POWDER RIVER ENERGY CORPORATION
PRECorp News NOVEMBER 2012
Basin wholesale power increase triggers COPA By Tim Velder, PRECorp Marketing and Communications Powder River Energy Corporation members will see an increase in their cost of power in 2013. PRECorp purchases all of its power from Basin Electric Cooperative, headquartered in Bismarck, N.D., and distributes that electricity to its members throughout northeast Wyoming. PRECorp is one of 135 electric cooperatives in nine states that receive electricity from Basin Electric. Basin Electric was formed in 1961 to provide wholesale electricity to meet the growing electricity needs of its member systems. Basin Electric’s long-range financial forecast has indicated an increase in wholesale electricity prices is necessary to maintain long-term stability in the supply and the price of the electricity. Over the past several years, Basin Electric has increased its ability to
Basin’s work to increase its generation capacity from these diverse sources will help ensure a stable power supply for its members. produce power to the tune of $1 billion in investment in diverse sources of power. These sources include wind farms, natural gas power plants, and new coal-fired generation plants. These facilities have been developed during the past 12 years as member cooperatives’ demand for electricity grew. This investment in generation will spread out the sources of electricity for Basin Electric, creating a more stable portfolio. By diversifying its own
long-term generation capacity, Basin Electric has a more stable supply and price to offer its members – electric cooperatives from Montana and North Dakota, to South Dakota, Wyoming, Colorado, Nebraska, and New Mexico. Part of the growth in Basin Electric’s system can be attributed to rapidly-increasing demand for electricity in the Bakken oil complex in western North Dakota, which has powered additional capital investments in Basin Electric’s service territory. In fact, two smaller generating units are currently under construction in an effort to meet that need. Coal power is about 60 percent of Basin’s portfolio, but natural gas and renewables are now up to 28 percent of its total generation capacity. Renewables include wind, recovered energy generation, and flare gas. Other parts of Basin’s portfolio include hydrocontinued on page 2
In This Issue Regular business: 1-800-442-3630 • Report an outage: 1-888-391-6220 www.precorp.coop
Holiday office hours
CEO Straight Talk
2013 Scholarships announced
PRECorp develops cooperative outreach strategy
Feed a Family
Basin Electric generation capacity End of Year 2012 EOY Generation Capacity
Maximum winter capability in MW
Natural Gas 13%
Coal-based - 3,101.1 Hydro - 315.7 Nuclear - 77.2 Renewables - 757.5
Oil - 181.2
TOTAL = 5,152.5 MW Basin Electric’s Resource Portfolio (above) consists of generation in megawatts (winter ratings) from owned facilities and purchased power contracts longer than 3 years. The renewables percentage includes wind, recovered energy generation, and flaregas totals.
Natural Gas - 719.8
continued from page 1
power, oil, and nuclear. Coal remains Basin’s largest energy producer, however, churning out 73 percent of its total energy production. Financing these facilities has had an impact on Basin Electric’s rates. And last year, Basin Electric imposed a small rate increase to cover the cost of building these new facilities over the past five to ten years as well as increasing fuel costs for baseload power plants. The rate increase is being assessed for all of Basin Electric’s members, not just PRECorp. For PRECorp, this means that the average cost of the power we purchase from Basin will go up. The calculation of the impact of that change on PRECorp members has not yet been finalized, but preliminary estimates indicate that it will represent an 9 percent increase in the total cost of power PRECorp buys from Basin. PRECorp’s kilowatt hour sales declined in 2012. While residential and commercial classes increased moderately, the loads from coal-bed methane and coal decreased enough to bring about an overall decline in kWh sales. PRECorp uses a mechanism known as the Cost of Power
Adjustment, or “COPA” in order to pass on changes in the Basin wholesale power costs to our own customers in their electricity rates. It is important to remember that the COPA only recovers the cost of wholesale power PRECorp purchases from Basin, and is necessary only when Basin’s rates change. COPA revenues do not go to pay for any other of the many operating expenses the cooperative incurs annually. If a COPA charge provides the Cooperative with more revenue than is necessary to pay the annual power costs, it is called an over-recovery. That over-recovery, plus interest, is calculated into the next COPA charge in order to return that revenue to the membership through the rates they pay. Our analysis of the COPA is still underway. When the final COPA is determined, PRECorp will file an application with the Wyoming Public Service Commission, which must approve it before it takes affect. The application will ask that the COPA take effect on or about January 10, 2013. PRECorp members will see the increase in bills delivered after that date.
