Montana cooperatives team up to deliver better service

The Hollywood image of the rugged loner notwithstanding, most big jobs, from taming a frontier to providing reliable electricity, are easier to handle with a partner riding shotgun, as the tale of two electric cooperatives in northeastern Montana demonstrates.

Although Northern Electric Cooperative and Valley Electric Cooperative have distinct characters, the utilities share many similarities: both get their power from Western customer Central Montana Electric Power Cooperative; they share the same union contract and, since 2000, the same general manager. “We also have the same attorney, auditor, outside contractor and lenders,” Joint Manager Larry Tade pointed out. “Valley and Northern have so much in common that it just makes sense to work together to save money and effort.”

Teamwork offers big advantage to small utilities
Small co-ops, in particular, have to look for ways to conserve human and capital resources. Northern Electric has 10 employees, 860 members and 1,200 meters, while Valley serves 1,290 members and 1,850 meters with only nine employees. Any plan that eliminates duplicated effort is good business for both utilities. New technologies that allow employees to work electronically from either office has made working together even easier, “and cut down on a lot of paperwork,” Tade observed.

Repair and maintenance equipment is a big investment for any co-op, so equipment sharing has proven to be a tremendous benefit of cooperation. For example, Northern has an excellent underground fault locator for finding breaks in underground electric cable. When Valley has an underground fault, Northern sends its crew and locator to the site and quickly finds the problem. “It’s a lot easier than having to go it alone,” said the general manager. “Of course, we keep track of what is being used where and cost that out appropriately to each co-op.”

With adjacent service areas that cover a total of 7,600 square miles, sharing vehicles and travel expenses can be almost as significant as sharing service agreements, personnel and equipment. The co-ops belong to many of the same organizations, such as the Montana Electric Cooperatives Association, and Tade often represents both co-ops at out-of-town meetings. Trustees from both co-ops also attend meetings together, cutting down on travel costs.

Heavy residential users and oil wells maintain Northern’s load
Controlling operating costs is an ongoing concern for Northern and Valley, since like so many RECs, they serve towns and counties with shrinking populations. Farms and ranches make up the bulk of Northern’s membership, with 80 oil wells adding a substantial commercial load. “Some of those wells use up to 100,000 kW per month,” said Tade. “They definitely help us to keep afloat.”

Use-per-member is also high in Northern’s territory, averaging about 1,300 kW per month. “That’s because the only choices out here are propane and electric,” Tade noted. “Just about everything the farmers and ranchers have is all-electric.”

Northern’s load may get a big boost if the utility gets to supply power to the new intake facility for a huge water project now under construction in northeastern Montana. But small business is just as important to the co-op and the community. The Lefse Shack, manufacturer of a popular potato pancake in Opheim, Mont., was at risk of moving to Minnesota when the owners decided to retire a few years ago. Rather than let the jobs leave the area, Northern bought the company’s stock. “It employs about 15 people, mostly farm wives, for nine months a year and puts $100,000 back into the community,” said Tade.

It’s not a huge corporation, he admitted, but in an almost entirely rural community, that revenue makes a big difference.

Valley looks to seasonal cabins and fish hatchery for load growth
Valley’s membership is more diverse than Northern’s, with a slightly different outlook, according to Tade. “It’s like there is a magic line dividing the two territories. To the north, people are a little more traditional; to the south, they’re a little more progressive and interested in new ventures to raise revenue.”

A ranch and feedlot combination is the co-op’s biggest load right now, but vacation cabins around Ft. Peck Lake are helping to maintain the residential base. A 14-lot development recently filled up and another 80-lot site is steadily selling out. A new warm-water fish hatchery being built near Ft. Peck will add a load about half the size of Valley’s total present load when it opens in 2005.

The tiny town of Ft. Peck itself has an unusual relationship with Valley. The town once had a municipal utility that bought power from Western. In 1990, Valley bought Ft. Peck’s electric system and took over its operation. The Western allocation transferred to the co-op as part of the deal. “We picked up 125 meters and were able to give our members a break on their rates,” Tate said. “We really appreciate having that Western power.”

Having gained so much from working together, it would seem to be a natural next step for Northern and Valley to merge, but Tade doesn’t see that happening—not yet, anyway. “Future retirements may drive a merger eventually,” he said, “but the economics are not quite enticing enough at this point.”

There are also some political advantages to remaining independent. “Two voices have more clout than one,” Tade acknowledged.

So, the two co-ops maintain separate boards, separate memberships in industry organizations and separate identities. Like old saddle pals, they go their own way. But if one needs help, the other will be there to lend a hand, because that’s really how the West was won.