CEO and General Manager's Message

Paul Sukut

Paul Sukut

I want to start by thanking our entire work force for all their diligent work in keeping us operating through all of this. I want to especially want to thank our essential employees, our people who keep operations going on a daily basis, we could have never made it without them. I'm here to tell you, every day, they're asked to go in, they're asked to keep our plants going. We would have never got this done without them. And then I also want to have a shout out to our IS&T employees because they made it possible, they made it possible for our non-essential work force to work remotely and it's worked pretty well. So, all of those put together, I think, has really made this whole thing possible and has really made our success possible here so far in 2020.

COVID-19 impacts
The COVID-19 global pandemic is going to totally change the dynamics of the work force. This is very evident in that we are so successful working from home. As I began to talk to other CEOs and others who were also experiencing the same thing, we believe that it will be somewhat mixed. I think there always be some positive aspect of people coming to a headquarters building for a couple reasons. If you're in an office setting, somebody can ask a question over the cubicle or get together even if it's at the water fountain. The other one is somewhat more unique to us as a cooperative, and it's our cooperative culture. I think, 'how can we pass that cooperative culture along if we're not, at least some of us, in the same setting.'

I do believe that there will be a lot of jobs that we now can truly work from home during very efficiently and effectively, I think each job may have to be evaluated to see which ones can and which ones cannot. I still think that there will be a place for people to come to the work place and still work together collaboratively.

As to the impact on Basin Electric, we immediately saw the fall in prices as everybody did: natural gas, oil, some of the cresylic in the chemicals that are produced at the Great Plains Synsfuels Plants. We immediately saw a drop in our load particularly in the Bakken, as much as 400 megawatt (MW) load drop. We are seeing those slowly come back, and now they're back to probably where they were prior to COVID-19 coming along. I think you're probably going to see more of a slow growth or a slower growth in terms of what comes on in the coming months and maybe in 2021.

Load growth and generation resources
One of the things that we've been working very hard upon this past year is our FERC (Federal Energy Regulatory Commission) regulations. We spoke to you a year ago about this, which occurred due to the fact that we had a couple of our members get large enough that they passed the threshold where they became FERC regulated, which, in turn, had us become FERC regulated. I think the takeaway from all this, is that it's going very well. We've had two or three of our dockets already approved, and we're working on a couple that are left.

We are an all-the-above utility. When I say, all-the-above, that's coal, gas, wind, and now solar. We're very proud to say today that we have just announced two purchase power agreements for solar. Contractually, these will come on in 2023-2024 because it's obviously going to take time to get permits and get them built. They will become a very essential part of our resource portfolio.

Because I referenced being a grower, at this point, I'd really like to welcome our newest member: Wyoming Municipal Power Agency will be a new member starting in 2021. And that's just part of our growing utility and I want to welcome them because they become such an essential part of us as a growing cooperative.

As we build into this growth, we try to take more of a look at resources that are low carbon or no carbon. I think we all should come to the realization that we're going to be living in a carbon-constrained world. We're working with producers, Bakken Midstream up in the Bakken right now, to see if there's a way that we can take some of the energy that's being flared off wells and burning it and making into a natural gas turbine so that we can use it for power for our growing load. So, working on a lot of other things, we're trying to do these things in the most efficient and effective manner in keeping your rates as low as possible.

Future for coal
Our members are asking us, "We have a lot of coal, and we're seeing less reliance upon coal." We're living in a carbon-constrained world and we're listening to that. Many of those plants have a lot of economic value on the books yet, they have debt against them and so, to just drop an end gate and shut them down really doesn't work very well. We're trying to see what is the most efficient and effective way that we can write them off the books and be less reliant upon them. I'm not here to tell you we're not going to utilize our coal, we are, there's no doubt about it. We cannot do it without coal for the next 15-20 years at least; it's just going to be something gradual.

