Todd Brickhouse, Basin Electric Interim CEO and General Manager
Over the next day and a half, we have a assembled an outstanding group of guest speakers and panelists who will provide you with expert views from industry perspectives external to Basin Electric.
You will also hear from members of Team Basin. Our objective will be to provide you with a “boots on the ground” view of issues we are tackling on your behalf. I am not going to give you the standard CEO speech with the 30,000-foot view. I’m going to speak to the practical issues we are addressing to serve you.
In November 2022, Basin’s senior leadership team and our board of directors began an effort to revamp our strategic plan. While strategic planning is never complete, the first phase of the effort concluded in June with acceptance of our new Mission Statement and Strategic Objectives.
What I look for in a Mission Statement is a Unifying Sense of Purpose, and our new mission statement does just that stating, “We are a safe, environmentally responsible cooperative that provides reliable, affordable power, products, and services to sustain the quality of life for our member-owners across rural America.”
As part of our strategic planning effort, we developed three cooperative-wide goals. Today I’m joined on stage with three of my colleagues who manage and measure these initiatives – safety, reliability, and affordability. I will give you some context on each of these and then let Miles McGrew, senior vice president and chief human resource officer; Gavin McCollam, senior vice president and chief operating officer; and Katrina Wald, interim vice president and chief financial officer; discuss the measurement and management of each of these. As the largest generation and transmission cooperative in the country and one of the largest electric utilities, we have an obligation to ourselves, to our members, and to our industry to do things safely, reliably, and affordably.
Safety is our most important initiative and Miles McGrew is leading our efforts to transform Basin Electric’s safety culture.
Miles McGrew, Senior Vice President and Chief Human Resources Officer
The smartest people on earth, the best companies in the world all acknowledge the importance of safety in the workplace. Safety is not a priority, because priorities change from year to year. Instead, safety is and must always be a core value. Basin Electric has a long history of making safety a core value, however over the last decade we have slipped.
Last year we reviewed the data to compare Basin Electric to similar industries. What we found was that Basin has had more safety incidents on average than similar industries, according to the Bureau of Labor Statistics. Once we analyzed the data, we set out to make a plan.
- We hired a new safety director.
- We centralized the safety function by moving the reporting structure from local site leaders to one single safety leader to better leverage knowledge of safety professionals from the entire co-op.
- We increased safety communication.
With the support of the board of directors and collaboration from senior leaders, we refined our strategic planning process. That process yielded a new mission statement as well as new established employee values. Because safety is our number one core value, it is specifically named in our new mission statement, employee values, the first of three cooperative-wide goals, and one of the co-op’s eight strategic objectives.
One of the first things we did is develop a safety scorecard so we can track our progress and hold ourselves accountable. We set a goal of a 10% reduction in both our Total Case Incident Rate, which are injuries beyond first aid, and DART or Days Away, Restricted, or Transferred. DARTs tend to be the more important indicator of safety because they show the severity rate or how serious the injury is.
After developing a detailed safety plan and implementing the components of that plan, we are currently seeing a 24% reduction rate in our total case incident rate from the end of 2022. In DART classifications, we are currently seeing a 65% reduction rate from the end of last year.
While our numbers are looking good and we have a plan in place to meet the goals we’ve set for our employees, safety is about more than numbers and metrics. It’s about people, and our true goal is to make sure our employees go home safely to their families at the end of every day.
That is why at Basin Electric, safety is more than a priority.
Todd Brickhouse
Now let’s shift gears to reliability. All of us are electric consumers in our homes and businesses, so naturally we associate power outages, or lack of reliability, with downed power lines. While this is most often the case, our country’s changing generation mix is more frequently impacting reliability.
In the United States, the generation mix is shifting from dispatchable resources like nuclear, coal, and natural gas generation to non-dispatchable, renewable resources. The generation mix has changed considerably over the last decade in SPP (Southwest Power Pool) and MISO (Midcontinent Independent System Operator), the two regional transmission organizations Basin Electric participates in. These trends are likely to accelerate as we can see from the interconnection requests in the same markets.
Extreme weather events can impact non-dispatchable resources in unique ways:
- Severe cold can cause wind turbines to be taken offline;
- Snow can cover solar panels; and
- The wind may not blow and the sun may not shine just when you need these resources most.
Even as it becomes the dominant dispatchable resource, natural gas generation is not without its challenges given the fuel must be continually transported as opposed to inventoried on site like nuclear and coal fuel sources.
In short, the U.S. electrical system is becoming less resilient and more fragile. Winter storm Uri in 2021 saw rolling blackouts impact 150 million Americans with extended power outages. Winter storm Elliot, which barreled across the country just before Christmas last year, caused the Tennessee Valley Authority and Duke Energy to institute rolling blackouts.
