Welcome to Bismarck Insights with mayor Mike Schmitz, a transparent and engaging conversational dive into meaningful topics impacting local government and Bismarck, North Dakota Bismarck Insights is dedicated to removing barriers between the city of Bismarck and the citizens we serve every day.

00:00:32,267	Welcome to Bismarck insights on Bismarck Mayor Mike Schmitz. And today I have with me Todd Brickhouse from Bass and Electric. And Todd, um, you know, we're going to focus on a local partner as I view it, a partner of business to our community, not just Bismarck, but kind of the whole state and region and multi states. But we really enjoy having your your business in town because it provides certainly a lot of economic benefit to the community. But Why don't you introduce yourself a little bit to the audience? How you got here? I know you started well. You probably started differently than the CFO, but one of the primary roles you had when you first moved to Bismarck was CFO for Bass Electric and now are in the CEO position, I guess, or something like that. Yeah. Well, first, it's great to be here. Mayor. I appreciate you having me in, um, my background. I'm a native Virginian. You might be able to tell by the accent that I'm not native to North Dakota, but my connection to the Great Plains is my wife, who grew up in Nebraska. So, um, we lived in Virginia for the first 20 years of our relationship and raised our daughters into their teens in Virginia. But we're back to the Great Plains pretty frequently to make sure our kids kept their Midwestern roots. And so here we are. And we kind of the joke in our family is that when we moved out to Bismarck three and a half years ago, we just turned 50. And so our joke is that when we turned 50 and had our midlife crises, we didn't, um, get divorced or cheat on each other or, uh, you know, buy fancy sports cars. Uh, we moved to Bismarck, so it's a it's a happy ending. And it's been, you know, a great place to live for the last three and a half years. I started my career in the investment banking and securities industry. That's securities, stocks and bonds, not, you know, securing something with a gun or guarding something. And then after doing that for, um, you know, 6 or 7 years, I, uh, you know, was looking to do something else. And it was a really interesting time in the electric utility business because deregulation was going on. Um, and so living in Virginia. Um, someone said, well, you should go and, you know, talk to this local utility who is doing a big capital expenditure plan, about $600 million. At that point, they could use somebody with your skills that knew how to raise money. So I joined, um, the utility industry in August of 2000. And here I am a quarter century later. In Bismarck. In Bismarck. Not in Virginia. So we're glad you're here. So let's talk a bit about what Basin Electric is and the and the kind of the entity structure that it is because not maybe not a lot of people really know that. You know, even though basic electric has been housed here for, I don't know, a long time, 65 years. Yeah. Um, older than I am, which was. That's a lot. Um, so let's let's explain to, to our residents and our listeners what the structure is and and then what does bass electric really do for people? Okay, so, uh, our full trade name is based on electric Power cooperative. And, uh, let's just focus on cooperative and what that means. And if you think about a similar business model, like a mutual insurance company, well, we are a mutual electric company. We are owned by those that we ultimately serve. Um, and the distinction between basin and an investor owned utility or a municipal electric utility is that factor that the customer at the end of the line owns basin um, and an investor owned utility like MDU, who's also headquartered here in Bismarck, is an integrated model. They own the generation. They own the transmission and they own the distribution, which is the last mile of line to our homes and businesses. The distinction with basins model is we generation and transmission cooperative. So you can drive especially out north west of Bismarck and you can see our generation facilities. And then you don't have to drive very far outside of Bismarck to see a number of our transmission lines. Um, now, where MDU will serve that last mile of line to our homes and businesses, that's actually served in our system by local distribution cooperatives. So for myself, as an example, in the Bismarck area, um, my family and I, we are served by Capital Electric. Some others that are close by and might be watching could be served by Rough Rider Electric Cooperative as their distribution cooperative or Kem Electric cooperative as well. And that's probably the one of the distinctions is ultimately is that user of that power. At the end, they're a member of the local cooperative, and that local cooperative is a member of the Basin Cooperative system. Is that correct? Correct. Um, and basin itself is we're a mission driven organization. And in our mission, it says that we exist to sustain the quality of life for our members. And the way we do that is by producing affordable and reliable power