Foundation standing firm

People drive our cooperatives, and in turn, the entire electric cooperative system. Basin Electric, along with cooperative members across nine states, follow a set of strong cooperative principles. These principles are simple, but that does not mean they are easy in practice.

The principle of democratic member control gives people a voice, and therefore power. To have a say in how your electricity is generated and what your power supplier does with its revenue is a privilege not enjoyed by most people in our nation. Cooperative members enjoy the privilege of serving on the boards of local electric cooperatives and helping make decisions that shape the future of their area’s energy service. 

Foundation standing firm

Cooperative model

Perhaps Basin Electric’s most unique feature is that its democratically elected board of directors serves as the cooperative’s rate-making authority, setting rates for the sales to members.

Basin Electric directors authorized a 1 mill rate decrease for 2020, which provides an approximate $30 million decrease in costs to members. Projections indicate that the rates charged to Basin Electric’s members will remain stable and competitive within the cooperative’s geographical region. Through ongoing work with the membership, Basin Electric also established a number of special electric rates for a variety of different services.

The long-standing electric heat rate continues to be successful and helps some distribution cooperatives maintain load levels in times when they are not growing. The load incentive rate was new in 2019, and provides a discounted demand rate through 2023 to encourage new large loads to develop in our member service area.

As we know, communication is challenging in any relationship. For example, understanding the connection among a distribution cooperative near Great Falls, Montana, a generation and transmission cooperative in Madison, South Dakota, and a wholesale generation and transmission cooperative in Bismarck, North Dakota, means information and discussion must be timely and transparent.

Grassroots control

Grassroots control - Basin Electric’s structure and governance is based on the cooperative business model, which has proven itself effective time and again. A director on the Basin Electric board must be an end-use consumer, elected to their distribution cooperative board, and subsequently also elected to their Class A board. In this way, any director serving on Basin Electric’s board must serve on both of these boards before being eligible — a true line from wholesale generation and transmission to the member turning on the light switch. District 9 is a unique case, in which distribution cooperatives are Class A and one is chosen to serve on Basin Electric’s board.

Plant brain power

Clear communication is the foundation for building strong relationships among employees. As Basin Electric is now a member of the Southwest Power Pool, work is going into determining how to best operate power plants to be more competitive in the market and to maximize value for our members. Basin Electric employees from across the cooperative work as a team to enable our generation plants to produce more revenue and minimize costs.

Organizational restructuring at the power plants and Dakota Gas over the last year and a half requires employees to develop new, more efficient processes to ensure the plants run safely and reliably. 

For example, Operations management worked with the State of North Dakota to ensure alignment on a new plan for Leland Olds Station’s Unit 1 outage, set to happen in 2020. The State requires an outage on each coal-based unit’s boiler every three years, with continuous inspections and meetings leading to the outage. Through up-front communication and transparency, Operations management successfully developed a new plan and gained approval from the State.

At Dakota Gas’ Synfuels Plant, staff continue to adapt operating and maintenance practices following a reduction in force in 2018. While 2019 was not the best year for production, the plant employees found opportunities to reduce and control costs (find more detail in the Finance section of this report).

Aging infrastructure

Process Assessment Team

Chief Executive Officer and General Manager Paul Sukut established the Process Assessment Team in 2018. It is a group of employees from cross-functional disciplines who have been tasked to perform a detailed review of Dakota Gas, Dakota Coal, and Basin Electric operations and processes. The team is working with all areas of the cooperative to identify areas for efficiency and process improvements. The goal of the group is to work with employees to find ways to work smarter and improve overall operations; reduce or eliminate inefficiencies, redundancies, and unnecessary processes; and help establish effective, sustainable cost-cutting and decision-making processes.

Regulation and security

As Basin Electric no longer uses Rural Utilities Service financing, and because two of Basin Electric’s Class A members have become subject to the Federal Energy Regulatory Commission (FERC) jurisdiction, Basin Electric no longer qualifies for an exemption from FERC regulation under the Federal Power Act. 

