Not just “Business As Usual”

            The big movie buzz right now is the last movie in the trilogy “Lord of the Rings.”  I read all those books about 30 years ago and have re-read them since.  They talk of a fantasyland inhabited by little people known as hobbits and their adventures to save the world from a wicked lord.  I’ve often compared the author’s description of a hobbits life in their Shire to our laid-back life here in southeast Montana.   One quote from the movie says it best.   “Life in the Shire (or Southeast Montana in our case) goes on pretty much as it has this past age – full of its own comings and goings, with change coming slowly…if it comes at all.

At Southeast Electric things have always been pretty low key with not too much excitement or too much change happening too much of the time.  Our high points as a utility have never been too high when compared to some of the other larger co-ops

            About 70% of our total load is residential, serving homes, farms, ranches and stock wells.  Another 4% serves small commercial accounts such as schools, businesses, etc.  The remaining 26% of our power sales comes from a single commercial account, an oil pipeline pumping station that came on line about twenty years ago.  Good, stable commercial and industrial loads can be a great boon to co-ops to stabilize the revenues and share some of burdens of system improvements with the members.  Since these loads run pretty much all the time compared to the ups and downs of residential loads, they usually receive a lower rate per kilowatt-hour.  But their monthly bills are always much, much higher than you or I would care to think about paying.  This is why co-ops love diversified loads that provide a level revenue stream.  The co-op I came from, for example, was about 50% residential and 50% commercial/industrial.  This is a good mix, but with little industry in our area, these “good loads” have always been hard to come by.

            Last June, I received a letter from Encore Operating L. P., an oil company that had previously purchased the Shell Oil holdings in the nearby oil field known as the Cedar Creek Anticline.  The letter requested that Southeast Electric Cooperative submit a proposal to serve electricity to a new, large site near Baker.  This site is for a High Pressure Air Injection (HPAI) compressor station designed for secondary oil recovery in the field. The electric load to serve is estimated to be 25 megawatts.   Southeast’s existing load is about 3.5 megawatts.  

            How does a tiny outfit like Southeast Electric Cooperative serve a load of this magnitude?  I’m sure that ran through the minds of some of Encore’s executives as it did mine.  But I knew something they didn’t.  As a cooperative, Southeast is part of a much larger family, namely Upper Missouri G&T and Basin Electric.  Together with our consulting engineers, and the staff at Upper Missouri and Basin, I began feverishly tackling the task of preparing a proposal.  I won’t burden you with the details, but for the past several months, the proposal was meticulously prepared and finally submitted to Encore.  It’s probably important to mention that MDU also received a request for proposal.  State laws allow the investor owned utility (MDU) to serve loads even in co-op territory if they can do it at less cost than the co-op.  We knew we were competing against a giant, but we also knew what David did to Goliath.  We forged ahead.  After the proposal was submitted, the next step was to prepare a contract that would reflect the elements of the proposal while protecting Southeast’s existing membership.  Many engineers and attorneys were involved in a big league negotiating process that had to produce a contract that was suitable to both parties. 

            That long process reached a milestone on December 31, 2003, when officials from Encore and Southeast Electric directors signed a contract agreement.  Encore has chosen Southeast Electric Cooperative to be its sole supplier of electricity for this site which they plan will  run for the next twenty to thirty years.  We are all very pleased and are looking forward to completing this historic undertaking.  I feel very confident that we have protected the interests of all of you members while still providing for a fresh source of revenue for our system.  I am excited about what the future holds for Southeast Electric Cooperative with this new load.  It certainly will not be “business as usual.”  

            MDU still has the legal right to challenge and serve the load.  But since Encore has chosen Southeast, any action to reverse that decision must be taken up in the courts.  I have been in contact with several attorneys who, after looking at our case, are confident that Southeast will prevail should a challenge be sought.

            A couple times a year all the co-op managers in Montana get together.  Part of our meeting is a round table discussion where each manager brings the others up to date on the goings-on at their co-op.  Maybe this year the others won’t yawn so much when I tell them about what’s going on with little ol’ Southeast.