Like a kaleidoscope, the pattern of a legal battle shifts depending upon how the pieces are arranged. That is clearly evident in the current litigation between Dakota Energy Cooperative, Inc., and East River Electric Power Cooperative, Inc.

In a lawsuit filed in November, Dakota Energy is seeking to withdraw from East River in order to purchase energy through an energy broker. The company indicated in a press release it is seeking more local control and better options for affordable and reliable power.

Since issuing the press release, Dakota Energy has been working to communicate a clear and consistent three-part message: (1) Dakota Energy saw 12 rate increases in 15 years, doubling the cost of power. (2) Dakota Energy has better options for obtaining affordable and reliable power. (3) East River refused to provide Dakota Energy with fair terms for withdrawal.

Rate increases

Regarding rate increases, Dakota Energy has stated the increases "have doubled what Dakota Energy was paying for power from East River over that period, from 3.24 cents kWh to 6.86 cents per kWh. In 2005, our power costs were 50% of Dakota Energy's expenses and today those costs now account for 72% of our expenses."

East River does not dispute the cost of power has increased over a period of 15 years. However, Chris Studer, chief member and public relations officer for East River, noted the board of directors sets those rates and Dakota Energy has a representative on that board. Also, the cooperative returns to member cooperatives any profits which exceed expenses.

"Overall, since 1975 -- when we were in a financial position to start returning profits -- East River has returned $77.6 million to its member systems," Studer said. Of the $3.6 million returned to Dakota Energy, $1.2 million has been returned since 2011.

Specifically addressing the cooperative's rates, he said, "East River has some of the lowest average wholesale rates in the country and are significantly lower than other power providers locally and regionally."

He added that East River has followed industry trends since 2007 and said rates have been stable for several years. Between 2019 and '20, rates actually went down and are expected to go down a second time in 2021.

Studer also pointed out the Wholesale Power Contract (WPC) isn't simply about buying and selling power. While it does stipulate Dakota Energy will purchase all of its power from East River, it does so to "help pay back the cost of building all of the infrastructure they need to serve their customers," he said.

"Dakota Energy has taken advantage of their contract as East River has built out transmission infrastructure to serve their members and now they want to break that contract to seek power supply from a for-profit energy broker," he said.

In a single project -- infrastructure supporting the Keystone Pipeline's oil pumping station -- East River invested over $7.3 million in Dakota Energy's service area.

More affordable options

Regarding other options, Dakota Energy states, "Companies like Guzman Energy are experts in power markets. They buy the energy and re-sell it to cooperatives like us at much cheaper prices."

Guzman Energy is a wholesale power provider based in Coral Gables, Fla., with an office in Denver, Colo. Dakota Energy CEO Chad Felderman indicated the cooperative has initiated discussions with Guzman.

East River also does not dispute that Dakota Energy could currently purchase power on the energy market for less than it pays East River. The energy market has been low lately due to a variety of factors such as low natural gas prices and low renewable energy prices, according to Studer.

East River does question whether Dakota Energy would have any real savings to pass on to its member consumers. Guzman Energy may be "experts in power markets," but they own no infrastructure, he said.

"They buy from the market and sell to customers," Studer said. "The electricity goes over the grid that's already there."

Because Guzman Energy owns no infrastructure, it cannot deliver the power customers purchase, forcing them to pay for transmission separately. In addition, Dakota Energy would have the additional cost if paying off the debt incurred from a buyout.

"It would be kind of like selling your house and then renting it back," Studer said, providing an analogy to illustrate the relationship Dakota Energy would have with East River if the cooperative achieves its stated objective.

Dakota Energy indicates its goal is affordable, reliable power, but declines to answer questions designed to confirm this assertion. When asked whether Guzman Energy would guarantee power or a rate, the cooperative -- through Ryan Budmayr, a company spokesperson -- said The Daily Leader was "seeking answers to hypothetical scenarios."

Terms for withdrawal

Regarding the desire to withdraw from East River, Dakota Energy stated, "East River refused to provide us with fair terms for withdrawal. Instead, and in spite of the bylaw requirement and the cooperative principle of voluntary membership, East River claimed it could force us to stay an East River member, paying exorbitant power costs for 55 more years."

East River does not dispute Dakota Energy's assertion regarding an unwillingness to provide terms for withdrawal. East River believes the WPC does not have a buy-out provision.

"This is a bilateral contract. Dakota Energy promised to buy all of its energy from East River Electric, and in turn East River Electric promised to provide all the electricity Dakota Energy needs over the next 55 years. That includes building new transmission lines when Dakota Energy adds a new business or new homes," Studer said.

"East River intends to stand by our promise and would hope that Dakota Energy would stand by its promise," he added.

Because East River holds that position, the cooperative does not believe it should have the unnecessary expense of hiring a consultant to propose a buyout offer.

Budmayr does not agree with the information that East River provided but offered nothing to refute what Studer said.

"I'm afraid the folks at East River are trying to paint a picture that is simply not true," he said via email.