produced in a safe and environmentally responsible manner. Um, while we're headquartered in Bismarck, we're actually basin is through our member systems. We are the largest electric utility in the country by retail service territory. About half million square miles, or 12% of the land of the free and the home of the brave. So we are a huge footprint across the Great Plains of Rocky Mountain, west of the United States. And the cooperative system originated because we had areas that weren't metropolitan, so rural. Yeah. And that was that was a way to deliver electricity in this particular case to them, more so than the investor owned utilities, because they didn't want to I don't know, they didn't want to spend the money. And so how did how did that all come about? Right. So really, if you go back to the 1920s and 20s and 30s, when electrification started in earnest, um, we could all and, you know, businesses still do look at a map and say, well, you want a high concentration of meters per mile of line. So whether it was investor owned utilities or municipal utilities, um, they tended to form in the cities where they could get a high concentration of meters per mile of distribution line. Uh, and then obviously that left out, um, you know, people that were farther outside of cities and municipalities. And so there was a gap there. And in the 1930s, the Roosevelt administration came in and said, well, let's create the Rural Utility Service under the Rural Electrification Act. And that was really the impetus for cooperatives to form and to extend service out to the countryside in rural areas. And being that that's really the model and how it all started is back to those countries. You're very. You're very user centric. Um, and so how how does the cooperative or the network of cooperatives respond to the needs in those various areas that, you know, in 12% of the country? That's a big area. It is a big area. Well, I think it helps being a locally, um, and democratically controlled organization. I think cooperatives are, um, famous for their annual meetings. I think you were kind enough to come and welcome everyone to our annual meeting back in August of 2024. I believe it was, um, might have been the year before. I can't remember right now, but, um, so that was a gathering of 6 or 700 of our members across that geographic footprint. Uh, and then each distribution cooperative has an annual meeting. And so we've got 139 distribution cooperatives across our service territory. And so that's a chance for members to come together for the cooperative to celebrate its success, but also get candid, real time feedback from those people that we serve. Talking about the challenges and opportunities that they see so we can all capitalize on them. Sure. And so large area, how do you how do you get the power generation? Because you're not doing it all from one station just northwest of here. I know that, right? You know, you've got multiple power plants and then our our you know, you start out at least a long time ago, 50 years ago, a lot of coal. Yeah. We're transitioning to something besides coal because of the requirements of government and clean air. Yeah. Um, so the way when basin started, we started with Leeland old station number one, um, and came on line in 1966. Um and basin was formed May 5th of 1961. So from a standing start in 1961 to having a first power plant online five years later was quite the accomplishment. And we actually I mentioned the Rural Utility Service. We funded that plant with a loan from the federal government under the Rural Utility Service. Um, and so we built that plant, and then we went and we built a large transmission system that currently stands at about 2500 miles of transmission line. And so that got our, um, the power out to the other areas that we serve our core markets. While we serve nine states, our core market is really North Dakota and South Dakota with a, you know, close third being Wyoming. If you look at North Dakota and South Dakota, about 60% of basin's unit sales come in those states. So we have a very large market share in the state of North Dakota, where about 60% of the unit sales of electricity in the state of North Dakota and in South Dakota, we have about 35% market share. And in each of those states, we're the largest electric utility in those states. And then we've got power plants in South Dakota as well, and in Wyoming too. So how what's the transition from coal to what what are we using? What are you typically trying to use now for the generation of power more efficiently, maybe. And and possibly likely cleaner. So basin will be 65 years old on May 5th of next year. Uh, and with that, um, if you think about how, you know, corporations work well, mayor's office work the same way about every 3 or 4 years, you're going to have a new election. In the case of a business, every three, 4 or 5 years, you're going to have a new kind of strategic plan or strategic direction. And so in basin's case, if you think, well, we've been around for 65 years, well, um, that means we've probably had 15 or 20 kind of strategic plans objectives over that 65 years. But we've had one overarching strategy and