PRECorp announces 2013 scholarships By Tim Velder, PRECorp Marketing/Communications Specialist Powder River Energy Corporation is announcing three competitive scholarships for eligible high school students from northeastern Wyoming. PRECorp’s service territory covers Campbell, Crook, Johnson, Sheridan, and Weston counties. To apply for any of the scholarships, students must satisfy the required criteria and complete the scholarship application, which can be obtained from area high school guidance offices, directly from PRECorp business offices or online at www.precorp.coop.
ule. However, seniors from Moorcroft and Hulett high schools are also encouraged to apply in the event an alternate must be selected. The filing deadline for the Swanda Scholarship is April 1, 2013. Powder River Energy Corporation Scholarship In 2013 Powder River Energy Corporation will award scholarships in the amount of $1,500 each to qualifying graduates of the 13 high schools in its service territory. To be eligible the
Descriptions and deadlines for each scholarship follow.
The deadline for Powder River Energy Corporation Scholarship is June 1, 2013. Basin Electric Power Cooperative Scholarship
Swanda Scholarship The PRECorp Foundation board of directors will award the 2013 Swanda Scholarship for $2,000 to a Crook County High School senior planning to enroll in a course of study in the agricultural or animal science field at a University or vocational/technical school in Wyoming, North Dakota or South Dakota. Seniors at Sundance High School receive preference this year on the program’s rotating sched-
applicant’s parents or legal guardians must be members of, and receive electric service from Powder River Energy. The applicant must be a student who is enrolled or plans to enroll in an accredited two-year college, fouryear college or vocational technical school. The scholarships are available to high school seniors graduating in 2013 and qualifying college students. The PRECorp Board of Directors selects the recipients.
Basin Electric Power Cooperative will award scholarships in the amount of $1,000. One student from the PRECorp service territory may be chosen. The filing deadline for the Basin Electric Power Scholarship is February 1, 2013.
Scan this into a QR code app on your phone to download PRECorp’s scholarships.
Updated scholarship materials for 2013 are available online at: http://precorp.coop/company-andnews/community/.
Please note our Holiday hours Powder River Energy Corporation offices will be closed for these upcoming holiday observances:
Veteran’s Day – Monday, November 12
Christmas Eve – Monday, December 24
Thanksgiving – Thursday, November 22
Christmas Day – Tuesday, December 25
and Friday, November 23
New Year’s Day – Tuesday, January 1, 2013
To report an outage call 1-888-391-6220.
By joining Operation RoundUp this holiday season, 100% of your donation will directly benefit local food banks serving our counties. bors - especially children - in northeast Wyoming. The Wyoming Food Bank facilitates the programs by ordering food for the entire state, saving communities money and time. Then the food is shipped to local coordinators who work with schools, churches, and other community organizations to insure the food reaches those children who need it most.
Feed A Family Imagine having to go an entire day just eating one meal.
There are 3,880 children in the PRECorp service territory identified as food insecure, meaning they don’t know where their next meal is coming from. The Wyoming Food Bank of the Rockies (WFBR) sponsors the Food for Thought Backpack Program. The backpack program gives hungry children a bag of food for out-of-school time, especially over weekends and long breaks. For these children, school lunch may be the only meal they get. The Powder River Energy Foundation is kicking off a fundraising drive to support the Wyoming Food Bank through the Operation RoundUp program. The Foundation has pledged its own support by donating $5,000 which equates to 30,000 meals for our neigh-
How can I help? Check the box on your bill or call us! When members sign up for Operation RoundUp, monthly bills are “rounded up” to the next dollar, usually a few cents every month, the average yearly donation is roughly $6 per year, per account. That six dollars from just one person can provide 24 meals to those in need. Signing up is easy. Check the enrollment box on your monthly PRECorp bill, call the Member Service Department at 1-800-4423630; or stop by a business office. Members may also sign up online at www.precorpfoundation.org or www.precorp.coop . Already an Operation RoundUp Member? Know that your contribution during the fundraising drive will go to this great cause! About WFBR The Wyoming Food Bank delivers food supplies to distribution centers in Buffalo, Gillette, Hulett, Newcastle, Sheridan, Sundance, Upton, and Wright. For every dollar donated, the food bank can provide four meals. They have served a total of 5,922 individuals and 1,683 families. Non-profit organizations that would like to be supported by the WFBR can contact: Kim Summerall-Wright at 307-265-2172 or tollfree 877-265-2172 or email: ksummerallwright@foodbankrockies. org. There is also an application for non-profit organizations at: www.foodbankrockies.org.
