CEO Talk

Paul Sukut

Our next greatest thing

As we begin 2017, we find ourselves in a world of change. Sometimes it’s difficult to get our bearings when so much around us appears to be in transition and in question.

Basin Electric has stood for more than 50 years as a stable force in our region and in the lives of the members whom we serve. We plan to remain that stabilizing force for many years to come.

The steps our board took in 2016 and 2017 validate that.

Making difficult decisions for the betterment of the family is what we do. So, while an intra-year rate increase was a tough pill to swallow – and believe me – it was our absolute last resort, it was a bold decision to position us for the future. I sincerely thank the membership for stepping up.

With that, I’m asking the membership to turn the page with me to our next story. It will be a story of evolution, of survival, and ultimately, a story of strength and of solidarity.

Emerging technology, volatile commodities and a carbon-constrained future continue to impact our decisions, and will no doubt, influence our course.

But, we plan to steer this Basin Electric ship through these driving forces. How? Let’s break it down into a few key areas.

Dakota Gasification Company

Dakota Gas is either the belle of the ball or the fly in the ointment. No doubt, to the membership, lately it has felt more like the latter. So, why not sell it? We must remember three truths remain: First, Dakota Gas’ Great Plains Synfuels Plant is inherently integrated with Antelope Valley Station, Leland Olds Station, and the Freedom Mine. Rapidly removing it from the scenario means we are willing to let our North Dakota coal-based plants crater, too. Are we ready to give up on coal? I do not ask this question flippantly; this is a question with which we need to give due consideration. My answer is no, but it deserves discussion.

The second truth is that through the development of the urea processing facility, we have a profitable path for Dakota Gas, not to mention we are fulfilling our mission to serve rural America. Within the Dakotas and Minnesota, there is high demand for urea. We believe the demand for urea will only increase with the unknowns surrounding the future of anhydrous ammonia.

Our last essential truth is that Dakota Gas holds the keys to the future of coal. All clean coal technologies seem to start with coal gasification. We are already partway there with the Synfuels Plant. We have great potential to bring the next state-of-the-art facility to the upper Midwest through the Allam Cycle. While we aren’t there yet, we are actively developing that path and are encouraging our congressional delegation and our state leaders to invest in rural America through a potential demonstration facility at the Synfuels Plant.

So, given these truths, what is our plan? In short, we’re looking toward the future, bringing solutions and creating a viable path for the plant – inspired by hope and balanced with caution.

With our decisions to pursue the urea facility and Allam Cycle, we are shifting our focus from being in a reactionary mode to a proactive position. At the same time, we are measuring our risks and developing key scenarios. Part of this scenario analysis will include a view of what the plant could look like in 2045. This could be a future that includes coal (as mentioned above) or one that doesn’t. The scenario will include an evaluation of putting a reformer on the ammonia plant, essentially decoupling coal from the facility, but yet allowing us to manufacture fertilizers. Tethering our future to natural gas isn’t without risks either, so we have our work cut out for us. We will again evaluate whether having partners is a viable option. And, we will again look at what a future would look like if we sold it. In short, nothing is being taken off the table.

Continuous Improvement

Before the intra-year rate increase, Basin Electric entered into an aggressive austerity program. This resulted in more than $170 million in total cost reductions for 2016. When the board authorized the rate increase, it came with the admonition to continue our austerity program. That continues. In short, we are evolving the program by digging deeper and looking for ways to further reduce expenses without risking safety or the reliability of our facilities. Where we can, we will continue to defer expenses. But, more than anything, we need to set up a process for working smarter, increasing efficiencies, and making sure that every dollar we spend of our members’ money is spent wisely.

This continuous improvement initiative is cornerstone to our planning for 2017. It will require employees at all levels to dig deeper, look at our processes, and think of ways to work smarter. We are encouraging employees to take ownership in this process and will reward those who come up with suggestions that result in true efficiencies and cost savings.

Next steps

Our strategic planning process has resulted in eight key objectives. All of our planning relates back to those objectives, keeping intact our core themes: commitment to cooperative, commitment to workforce, operational excellence, and supporting membership and related growth. Everything we do must relate to those themes and help us achieve our objectives. 

As we roll out our 2017 cooperative plan, you’ll read about those objectives, along with risks, opportunities, values and lastly, our initiatives for the year. We sought our Class A managers’ input as we developed this plan, and out of this process came a better understanding of their key challenges and how our decisions impact their cooperatives.

Central to our plan is risk mitigation. I’ve outlined steps we’re taking with regard to Dakota Gas. Our work doesn’t end there, however. We have efforts under way with regard to our hedging program, power supply planning process, and other areas of the cooperative.

All of this requires difficult conversations, extensive analysis, and the work and commitment of our employees and membership. I have complete confidence that we can do it. This time, more than ever, requires us to be looking – and planning – forward together. We have a rich history. It wasn’t easy – nothing worth it ever is – but today we stand nine states and nearly three million consumers strong. With this plan, we begin to weave together the fabric of our next story. It will be a story about serving and strengthening rural America. And, while we may not know exactly what shape or form it will take, I do know it requires you. And, if we work together, it will be our best story yet.