One of the projects we're very excited about is our ITC project, our Integrated Test Center at our Dry Fork Station. Via that specific project, we are demonstrating about five different technologies that would extract carbon from the flue or the back end of the plant. At the same time, the Wyoming CarbonSAFE people are drilling wells for the potential storage of carbon dioxide (CO2). If this can be done, Dry Fork Station will be, if not one of, the cleanest coal plant in America. We can scrub for SO2 to 99%; we can take care of the mercury and the NOX via our SCR (selective catalytic reduction equipment). This would be the last step, essentially, to be able to extract the CO2 and inject it; it would be the last step to make it one of the cleanest coal plants in America. So, we're very excited about this.

The other thing I would really like to do is shout out to Sen. John Barrasso of Wyoming for all his help in getting us the USE IT Act passed in Congress. The USE IT Act provides funding for better means for us to do carbon capture. He helped greatly in getting this done, in fact, he asked me to testify before Congress in support so I want to take this opportunity this morning to especially thank him for all his help in this legislation.

Strategic planning
As we started doing some of our strategic planning over the course of the last year, one of the things the board asked us was to talk to our members, we should listen to our members. So we put a full-court press on, we used Paulsen Agency out of Sioux Falls (South Dakota) to help us with this study. There is over a thousand pages of data that we went through. We learned a lot, and I think our members now have a lot of that information in their hands. We learned that reliability and rates are number one and two and then Dakota Gas is the third concern.

We ran multiple scenarios on Dakota Gas to see what would be the best economic way to help this subsidiary get it over the hump. I think the biggest thing we did in doing that is we said we are not going to harm rates or reliability for the cost of trying to do that and I think we have found a way. This afternoon, at our Members-Only Meeting, we are going to go through some of those things that we have planned. It's our goal to make sure we do not harm our first and second, which is reliability and rates.

It's important to communicate. I think it's more important now than ever in terms of our cooperative business model. We're reliant upon each other and if we don't communicate with each other, it's not going to be as efficient. We have tried to find different ways what we can communicate. We have weekly meetings with our Class A members-managers. In September, we collaborated with our managers and with the board in a session. Also, we also want to maintain at least a minimum of two joint member manager meetings each year.

We had a lot of different initiatives under each pillar of strategic planning. On the member and employee focus, we continue with our BE Leaders Program, to train our employees. We have tried to improve the way we communicate. With our continuous improvement, I think one of the things that I have seen great success with is our Process Assessment Team, affectively known as the PAT team. That team has provided tremendous benefits to us. In strategic direction and forward look, our members have asked us to take a look at Dakota Gas, what can you do to mitigate some of the losses that Dakota Gas has had.

A look ahead
When we go to Wall Street and visit with the rating agencies and the banks, we always go through with them our true credit strength. And one of the questions they always have is, "How is your relationship with your membership?" And we're always so proud to say how strong it is. We have long-term contracts; we have our rate-setting economy via our board governing us in terms of rates. We have a very diverse and growing and strong membership base. That morphs into strong financial metrics and robust liquidity or the ability to borrow capital to do what we need to do to be able to build out our resources.

I would like to thank our work force. This has been a difficult year. If I were here to tell you just how difficult it was, I wouldn't have enough words to do it. We had essential employees at some of our plants who worked 44 days in a row. We had some of them putting in 24-hour straight shifts in order to keep our plants running. That's how dedicated our workforce has been. We cut our budget by about $40 million in 2020. And as I stand here today, we are still ahead of that budget by about $10-$20 million. And so without our employees standing with us and fighting hard to get through this, we would have never made it.

My communications staff remind me that next year will be our 60th anniversary. I remember very vividly the 25th anniversary so that would tell you how old I am. But I'm so proud of Basin Electric and our membership and all you've done and all our employees and I, again, want to thank you the members.

I want especially to thank our board. Our board challenges us, they ask us very tough questions, they send us back sometimes and say, "No, this isn't going to work." I want to publicly thank them for their support because I don't think they understand sometimes just how much this really means. And it's that support and our working with our members and our members being able to work with us that we're in such good financial shape with stable rates.

You know we have such a bright future. I have to tell you I was 15 years younger and could do this job for 15 more years. We have such a bright future, I've never been more excited about our future.

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