Local affiliated programs and organizations: Campbell County: • Council of Community Services • Boys and Girls Club 669 households served; 2,686 individuals Crook County: • Sundance Totes of Hope • Crook County Senior Center 145 households served, 495 individuals
Johnson County: • Buffalo Senior Center • Feed My People 60 households served ; 85 individuals Weston County: • Weston County School Dist. – Totes • Weston County Senior Services 175 households served , 520 individuals
Sheridan County: • Blessings in a Backpack • Salvation Army • VOA Gathering Place 634 households served; 2,136 individuals
Know the facts about hunger
Fact: In one northeast Wyoming school dis-
trict alone there are more than 500 children receiving Food Backpacks each week so they don’t go hungry over the weekend. Bigger counties with more jobs and industry also have hunger. Campbell County and Sheridan County have more than 1,300 households needing food assistance. Myth: Hungry folks are adults, who need to get a job. Reality: Half of adults choose between paying for food and paying for rent or mortgage; and 58% choose between paying for food and paying for transportation (to usually get them to a job). Many have unpaid medical bills. Nearly one out of three under the age of 65 in Wyoming are uninsured and nearly three out of four people went without health care coverage for at least six months. The costs of groceries, fuel, and housing are not keeping up with wages. Of the folks who use food banks, 70% have incomes at or below the poverty level and 40% of these households have at least one person working.
When you enroll in Operation RoundUp, all of your monthly donations for November, December and January, wll be directly attributed to replenishing the inventory at local food banks. You can sign up one account, or multiple accounts to help feed the hungry in northeastern Wyoming. Myth: There are so many public programs for getting help with food...no one could be hungry. Government is taking care of the hunger problem. Reality: Cumbersome application processes, transportation and confusion about eligibility often hinder participation in the public programs. People with food shortages are turning to the nonprofit, charity network when they need help.
A d Feemily Fa
Myth: Most hungry adults are uneducated, and dropped out of school. Reality: According to Wyoming demographics, 88% graduated from high school and most have some post-secondary education including associates or trade degrees. , 12% have a bachelor’s degree or higher. Myth: Some people using food banks don’t need it. Reality: 87 percent of food bank users live in rental housing, with 60 percent paying market rent and 27 percent living in social housing. Six percent reported owning their own homes. Many times a medical issue, a disability, one financial crisis can bring a person that was formerly considered, “middle class” into poverty. Myth: People using food banks are illegal immigrants Reality: 99% are residents and local.
Myth: There is no hunger in a country as rich as the United States. Reality: One in seven people in the United States does not know where their next meal is coming from. One in 10 in northeast Wyoming doesn’t know where their next meal is coming from.
Myth: Food Stamps are intended to supply a family with all the food they need every month. Reality: The food stamp program is a supplemental program. Food stamps cannot be used for soap, diapers, and paper products.
Myth: Welfare reform has taken care of the problem of hunger. Reality: As caseloads for the Food Stamp and Cash Assistance programs have declined over the past 4 years, the demand for emergency food has increased proportionately. Myth: Hunger is only a big city problem. Reality: Hunger strikes people in rural, suburban and urban communities. Hunger is about poverty too.
CEO Straight Talk
In my last two articles I spent some time explaining our Vision, Mission, and Developing Strategy. Last month I described PRECorp’s Strategy using an easy-to-understand diagram called a Strategy Map.