On Sept. 30, 2019, Basin Electric submitted filings to FERC to ensure it is in compliance with relevant rules and regulations.

Basin Electric’s first-ever compliance audit for Critical Infrastructure Protection (CIP) was conducted by the Midwest Reliability Organization (MRO) in August 2019. The audit covered the cyber and physical security initiatives Basin Electric has in place. The cooperative received its final audit report.

In an effort to increase an already robust security program, Basin Electric hired a chief security/compliance officer. This newly created position will centralize the function of compliance and security for Basin Electric and further protect the cooperative’s electric infrastructure.

Basin Electric employees participated in GridEx V, a continent-wide security exercise sponsored and administered by the North American Energy Reliability Corporation (NERC). This biennial exercise is designed to enhance the coordination of cyber and physical security resources and practices within the industry, as well as communication with government partners and other stakeholders, including those in Canada and Mexico.

Strategy and SPP

Strategy and SPP - Southwest Power Pool’s (SPP) Strategic Planning Committee determined a market on the west side of the grid is one of their top priorities. Tom Christensen, Basin Electric senior vice president of Transmission, Engineering and Construction, serves on that committee. “The Western Energy Imbalance Service (WEIS) is not the full regional transmission organization we had hoped for, but with more than 700 megawatts of DC ties and SPP’s full market operating on the east and directly connected to the DC ties, we think SPP is the  right choice to administer it,” Christensen said. 

SPP will continue to pursue strategic expansion of its membership and geographic footprint to leverage its capabilities and lower costs, according to Christensen.

SPP will administer the WEIS on a contract basis beginning in February 2021. Utilities do not have to be a member of SPP to participate.

Maintaining reliable infrastructure

Basin Electric, together with Class A member Tri-State Generation and Transmission Association and the Western Area Power Administration, announced its decision to join SPP’s Western Energy Imbalance Service (WEIS) market. Three additional utilities, Wyoming Municipal Power Agency, Deseret Power Electric Cooperative, and Municipal Energy Agency of Nebraska, have announced their intent to join as well. When SPP launches the WEIS market in February 2021, it will become the energy imbalance market administrator for these and potentially other utilities in the West. The market will economically dispatch energy from these participants’ generation facilities throughout the region, enhancing both the reliability and affordability of electricity delivery.

SPP received its Western reliability coordination certification from NERC, which confirms SPP has the necessary tools, processes, training, procedures, and personnel to operate as the reliability coordinator in the West. 

SPP launched reliability coordination services on Dec. 3, 2019. Basin Electric receives reliability coordination services from SPP.

In 2018, the cooperative unveiled a multi-year initiative to replace aging transmission infrastructure. As part of this program, the Transmission System Maintenance division, along with the Engineering and Construction division, evaluated all of Basin Electric’s transmission infrastructure, looking closely at aging substation equipment. The process included reviewing test data of similar equipment in the same age range that experienced either a failure or was tested and determined that it couldn’t be put back in service. The evaluation also included considering the amount of time that would be required to replace equipment in the event of a failure.

In addition, Transmission System Maintenance determined whether the manufacturers continue to support the aging substation equipment. The process of replacing aging equipment in all substations will take several years (see graphic on pg. 14), with some leeway to accommodate using Basin Electric’s engineering and Transmission System Maintenance construction labor when feasible.

Communication flow

Basin Electric’s communication strategy has evolved to include more timely and transparent communication with members. A members-only meeting is now included as part of the annual meeting activities. CEO and General Manager Paul Sukut holds conference calls with all cooperative general managers following each board meeting and senior management holds several in-person member manager meetings each year. Also in the mix: quarterly strategic planning sessions with the Basin Electric board, committee meetings prior to each board meeting, an expanded board report in addition to a monthly news-style board report  with in-depth interviews with key staff members, and a password-protected members’ website populated with meeting summaries and information for members only.

Communication flow