start on Phase I of the North Killdeer Loop project. This project, which includes 60 miles of 345 kV transmission line and three substations, is being pursued due to load growth projected in North Dakota’s McKenzie County in the 2016 timeframe and beyond.
Phase I of the North Killdeer Loop project is scheduled to be completed by the end of 2016. Phase II of the North Killdeer Loop project and the Judson to Neset section of the Antelope Valley Station to Neset project are scheduled for completion by the end of 2017.
At Dakota Gas’s Great Plains Synfuels Plant, construction on the urea production facility continues on schedule for commercial operation in the second quarter of 2017.
Most of the equipment needed to complete the urea facility has also arrived at the plant. The core process equipment consisting of a separation vessel, scrubber and pool reactor arrived at the plant from Austria in late November.
The project is slated for completion in the spring of 2017 when the Synfuels Plant will begin production of 1,100 tons of urea daily, with the ability to shift urea production to produce diesel exhaust fluid and sell liquefied CO2.
Worker numbers are projected to increase throughout the year and peak at 750 workers in 2016. Product is expected to be available for sale by spring 2017.
At Laramie River Station, staff is working on a project needed to meet the Environmental Protection Agency’s Regional Haze requirements.
In early 2014, the EPA issued a partial federal implementation plan on Wyoming’s state plan that requires Laramie River Station to install Selective Catalytic Reduction (SCR) nitrogen oxides (NOx) controls on all three units by March 2019. These SCRs would be in addition to the low-NOx burners and over-fire air required by Wyoming’s state plan.
The federal plan would cost Basin Electric approximately $363 million and the Missouri Basin Power Project more than $750 million collectively to bring Laramie River Station into compliance. In September 2014, the 10th Circuit Court of Appeals granted a Motion to Stay the ruling, effectively granting Basin Electric and PacifiCorp’s request that the compliance deadline for EPA’s federal implementation plan be extended for the duration of the stay.
In the face of regulatory challenges such as these, Basin Electric continues looking for ways to work better and collaborate with both members and non-members.
Basin Electric accepted membership for three cooperatives in Montana. Basin Electric Class A member Upper Missouri Power Cooperative has accepted Mid-Yellowstone Electric Cooperative’s formal request for membership. Mid-Yellowstone is headquartered in Hysham. Basin Electric’s power deliveries and their agreement will begin in October 2017.
Fergus Electric Cooperative and Tongue River Electric Cooperative also took action to become members of Class A member Powder River Energy Corporation in Wyoming. Fergus Electric is headquartered in Lewistown, MT, and Tongue River Electric is headquartered in Ashland, MT. Basin Electric power deliveries under these contracts will begin in October 2017.
The addition of these three Montana member cooperatives will grow the Basin Electric power supply obligation by slightly more than 52 MW.
During the year, the 2016 Class A member rate structure was modified to include a demand and energy contract extension credit associated with a depreciation extension of the cooperative’s power plants, which is possible due to an extension of the member wholesale power contracts through 2075. This contract extension credit amounts to a discount of $37.4 million in 2016 and equates to roughly a 1.5-mill discount to the member rate.
Basin Electric and its membership are reviewing the rate structure, load management operations, and an expansion of its support of solar generation development in the memberships’ service territories over the next nine months, with the ultimate goal of supporting membership growth.
To best serve the membership, Basin Electric is also strengthening its strategic planning processes, along with the measures to monitor progress toward meeting the goals.
Basin Electric is focusing on four key areas: an empowered workforce, cooperative culture, membership growth and operational excellence. Staff is in the process of identifying pilot projects for continuous improvement.
With continuous improvement comes continued commitment and service to the membership. At the forefront is Basin Electric’s member support & services division. This division offers 24-hour dispatch services for 70 distribution cooperatives and their residential and commercial customers across the Midwest. It also offers a range of alarm monitoring such as fire, police, personal medical pendant and environmental.
As Cooperative Planning develops plans to meet members’ energy needs, all options to help keep member rates low are considered. Staff has developed a new load forecast in early 2016 and has issued another request for proposal, or RFP, for power. The team is also evaluating if it is economical to build additional generation.
