Member Support and Growth
Basin Electric was created to provide low-cost, reliable electricity to its members. It’s a focused mission, and one that has endured for more than five decades. While distributed generation and self-supply have become options, the economics and risks they carry are rarely better than what the cooperative can do with economies of scale and a united front.
To ensure its mission continues, Basin Electric’s engineering and construction, planning and right of way, and environmental services teams were busy in 2016 with several generation, transmission, and process projects.
Construction wrapped up on Phase III of Pioneer Generation and Lonesome Creek stations, two natural gas peaking plants in northwestern North Dakota.
Phase III of the Pioneer Generation Station project near Williston, ND, added 112 MW of peaking capacity using 12 natural gas-based Wärtsilä reciprocating engines. These engines are a first for Basin Electric. They began commercial operation in January 2017.
At Lonesome Creek Station near Watford City, ND, commercial operation of Units 4 and 5 began in April 2017. The additional units at Lonesome Creek employ General Electric LM 6000 combustion turbine generators. A third unit is permitted for future installation.
Construction continues on the 200-mile Antelope Valley to Neset transmission project to improve reliability in western North Dakota and eastern Montana.
Work is under way on the final phase of the project, a 65-mile 345/115-kV line with Class C member Mountrail-Williams Electric Cooperative.
Crews also completed foundation work and setting structural steel as part of the new 345-kV Tande substation, located near Tioga, ND. The contractor worked through the winter and plans to complete the substation by October 2017. Modification to the 345-kV Neset substation will complete construction on the Antelope Valley to Neset project in October 2017.
Additional transmission construction includes the North Killdeer Loop project. Phase I is approximately 60 miles of 345-kV transmission line and three substations that will deliver power into Class C member McKenzie Electric Cooperative’s service territory.
The final portion of Phase I, the Patent Gate to Kummer Ridge transmission line and Kummer Ridge substation, was energized Sept. 27.
These substations tie directly into member co-op systems and have spare bays for future member growth. There are also a number of member construction projects on the distribution system.
Dakota Gas diversification
At Dakota Gas’ Great Plains Synfuels Plant, construction is about 65 percent complete on the urea production facility project, which will ultimately produce 1,100 tons of urea daily, with the ability to shift from urea production to produce diesel exhaust fluid (DEF) and sell liquefied carbon dioxide (CO2).
Work continues on the project on parallel construction paths. The process areas, logistics and common facilities are all being constructed at the same time. Much of the foundation, structural steel and equipment setting has been completed as have the new power supply and control room.
Unfortunately, the project faced challenges. The partially complete urea storage building was destroyed by strong winds at the construction site in early July. Sustained winds at nearly 80 miles per hour collapsed the steel frame of the approximately 150,000-square foot building. The steel frame was about 80 percent complete and siding was about 10 percent complete before it was destroyed. Fortunately, the winds did not damage the process construction areas, allowing construction there to continue as soon as power was restored.
Additionally, contractor issues perpetuated delays and increases in the cost of the project further challenged the project. However, Basin Electric has taken over as general contractor and a new contractor was secured for piping work.
Even with the delays and added costs, the project still maintains a positive rate of return based on current projections. The project is slated for completion in early 2018.
The urea plant is one of a number of capital investments at Dakota Gas. Since Basin Electric purchased the plant in 1988, Dakota Gas has made capital improvements totaling $820 million through 2016. These efforts include projects to increase plant production, such as gasifier utilization and process unit debottlenecking, as well as product diversification projects like carbon dioxide, phenol, cresylic acid, fertilizers, and krypton/xenon.
Maintaining regulatory compliance
While all of the projects under construction within Basin Electric support a growing membership and innovative opportunities, there are a number of projects that address changing environmental regulations.
In January, the board approved the SCR (selective catalytic reduction) project for Unit 1 at Laramie River Station. Installing the SCR required the bulk warehouse to be targeted for demolition as moving it was not cost-effective. Construction of a new 300-foot by 180-foot bulk warehouse was completed during the year.
The SCR technology is a process where an ammonia-based reagent is sprayed into flue gas, converting nitrogen oxides into nitrogen and water, which is then released through the air heater, scrubber, and emissions stack. The equipment is scheduled to be operational in 2019.
Emission control technology that captures mercury was installed at other facilities including both units at the Antelope Valley Station, all three units at the Laramie River Station, and both units at the Leland Olds Station. Capturing mercury emissions involves injecting activated carbon, which is a reagent that reacts with the mercury emissions produced from coal combustion.
Additionally, construction was complete in 2016 on the Leland Olds Station SNCR project.
While Basin Electric tackles projects, the cooperative looks ahead to opportunities for advanced coal technologies, recognizing that innovation is critical to the long-term viability of the cooperative and its subsidiaries.