This transaction would be a purchase for wholesale since the cooperative buying the power from PRECorp would then sell the power to its members. This arrangement could be beneficial to our existing members as it would provide us the opportunities to inour economies of “...it is never too early to position crease scale.
m i k e eas l e y , CEO
I think it is important for you, the owners of PRECorp, to be yourself to take advantage of given the opportuSince PRECorp is organity to understand opportunities should they pres- nized as a cooperative, the issues that we ent themselves.” each cooperative buying are facing. It is also power from PRECorp important to underwould need to become a stand what we are doing to face those issues. member of PRECorp, and this requires a slight That is where strategy comes in. modification to our bylaws. On the next two pages you will see an article describing the As you know, for the past decade PRECorp change, the Board Resolution that requests the has been enjoying the benefits of robust system change, and excerpts from the various bylaw growth due to the boom of Coal Bed Methane sections showing the language changes. This (CBM) development. That growth provided rate information serves as notice to our members stability for many years because we were able to of the proposed bylaw change and establishes spread our fixed costs over a larger amount of Tuesday, December 18, 2012, as the date the system sales. This concept is called increasing Board will vote on these changes. economies of scale. Over the past several years we have been adjusting to the declining sales. Please note that these bylaw changes create a This has helped us to control our distribution new membership class called a Class C memcosts even though we have seen rising wholeber and also create a new board seat for up to sale costs. four Class C members. The existing PRECorp members would continue to vote on the 10 curOur forecasts show that we will see another year rent board seats. The cooperative boards from with a wholesale rate increase in 2013, but we the Class C Members would appoint their repwill still be able to hold the line on our distriburesentatives to the PRECorp Board, much like tion costs. In 2014 we anticipate a leveling of our our Board appoints a director to sit on the Basin wholesale power costs and more than likely an Board. increase in our distribution costs, which will require that we file a rate case with the Wyoming Please feel free to contact me if you have any Public Service Commission. questions or comments on these proposed changes. The future for growth in the CBM industry does not look too optimistic and the coal industry is It is too early to know if these cooperatives will facing growth challenges as well. PRECorp still be seeking power supply from PRECorp, but has opportunities for growth and that is why it is never too early to position yourself to take one of the themes of our strategy is to seek susadvantage of opportunities should they present tainable growth opportunities. In my article last themselves. month I mentioned that we were looking at opPlease look for my article next month for an upportunities to help some Montana cooperatives date on this opportunity and a preview of our who may be looking for power supply due to 2013 Operating Budget and Goals. the bankruptcy of their power supplier. PRECorp could find itself in a position to become a power supplier to one or more of these cooperatives by selling them power that we would purchase from our power supplier, Basin Electric.
PRECorp develops outreach strategy Bylaw changes to be considered at Dec. 18 meeting By Tim Velder, PRECorp Marketing Communications As Powder River Energy Corporation adopts its new vision and mission, the Board of Directors is making it possible for PRECorp to sell wholesale power to distribution cooperatives. Part of the new vision states, “PRECorp will be an innovative leader through growth in territory, services, and membership.” Reaching out to fellow cooperatives in need has put this vision into action. The PRECorp Board of Directors has entered into preliminary discussions with cooperative boards from Montana electric cooperatives. These neighboring cooperatives have been put in a tenuous position for wholesale power since their supplier, Resolution 2012-04 Approval of Cooperative Outreach Plan WHEREAS, Powder River Energy Corporation has developed a cooperative outreach strategy; and WHEREAS, the cooperative outreach vision states “Working together to benefit the member-owner by creating an aligned strategy and framework that transition cooperatives among cooperatives from a neighbor helping neighbor relationship to a formal alliance focused on delivering mutual benefit through economies of scale, shared services, and cost sharing while ultimately working towards a restated and/or restructured organization or organizations that optimize resources and reflect appropriate board governance structures” ; and WHEREAS, Powder River Energy Corporation’s Vision states that PRECorp will be an innovative leader through growth in territory, services, and membership; and WHEREAS, opportunities for a potential wholesale membership class exist including Montana distribution cooperatives recently affected by the bankruptcy of their G&T
POWDER RIVER ENERGY CORPORATION