Based upon previous power supply planning analysis, Cooperative Planning has secured resources or developed strategies to meet the forecasted membership load growth into the year 2020 in Montana, through 2022 in MISO (Midcontinent Independent System Operator) and into 2024 in SPP. There is no need for additional generation in the Colorado/Wyoming area well into the future.
Options being considered to address member growth beyond those periods are the construction of Montana peaking generation, possibly by 2020, and a combined cycle power plant somewhere in SPP by 2024. Basin Electric is also evaluating a joint-ownership structure for a potential combined cycle power plant in the MISO system. Next steps for the project include finalization of definitive agreements related to the arrangement and potential full commitment to the project’s development in 2016.
Membership in SPP enables Basin Electric to do business with more entities and reduces the risk of lost resources as the cooperative looks to either build new generation or execute power purchase agreements.
Power purchase agreements, or PPAs, are another tool to help keep rates low. There are times Basin Electric can enter into PPAs at a cost less than construction of new generation facilities such as a combined cycle or peaking plant, and buys time to monitor load growth and market conditions before building generation resources. In May, directors authorized staff to execute PPAs of up to an additional 425 MW. The agreements are strategically placed across SPP, Montana and MISO.
Basin Electric also continues the development of new renewable generation sources. The cooperative’s renewable generating portfolio, which includes waste heat, will total more than 1,400 MW by the end of 2016.
Uncertain oil and gas prices and the Clean Power Plan make it impossible to know all of the answers. But, with the help of external consultants, collaboration with the membership and continued hard work and innovative thinking, Basin Electric will continue to work to keep rates as low as possible.
Basin Electric’s subsidiary Dakota Gasification Company plays a key role in that process. The unique Great Plains Synfuels Plant with its diverse commodity structure and endless opportunity for innovation has long been a significant financial support for the cooperative.
When Basin Electric purchased Dakota Gas in 1988, only 2 percent of the revenue was from products other than natural gas. By 2017, 75 percent of Dakota Gas’s revenue is projected to be from additional products. Product diversification and revenue generation have been key in securing the Synfuels Plant’s operation into the future.
Dakota Gas, with Basin Electric’s support, has expanded to nine additional products today, with three new products – urea, diesel exhaust fluid and liquefied carbon dioxide (CO2) set to be ready for sale by spring 2017.
Innovation provided the unique scrubbing system that uses ammonia as a reagent to capture sulfur dioxide and produce the ammonium sulfate granular fertilizer Dak Sul 45® sold to the agricultural community.
Another innovative project is the carbon dioxide project. More than 30 million tons of CO2 has been captured and transported to the Canadian oil fields for enhanced oil recovery.
Innovation isn’t simply adding products, but also increasing efficiency and availability of the plant. The clean cooling water project has lengthened the duration between maintenance outages to two years. This year, for the first time in its 31 years of operation, the Synfuels Plant was able to eliminate a maintenance turnaround and realize millions of dollars saved in maintenance costs and production downtime.
Another area staff is working to improve efficiencies is in the ammonia plant. A study was conducted this year with Kellogg, Brown and Root, who provided an extensive review of the anhydrous ammonia plant operation. One of the things they determined very quickly is the Synfuels Plant was running the temperature on the outlet of one of the heaters warmer than necessary. By lowering the temperature, they’ve been able to realize an immediate five percent increase in ammonia plant efficiency. That was one of a number of significant projects completed during the year.
With the focus on innovation and diversification, and keeping cooperative principles in mind, staff at the Synfuels Plant spent time this year developing a new strategic plan. A committee that included members of the management team and a cross section of experienced and new employees discussed and evaluated the future of the plant.
The results include a new mission statement, vision statement, values and strategic themes.
The urea facility is an example of a project that follows the thought behind this plan. It will develop three additional products, which will increase the revenue stream and more safely move the plant’s products to market, while providing urea fertilizer to benefit members and rural America.
In 1988, when Basin Electric’s membership voted to purchase the Synfuels Plant, the cooperative realized a $37 million per year benefit. Today, that benefit is nearly $60 million a year.
We are committed to continuing on a path to further diversify operations to position the facility for a bright future with an increasing benefit to the membership.