As the result of a court order handed down earlier this month, Dakota Energy Cooperative, an electric distribution cooperative, finds itself engaged once again in legal action again Basin Electric Power Cooperative, an electric generation and transmission cooperative.
"We were disappointed that Basin was allowed to intervene in the lawsuit between Dakota Energy and East River," said Chad Felderman, Dakota Energy CEO and general manager, via email. "From the beginning, all we've ever wanted is a fair and equitable exit cost to determine what's best for our members."
In November 2020, Dakota Energy filed a lawsuit against East River Electric Power Cooperative, which delivers wholesale power to Dakota Energy and other member distribution cooperatives, asking the court to determine whether East River's bylaws allow Dakota Energy to withdraw from the cooperative. Dakota Energy also asked the court to determine how much the cooperative would have to pay to fulfill its contractual obligations.
In December, East River asked that the case be moved to federal court, an action to which Dakota Energy did not object. Basin Electric then filed a motion to intervene, noting that if Dakota Energy were allowed to withdraw from the East River cooperative, Basin would suffer financial harm.
In granting a motion to intervene, U.S. District Judge Lawrence L. Piersol provided background based on court documents and outlined the legal arguments. He noted that all three cooperatives "are requesting a declaratory judgment regarding whether the WPCs and bylaws allow for early termination."
Wholesale Power Contracts (WPCs) are described as "the backbone of the cooperative generation, transmission and distribution system established by the federal government during the Great Depression." The revenues from these contracts provide funds "to operate, maintain, and improve the Basin electrical system."
At issue is whether Dakota Energy must meet "all its contractual obligations to the cooperative," including a WPC which has been extended to 2075, or whether the bylaws enable early termination. Court documents indicate Dakota Energy has previously sought to find an avenue for ending its relationship with Basin Electric.
When Basin Electric filed its wholesale power rates with the Federal Energy Regulatory Commission for approval in 2019, Dakota Energy joined McKenzie Electric Cooperative, a cooperative based in western North Dakota, in filing a protest. The cooperatives alleged the absence of early termination and withdrawal rights in Basin's WPCs was "unjust and unreasonable."
The FERC disagreed. In September 2020, a decision was handed down indicating Basin is not required to include early termination provisions in its WPCs.
Piersol stated that in granting the motion, he was giving Basin Electric legal standing in the case, not resolving "factual disputes, the merits of a claim, or the applicability of defenses." He wrote that "it would be premature for the Court to examine the binding effect, if any, of the orders issued by FERC in regard to the WPCs."
In considering the legal points, Piersol outlined the ramifications for Basin Electric as indicated in submitted documents.
"The continued existence of WPCs may be jeopardized if Dakota Energy prevails. Basin asserts that should Dakota be allowed to terminate its WPC with East River "the generation and transmission system would begin to unravel: Basin would have unmet costs from Dakota's withdrawal, costs which would be forced upon its remaining members, thereby increasing the costs of electricity for every other member of the cooperative."
In opposing Basin Electric's motion, Dakota Energy argued that the loss of revenue resulting from its withdrawal from the East River cooperative wasn't sufficient to give Basin standing in the case. The distribution cooperative questioned why the unmet costs Basin cited "would result from the loss of a tiny downstream customer like Dakota that purchases a minuscule percentage of the electricity Basin produces."
In providing background for examining the legal issues, Piersol noted that a representative from Dakota Energy, David Allen, sits on the East River board of directors and voted both to extend East River's WPC with Basin Electric and to extend East River's WPCs with member cooperatives, including Dakota Energy.
Chris Studer, chief member and public relations officer with East River, said a new timeline for the case will be established as a result of the judge's ruling.
For East River and Basin Electric, one of the key considerations is the investment both cooperatives have made in the area served by Dakota Energy.
"We have a pile of debt and a lot of investments in infrastructure sitting out there, but Basin has more than we do," Studer indicated. "If they buy out, the biggest part of their debt will be to Basin Electric."
Dakota Energy has other concerns and sees the lawsuit as a way to have these addressed.
After expressing the hope that the new timeline "doesn't slow down the process," Felderman said, "We do look forward to finally getting answers to some questions about the $700 million in losses of Basin's Dakota Gasification subsidiary, salaries of the Basin executive team, and the multiple private jets that are on call to Basin executives and board members."
Felderman stated Dakota Energy's belief that these losses and expenditures have increased the cost of power for the cooperative's members.