Southern Montana Electric Generation and Transmission, entered bankruptcy proceedings a year ago. PRECorp is working with Basin Electric, its power supplier, to offer proposals to these cooperatives, giving them an option for long-term wholesale power. “It is a cooperative principle for cooperation among cooperatives,” said PRECorp CEO Mike Easley. “We have the ability as a family of cooperatives to embrace the neighbor helping neighbor philosophy.” The PRECorp bylaws would have to be changed in order to realize this opportunity. The major change would be the creation of a Class C mempower supplier; and NOW THEREFORE BE IT RESOLVED, that Powder River Energy Corporation Board supports the creation of a Powder River Energy Corporation Class C Membership to allow Powder River Energy Corporation to become a wholesale power provider under its current contract with Basin Electric Power Cooperative and directs staff to pursue this opportunity in accordance with the terms outlined below. 1. Amend PRE Corp Bylaws: i. New member becomes a PRECorp member as a PRECorp Class C Member. ii. New Member has one (1) Board seat on the PRECorp Board. 2. New Member executes supplemental all requirements contract with PRE Corp to match PRE Corp’s contract term with Basin. 3. PRECorp maintains cost of service rate philosophy in determining wholesale component of rate consistent with PSC approved regulatory process. 4. Transmission pancakes passed on to Class C Member. 5. Equity adders passed on to Class C Member. 6. Patronage would be assigned based
ber and a new seat on the PRECorp Board. The language enables PRECorp to make wholesale power transactions. These proposed by-law changes are published on page 8. Also included below is PRECorp Resolution 2012-004 which outlines the guidelines by which PRECorp can create this new membership class. These guidelines will ensure that PRECorp’s existing members do not unfairly subsidize the rates for the wholesale member since the rates would be a pass-through of Basin’s wholesale costs and would also be based on cost-of-service principles. upon power supply patronage. 7. The level of and path towards greater integration would increase the opportunities to realize economies of scale in power supply and other costs. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Corporation this 31st day of August, 2012. (signed) Tom L. Davis, President (Corporate Seal) SECRETARY’S CERTIFICATE I, Philip Habeck, do hereby certify that: I am the Secretary of Powder River Energy Corporation (hereinafter the “Corporation”); that the foregoing are the true and correct copies of resolutions duly adopted by the Board of Directors of the Corporation at a special meeting held August 31, 2012, and entered in the minute book of the Corporation; that the meeting was duly and regularly called and held in accordance with the bylaws of the Corporation; and that none of the foregoing resolutions have been rescinded or modified. (signed) Philip Habeck, Secretary
Regular business: 1-800-442-3630 • Report an outage: 1-888-391-6220 www.precorp.coop
PRECorp by-law amendments PROPOSED BY-LAW AMENDMENTS The PRECorp Board of Directors proposes amending the by-laws of the corporation as follows: 1.Article I, SECTION 7 is hereby amended to read as follows: SECTION 7. Definition and Classifications The Corporation may have one or more classes of members including, but not limited to, a Class C membership to allow Powder River Energy Corporation to become a wholesale power provider. If the board establishes more than one class of membership, it shall, by resolution, determine the definitions, types, qualifications and rights of each class and make the information readily available to the membership. 2.Article III, SECTIONS 1 and 2 are hereby amended to read as follows: SECTION 1. Annual Meeting The annual meeting of the members shall be held at a place in one of the counties of Campbell, Crook, Johnson, Sheridan or Weston, State of Wyoming, or at a location as may be designated in the notice of the meeting, and on the date established by the board of directors and designated in the notice of the meeting. The board of directors will post notice of the date designated for the annual meeting in the principal office of the Corporation not less than 60 days prior to the designated meeting date. The purpose of the meeting shall be the election of directors, passing upon reports for the previous year and transacting other business as may properly come before the meeting. It shall be the responsibility of the board of directors to make adequate plans and preparations for the annual meeting. Failure to hold the annual meeting at the designated time shall not work a forfeiture or dissolution of the Corporation. SECTION 2. Special Meeting Special meetings of the members may be called by any five directors, by the president, or by ten percent (10%) or more of all the members, and it shall thereupon be the duty of the secretary-treasurer to cause notice of the meeting to be given as hereinafter provided. Special meetings of the members may be held at any place within the counties of Campbell, Crook, Sheridan, Johnson or Weston, State of Wyoming, or at another location as specified in the notice of special meeting. 3.Article IV, SECTIONS 1, 2, 3 and 6 are hereby amended as follows: SECTION 1. General Powers The business and affairs of the Corporation shall be managed by a board of ten (10) directors and one director for each Class C member up to a maximum of four (4) Class C directors which shall exercise all the powers of the Corporation except as are by law, the articles of incorporation or these bylaws, conferred upon or reserved to the members.
