The Financial Report began with the 2022 financial results.
Deloitte conducted the independent audit of Basin Electric’s and its subsidiaries’ 2022 financial statements. As in years past, Deloitte issued clean, or unqualified, audit opinions for the consolidated Basin Electric financials as well as the Dakota Coal Company and Dakota Gasification Company financials.
The Basin Electric consolidated financials complete with the notes to the financial statements are included in the 2022 Annual Report which was published earlier this year. The annual report features a comprehensive financial section with enhanced discussion and analysis of the financial results.
Basin Electric had a very strong year in 2022. Consolidated net margins and earnings were $155 million.
In 2022, Basin Electric saw a 7.8% increase in member load growth and established a record for peak demand in December at 4,679 megawatts. In addition, West-side surplus sales increased, as prices were very strong in the last half of the year. The Operations and Marketing teams did an excellent job optimizing the member’s assets in 2022. Lower maintenance expenses and benefits from power congestion hedging also contributed to the strong results in 2022. Partially offsetting these benefits was higher fuel costs and inflationary pressures having an impact on certain operating expenses.
In 2022, Dakota Gas had a record year with net income of $186 million. Fertilizer and diesel exhaust fluid (DEF), revenue was a large contributor to the record results and pricing was a large factor in the revenue increase. Prices for fertilizers were some of the highest we have ever seen. On the production side, ammonia production was at record levels and DEF volumes were 35% higher than in 2021. In addition, synthetic natural gas prices averaged close to $6 per million BTU resulting in higher revenue from synthetic natural gas sales.
As mentioned previously, the consolidated margin was $155 million. However, that is after the impact of value creation activities. On an adjusted basis, prior to value creation activities, the consolidated margin was approximately $470 million. The value creation that occurred in 2022 included a $115 million bill credit to the members, a return of value. As a form of de-risking, early amortization of regulatory assets occurred in 2021 and 2022. For the two years, that totals over $100 million with $28 million coming in 2022.
Additional risk mitigation occurred with the resolution of certain tax items consistent with the tax-sharing agreement and the recognition of a gain related to an interest rate lock. Finally, $155 million was added to the rate stability fund which put the balance in the fund at $415 million at the end of 2022. The rate stability fund provides a shock absorber for rates in the event of extreme weather events, unexpected maintenance, a spike of power prices, or other events that could have a significant impact on rates. The rate stability fund is the ultimate risk mitigation tool and plays a big role in Basin Electric fulfilling its mission to provide reliable and affordable power.
Now we’ll shift to financial performance in 2023. One of Basin Electric’s objectives is to provide members with affordable power as measured by the rates we charge members. As Todd mentioned, three cooperative-wide goals were set for 2023 with one of the goals centered around financial performance and affordable power.
Basin Electric’s financial goal for 2023 is to is to achieve a net cost per member megawatt hour sales equal to or less than $53.23 and achieve a consolidated net margin equal to or greater than $199.4 million. Through June, the net cost per member megawatt hour sales is lower than the budgeted amount, achieving the first financial objective for the first six months, largely due to costs coming in $86 million below budget.
The second financial objective is to achieve a consolidated margin and the June year-to-date consolidated margin was $65.2 million or $1.1 million above the objective of $64.1 million; achieving the second financial objective.