Cooperative Alliance FAQs
About your cooperative's management agreement
Alliance manager Jay Jacobson answers questions about the alliance agreement reached by Northern Plains Electric and Dakota Valley Electric on Sept. 1, 2005.
Q How does the alliance work, what does it do?
Jay: The two cooperatives have agreed to share employees, equipment, and other resources for mutual efficiencies and savings. We have combined management and established procedures to allow employees to work for either cooperative.
Many of our policies and rates are already similar, but our alliance also calls for us to bring our programs and policies even closer over time. As we do this, we will examine the programs at each cooperative and make changes that reflect what is working best for our members.
Q How is this arrangement different from a consolidation?
Jay: The two cooperatives, while sharing employees and resources, will remain as separate businesses with their own identities, assets and obligations. The finances of the two businesses will be kept separate, other than the billing that will take place back and forth to account for shared employees and equipment.
In many ways, our alliance is similar to the joint powers agreements held between counties and school districts. The boards of each cooperative will continue to represent the local interests of their members, and will make decisions which weigh the short and long-term benefits to their cooperatives, just as they do now. The alliance partnership is simply another tool which will be used by both cooperatives to serve the goals of each.
Q Why have the cooperatives formed this alliance?
Jay: We know that, by working together over time, we will gain efficiencies and savings. For example, the cooperatives already use the same primary computer programs for business functions, mapping, engineering, and records and load management. Under an alliance, employees will be able to process transactions for either cooperative, and we will be able to dedicate highly-trained employees to the tasks of programming specialized computer programs more efficiently. This is just one example of the efficiencies we will achieve.
These efficiencies, of course, won't occur immediately. It will take time to blend the job functions of the cooperatives together. We expect, however, that many changes can be put in place within the first year, and that labor savings and specialization improvements will increase over the years ahead.
Q What changes will the members see?
Jay: We don't expect that members will see any change in their service. Members will still see the same linemen working in their area, and reliability and delivery of electrical service are not expected to change. A member calling into the office to arrange work at their account may initially talk to someone at one of our other offices. However, when it comes time to do the work at the site, the member will generally see the same cooperative personnel they have dealt with in the past.
The rates and policies of each cooperative will initially remain as they presently are. However, when occasion calls for adjustments at either of the two cooperatives, the boards will study options that serve to bring the rates or policies of the two cooperatives closer together. Again, this is a step intended to maximize the effectiveness of the alliance. We expect this process to be gradual over time, with each change evaluated by the boards to ensure that the direction is in the best interest of that particular cooperative.
Q How will this affect the way the linemen serve their areas or their ability to respond to outages?
Jay: The number of linemen at either cooperative is determined by the amount of work necessary to provide good service. As indicated earlier, the alliance is not expected to have an impact on the numbers of linemen, and any changes, either up or down, in linemen numbers will be those the cooperatives would normally make, whether or not an alliance is in place. That being said, we do expect to benefit in our storm outage response by having linemen available over a larger geographical area. Major storms will generally only affect parts of the electrical system across two cooperatives. The alliance and sharing arrangements in place will allow us to more quickly route linemen from throughout the two cooperatives to those areas which are most in need of help.
Other benefits which should be mentioned are greater availability of specialized equipment, availability of a shared material inventory, and the fact that among the larger linemen group we will be able to better train for specialized skills, such as power quality problem troubleshooting. Having better access to backup equipment and material means less delay on the job, and specialized training means more expertise on the job.
Q How about rates? How will members be affected by the alliance?
Jay: The overall cost-per-kWh in each of the rate classes at Dakota Valley and Northern Plains are fairly close, but rate structures vary. For instance, there are variations in the basic service charge, in whether or not demand charges are utilized in some rate classes, or in the division of energy levels. Because the cooperatives are not consolidating, these differences, which were put in place to serve the needs of each cooperative, can remain in place if the boards so determine.
On the other hand, there are efficiencies that the cooperatives can realize if the rate structures are similar. Because of this, over the next couple of years, the boards of both cooperatives will be examining rate structures to determine whether there are opportunities and reasons to bring some of the rates closer together in their components.
Q Will member districts be retained so members continue to vote for directors as they have in the past?
Jay: Each cooperative continues as an independent business with its own governing board elected by the members. The boards of each cooperative remain in place, and the voting districts at each cooperative do not change.
Q What will you do with the savings this brings about?
Jay: Looking ahead, we know that both cooperatives face increasing power supply costs as new generation is put in place. These increases will be in addition to inflationary increases we are seeing in fuel, materials and labor cost. Any savings we can bring about through the alliance will help offset some of these impending increases.
As the two cooperatives started working together, the directors felt it important to fully bring together the long-established policies and procedures of both cooperatives.
In this joint arrangement, we are asking each department of the two cooperatives to do the same in order to find the most productive methods for our alliance.
These are two large cooperatives covering over 14,600 square miles spread across 14 counties. Working to align the work procedures and workforces of these two cooperatives is a big task, and we will benefit by having joint participation in the management of the cooperatives.
Q Why don't the cooperatives just consolidate or merge?
Jay: The cooperatives studied this option a couple of years ago. A consolidation would lessen the combined cooperatives' representation with its power supply organizations and with other associations. There were also questions as to whether the members wanted such a change in their present director representation. For these reasons and others, it was decided that now was not the time to consolidate.
Our alliance, however, provides many of the benefits of consolidation without the governance detriments. Both cooperatives have contractually agreed to the terms of this alliance, and our task is to make it work as efficiently as a consolidation.
Q How will you measure whether this alliance is successful?
Jay: We will aim to hold our expenses associated with our workforce and equipment to a trend that is below inflation. At the same time, we will benchmark our performance in incorporating technology against other cooperatives and investor-owned utilities. These evaluating points will help us gauge both savings and improvement in specialized skills, which are the goals of the alliance.
We will also continue to be measured by our members: whether we are providing reliable power at stable rates, and whether we have the capability to provide whatever other services our members need from us. Those continue to be our ultimate goals.
For more information about your cooperative's alliance agreement, contact Northern Plains Electric Cooperative at 800-882-2500, or Dakota Valley Electric Cooperative at 800-342-4671.