In addition to the ITC at Dry Fork Station, Basin Electric is working to assist in the development of some innovative technologies that could help preserve the role of fossil fuels in a carbon-constrained world. Among them are a potential CO2 sequestration project with the Energy and Environmental Research Center (EERC) and the Allam Cycle.
The vision for the Allam Cycle consists of gasifying lignite coal to produce synthetic natural gas, which would then be used along with oxygen and CO2 to drive a turbine generator, all without increasing the cost of producing electricity. Basin Electric and ALLETE have committed to contributing matching funds and in-kind services to support the work.
Joining Basin Electric’s Horizons Team in looking to a carbon-constrained future is the Environmental Regulatory Activities Committee, formed by the cooperative during the year. The cross-departmental team’s purpose is to monitor, review and evaluate all current and proposed environmental regulatory activities that may impact the cooperative.
A benefit to the cooperative
The common thread is consistent long-term viability. The Synfuels Plant is an example of that. On average, Dakota Gas provides about $90 million in benefits to Basin Electric annually. Economies of scale between the electric operations of the cooperative, and the Dakota Gas byproduct operations have provided financial stability and benefits over the years to both sides of the business. The cooperative has reduced coal costs, among many other benefits, because of how the coal is shared between Antelope Valley, Leland Olds, and the Synfuels Plant.
In 2016, the Synfuels Plant had a half-plant outage to allow staff to complete needed maintenance including repairs on the solvent distillation overhead separator in the phenol recovery unit; as well as work on the Riley boilers and ammonia plant.
The continued focus for Dakota Gas is investigating opportunities to further diversify its products to mitigate risk.
The Revenue Generation and Diversification team at Dakota Gas pursued and evaluated opportunities to upgrade existing products. The team remains focused on the goals set forth in the cooperative plan. These include a process to further reduce the plant’s environmental footprint, diversify revenue, enhance safety, and improve compliance programs.
Examples include installation of a mercury emissions control system; improved efficiencies in the ammonia plant; minimized product freight costs by implementing suggestions from the Logistics Continuous Improvement team; and an enhanced safety culture through a new Management of Change process.
Aligning Dakota Gas’ safety, health, security, and environmental efforts is the Responsible Care® certification. Every three years the plant is audited by a third party. In late 2016, the facility received notification it was recertified.
Mechanical integrity and continuous improvement programs all play a part in achieving success within the program. Responsible Care focuses on measuring risk. Staff at the plant continue to mitigate risk by enhancing programs such as pipeline reliability and maintenance.
The pipeline integrity program monitors nearly 250 miles of pipeline. Pipeline internal gauges, known as pigs, are used to collect important data. With new technology, the plant has gone from running several pigs a year to capture data, to one.
Austerity and fiscal responsibility are also components of risk mitigation, and employees have participated fully in the cost-cutting process. They are active in reviewing daily processes, procedures, and actions to identify ways to save dollars, and they are committed to continue cutting costs, minimize expenses, increase revenues, and improve efficiency. All of these efforts have translated into a continuous improvement initiative in 2017.
The Synfuels Plant is linked by design to Antelope Valley and the Freedom Mine sharing services, coal, water, and power supply. Dakota Gas is also linked with the membership, having paid $230 million in dividends to Basin Electric over the years. These dividends have helped keep the mill rate low when electric rates at utilities across the nation steadily increased.
Understanding and responding to the needs of the membership also helps. When the cooperative’s 2016 load forecast was complete in January, it showed power needs across the membership were projected to increase 1,360 MW from 2015 to 2035. That’s growth of 1.4 percent annually. At the close of the year and into 2017, an updated forecast projected about 1,145 MW of growth or 1.1 percent annually across the membership.
Serving the membership
The member load forecast is the main tool for transmission and power supply planning. It’s fundamental to financial forecasting and used to establish rate components. The load forecast shows the magnitude of each member’s load growth or decline projected over 20 years. It’s reviewed and approved by each member system and then presented to Basin Electric directors each year for approval.
Through the process, Basin Electric load forecasting staff works with the membership and reviews the granular details: meter counts for each load classification, rural residential versus seasonal residential, street lights and irrigation accounts, small and large commercial usage, and timelines for new large loads coming online.
In 2016, staff expanded the efforts to evaluate the dynamics across the membership. Cooperative Planning started a supplemental annual load forecasting process to capture a broader view of member load levels. It only considers the big drivers that can affect electricity sales quickly, but supplements the more detailed process. The evaluation is now completed three times per year.
Cooperative Planning is also looking at loads that could potentially be lost or economically supplied by other sources through market purchases or self-generation, called loads at risk. The ultimate objective is to keep member rates low.