Basin Electric is committed to reliability as demonstrated by our capital expenditure program. We currently have 11 major projects underway which have a forecasted cost of $1.9 billion. Over the next decade, our financial forecast projects that we’ll spend $5 billion in capital expenditures.
While Basin Electric has the resources to ensure reliability, our efforts are constrained in a number of ways. First, 9% of our member sales occur in MISO and 73% occur in SPP. MISO and SPP are regional transmission organizations with their own rules around reliability. When power shortages occur, they can direct us to disconnect load, regardless of our resource availability.
Second, the Environmental Protection Agency is on a determined campaign of regulatory overreach, which not only threatens our existing generation assets, but also severely restricts what technologies we can use to insure future reliability. Our unit sales increased 7.8% last year and we project robust growth going forward, so regulatory uncertainty is a significant risk to this growth and significant cost to serve this growth.
Basin Electric has an all-of-the-above energy strategy, and unfortunately to defend this strategy we also have an all-of-the-above legal strategy. We are engaged with the National Rural Electric Cooperative Association (NRECA), the Lignite Energy Council, attorneys general of several states, and our industry partners to defend our interests and ensure future reliability.
While these outside forces are distracting, it is of paramount importance that we maintain our focus on controlling what we can control with respect to the reliability of our transmission and generation assets. Gavin McCollam and his team have been busy developing reliability metrics, identifying critical spares in anticipation of the unexpected, evaluating our maintenance practices, and discussing other best practices with other generation and transmission cooperatives (G&Ts).
Gavin McCollam, Senior Vice President and Chief Operating Officer
Todd talked about our new mission statement, strategic objectives, and cooperative-wide goals. One of the key components in each of them is our responsibility to be a reliable energy supplier to our membership. Recent member surveys have consistently put reliability at the top of the items most important to our Basin Electric family.
In general terms, our goals for reliability for the generation fleet are to be two percentage points better in the equivalent forced outage rate than industry average, and to have a better forced outage rate than we did last year. So far we are barely ahead of our goal – we had a few challenging months at the start of the year but I believe we are hitting our stride.
So what exactly is the equivalent forced outage rate? This is how reliability is complicated. We have performance engineers working with engineers at the plants and the marketing team to track all the outages and their causes and run the calculations to determine our reliability performance.
Reliability can be stressful. Like the time last Christmas when Leland Olds Station Unit 1 came offline due to a melted piece of copper in the generator exciter. During the height of Winter Storm Elliot when energy across the grid was critical, a team of Leland Olds Station electricians and engineers worked non-stop for two days to reverse engineer and fabricate a legacy part from the almost 60-year-old generator to get the unit back online when a one-of-a-kind replacement part was nowhere to be found.
Reliability can be dangerous. During that same time last Christmas, crews at Dry Fork Station worked in bitter cold temperatures to return that unit to service after an unplanned outage. And back in North Dakota, that same winter storm inundated the northwestern part of the state and power plant and transmission system employees labored through bitterly cold temperatures, deep snow, and high winds to return units to service as soon as possible. Throughout this time, with all the stress and danger of returning units to service in bitter temperatures, not one Basin Employee was injured.
Another area we have been focusing on this past year is improving our systems for lessons learned and root cause analysis. I firmly believe that our colleagues out in the field are the best in the business in fixing things when they break. What we want to make sure is that we do everything we can to prevent plant outages in the first place.
I can also tell you that the men and women who are on the front lines of our reliability efforts – and by that I mean the people who operate and maintain your generation and transmission assets – work very, very hard to keep those assets online.
And that is our ultimate goal and my personal commitment to all of you – that we will do everything we can to keep reliability simple … when you flip the switch, the light comes on.
Todd Brickhouse
Our interim Chief Financial Officer, Katrina Wald, will discuss affordability. She has the most challenging job today – we can measure safety and reliability objectively, however affordability is much more subjective.
I’d define affordable rates as increasing below the rate of inflation. Some of you would characterize affordability as stable rates, but most of you probably define affordability as decreasing rates.
Affordability is also impacted by a number of factors like your system’s load factor, the costs of your transmission service, and the meter density of your service territory.
One way we evaluate Basin’s affordability is comparing our costs to other G&Ts. The results are positive. In 2021, Basin had the 17th lowest rates of 52 G&Ts, as reported to the G&T Accounting and Finance Association. In 2022, we had moved up to have the 12th lowest rates out of 45 G&Ts that reported their results.
Like safety and reliability, we have developed specific affordability metrics. Learn more in the Financial Report.