(Proposed amendments are denoted in RED or with a strikethrough.)
SECTION 2. Election and Tenure of Office With the exception of Class C directors all directors shall be elected by secret ballot at each annual meeting by and from the members of the Corporation. The Class C directors shall be appointed by the Class C member’s board of directors and shall have three (3) year terms. Beginning with the election of directors at the annual meeting of Powder River Energy Corporation in the year 1999, ten (10) directors shall be elected with staggered terms of one (1), two (2) and three (3) years. Campbell, Crook, Johnson, Sheridan and Weston counties shall have an equal number of directors on the board at all times. At the annual meeting in 1999, one (1) Campbell County director shall be elected to a one (1) year term and one (1) Campbell County director shall be elected to a two (2) year term, one (1) Crook County director shall be elected to a three (3) year term, one (1) Johnson County director shall be elected to a one (1) year term and one (1) Johnson County director shall be elected to a three (3) year term, one (1) Sheridan County director shall be elected to a two (2) year term and one (1) Sheridan County director shall be elected to a three (3) year term, one Weston County director shall be elected to a one (1) year term and one (1) Weston County director shall be elected to a two (2) year term. Thereafter all directors shall be elected for three (3) year terms, except those who may elected to fill unexpired terms. If an election of directors shall not be held on the day designated herein for the annual meeting or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the members or at the next regular annual meeting. If the election is delayed until the next regular annual meeting, the term of each qualified director shall be extended one (1) year for each year the election is delayed. Directors may be elected by a plurality vote of the members. With the exception of Class C directors all other directors shall be elected by a plurality vote of the members present by proxy or in person at the Annual Meeting. Members taking service outside of the counties of Campbell, Crook, Johnson, Sheridan or Weston shall be deemed to be a member of and within the area served by the county closest to the nearest meter serving the member, provided however, the member is not already taking service within the county. SECTION 3. Qualifications Section 3.1 A nominee for a Powder River Energy Corporation director position must meet the following qualifications: (1) Must be a member receiving electric energy from the Corporation; (2) Must reside within the service territory of the county from which he/she is elected; (3) May not be in any way employed by or have a substantial financial interest
in a competing enterprise or a business selling electric energy or supplies to the Corporation; and Upon establishment of the fact that a director is holding office in violation of any of the foregoing provisions, the board of directors shall remove the director from office. Nothing contained in this section shall affect in any manner whatsoever the validity of any action taken at any meeting of the board of directors. Section 3.2 – Class C Director Qualifications (1) A director from a Class C member must be a member of the board of directors of the Class C member. SECTION 6. Vacancies Subject to the provisions of these bylaws with respect to the filling of vacancies caused by the removal of directors by the members, a A vacancy occurring in the board of directors shall be filled by the affirmative vote of a majority of the remaining directors for the unexpired portion of the term. A Class C director vacancy shall be filled by appointment from the Class C board of directors. 4.Article V, SECTION 1 is hereby amended as follows: Section 1. Regular Meetings The regular meeting of the board of directors shall be held monthly at a time and place within the counties of Campbell, Crook, Johnson, Sheridan or Weston or at another location outside Campbell, Crook, Johnson, Sheridan or Weston County as the board of directors may provide by resolution. 5.Article VII, SECTION 2 is hereby amended as follows: Section 2. Patronage Capital in Connection with Furnishing Electric Energy The Corporation’s operations shall be conducted so all members through their patronage furnish capital for the Corporation. In order to induce patronage and to ensure that the Corporation will operate on a nonprofit basis, the Corporation is obligated to account on a patronage basis to all its members for all amounts received and receivable from the furnishing of electric energy in excess of operating costs and expenses properly chargeable against the furnishing of electric energy, provided however all Class C patronage shall be assigned based upon power supply patronage. All amounts in excess of operating costs and expenses at the moment of receipt by the Corporation are received with the understanding that they are furnished by the members as capital. Purchasers of the Corporation’s services, other than purchasing electric energy, shall not be eligible for membership or patronage credits and are neither members nor patrons by virtue of their purchase of these services. All remaining paragraphs in Article VII, SECTION 2 are unchanged.
The PRECorp Board will consider adoption of these bylaw changes at its regular meeting at 9:30 a.m. Tuesday, December 18, 2012, in Sheridan.