Power purchase agreements (PPA) are one tool the cooperative uses to do so. In February, Basin Electric issued a Request for Proposal, or RFP, for power supply proposals within both the eastern and western interconnections. Through this process, 85 proposals were received totaling more than 9,000 MW of power supply, with 1,900 MW short-listed for detailed review and evaluation.
Basin Electric has four different regions to plan for: Midcontinent ISO (MISO), SPP, Montana, and the Colorado/Wyoming area. Each region essentially requires evaluation and balance of generation with load.
In Colorado and Wyoming, there is excess generation primarily due to reduced coal-bed methane extraction and reduced coal mining load levels. In Montana, power purchase agreements were executed through 2025 to supplement the power deliveries into the region from eastern interconnection resources.
In MISO, Basin Electric has resource obligations and power purchase agreements in place to meet MISO load obligations through 2022. In SPP, the cooperative evaluated power purchase and new resource economics.
Additional renewable generation
Through the resource planning process, the cooperative evaluated the possibility of entering into additional wind power purchase agreements. In October, the board authorized execution of a PPA for 200 MW of additional wind generation with NextEra Energy Resources called the Burke Wind Project, with the option to expand this purchase before October 2017 to 300 MW. It will be commercial in late 2019. With the new wind PPA contract execution, Basin Electric expands its wind portfolio to 1,600 or 1,700 MW by the end of 2019.
As the year closed, three wind projects for which Basin Electric signed PPAs began commercial operation. The Sunflower Wind Project, declared commercial Dec. 22 and located near Hebron, ND, has a maximum capacity of 104 MW; and Brady Wind I Energy Center and Brady Wind II Energy Center, located adjacent to one another near New England, ND, are composed of 174 turbines with a maximum capacity of 300 MW. These projects are also owned by NextEra Energy Resources. The projects were declared commercial Nov. 21 and Dec. 27, respectively, and added 404 MW of capacity to the cooperative’s portfolio.
Rate increase in 2016
One of the most challenging decisions in 2016 was the board’s approval of an intra-year Class A member rate increase of approximately 7 mills effective Aug. 1. The drivers impacting it were lower-than-anticipated member sales; reduced revenue from non-member sales; added costs to operate generation facilities; generation and transmission investments; and reduced revenue support from non-electric or subsidiary businesses.
The new 2016 demand and energy rate components were held constant into 2017, and the average Class A rate for 2017 is estimated to be 64.2 mills per kilowatt-hour.
Changes to other rates include modification of the solar purchase rate. Starting Jan. 1, 2017, the rate was renamed the Renewable Resource Pass-through Rate. It continues to allow Basin Electric to purchase the net generation from solar, wind, hydro, or biomass generation projects, up to 150 kilowatts (kW) in size, from consumer- or member-owned projects at Basin Electric’s avoided cost.
Several members asked about incorporating solar energy as a resource option, so Basin Electric is considering how to best incorporate both small and large solar resources into its generation fleet.
Through 2016, the cooperative helped with the development of small solar projects located within member distribution systems primarily in Iowa, South Dakota, and Minnesota through financial incentives.
Basin Electric’s goal is to maintain the lowest cost of power possible for the collective membership, and the membership took steps to help meet that goal, through assignments of Public Utility Regulatory Policies Act (PURPA) obligations for projects 150 kilowatt (kW) or more to Basin Electric.
Basin Electric has grown in the number of distribution cooperative members.
At the start of 2016, three new member cooperatives were slated to join Basin Electric beginning Oct. 1, 2017. However, over the course of the year, the parties agreed to move the date to Jan. 1, 2017.
In Montana, Class A member Upper Missouri welcomed Mid-Yellowstone Electric.
Fergus Electric and Tongue River Electric became members of a new cooperative called Members 1st Power Cooperative, which will be represented in District 10.
PRECorp, which was previously represented as a Class A member in District 10 became a Class C member of Members 1st Power Cooperative.
Further due diligence also continued in 2016, with the possible addition of Minnkota Power Cooperative, headquartered in Grand Forks, ND, as a Class A member. Work continues to reach a conceptual agreement and an evaluation of the economics.
View Basin Electric's generation portfolio on the At a Glance page.
In June and July, five transformers for the North Killdeer Loop project were delivered: two each to the Patent Gate and Kummer Ridge substations, and one to the Roundup substation.
It took transportation contractors four weeks to deliver all five transformers – one by one – from Dickinson, ND, to their appropriate site, using a 31-axle semi-truck.
Due to the heavy gross weight, contractors used a push-pull concept for delivery, which alleviated stress on the truck pulling cargo and ensured adequate power to climb the steep grades on the route.