that overarching strategy has been to minimize our fuel cost, and fuel is the largest expense on our income statement, and in conjunction with minimizing those fuel costs, have very low transportation costs associated with that fuel. So we started from 1961 through the mid 80s almost exclusively building coal, and it was my mouth coal for the most part. So here in North Dakota, we've got you can go down 20ft and find beautiful scenes of lignite coal. And we built our power plants right next to those coal deposits. So we minimized the transmission, the the transportation cost, in addition to having a low source, low source cost or low fuel source? Low cost fuel source. Um, and then if you look back over the past quarter century, what we've done is we've expanded that strategy from coal to wealth, natural gas out of the Bakken. So, again, inexpensive fuel source in the form of natural gas and very, very limited transportation costs. And then living here on the Great Plains, Providence has provided us another great natural resource, which is wind. And so we've got mine mouth, coal, well mouth gas and horizon mouth wind. That's and that's a good strategy. It creates, uh, sustainability. Um, knowing that, uh, having reliable sources of that fuel to create the electricity between natural gas and coal because wind is never can't guarantee it. Yeah. It could be no wind or it could be too windy. Yes. So you know. And I know that's a big thing. To the power grid is to make sure we have reliable electricity to be delivered to wherever you're serving. And, and, you know, we've experienced some situations across the country where that that grid had some struggles at that point in time. It does. Um, so that's wonderful. I know that the cooperative has been involved in a few other things. Um, not just the electricity generation. Um, as a diversified and has a up in the Beulah area, there's a a plant that does other things. Yes. Um, how's that going? Uh, it's going well. So, DG, you're talking referring to the the coal gasification. Uh, and so DC is, um, the history around that is fascinating. So in 1974, so basin was 13 years old at the time. We were approached by a consortium of natural gas pipeline operators, and natural gas at the time was regulated at the wellhead by the Federal Energy Regulatory Commission. And there was a shortage of natural gas. And you had the Arab oil embargo the year before. Um, and so there was great concern about where natural gas was going to come from in the future. And so they this consortium of natural gas pipeline companies approached basin and said, we have technology that will convert lignite coal into synthetic natural gas. Um, we'd like to partner with basin and have basin build a power plant to provide the power to, to go to gasification. And so ten years later, we had Antelope Valley Station built again up in the Beulah Staunton area. Um and DGC was built there as well. Well, what happened in between 74 and 84 was the Natural Gas Act in the late 70s, which deregulated natural gas at the wellhead. And obviously, as a country, our energy policy had been to develop oil and gas resources beyond what we've done historically. And so there was a lot of oil and gas development here in North Dakota at the time, also up in Alaska. And so you had much lower natural gas prices at the time. And it didn't make sense for, um, those that consortium of pipeline companies to continue producing natural gas from DGC. So basin ultimately bought DGC And over the last 40 years, we have expanded the product line there from synthetic natural gas to 13 other co products. The biggest products that come out of DGC are synthetic natural gas and then fertilizers. It shows that became nimble to adjust to the times, and that was not an easy move because that's a big it's a big moving part up there. Yes. So so Basin Electric is a is an employer in communities and certainly in the city of Bismarck and Mandan a great employer. What are some of the community items that you partner with? Are the things you try to do within the communities that you're located? Sure. Well, I'll just highlight for you a, you know, few statistics. Um, one, we've got 1800 employees in total. Uh, 1500 of those are in North Dakota. Uh, About 500 of them are in the Bismarck metropolitan area. Um, so our North Dakota wages in 2024 totaled about $180 million. So you can do the math and say $180 million divided by 1500 employees. That's about $120,000 a year as our average wage. So we have very good, um, wages that we pay at basin. So I think that is the first advantage to, you know, a community or a state is having good high paying jobs from a stable employer that has been around 65 years. Uh, we try to be very good corporate citizens. Over the past ten years, we have donated to various charities and, um, you know, other, um, you know, charitable organizations, schools. Um. ET cetera. About $9 million. Um, and then last year, in 2024, uh, our donation was about $700,000 and 4 or $500,000 of that was here in the Bismarck area. Sure. We certainly appreciate that, but I think it goes beyond the dollars. I think it's the engagement of your team members because they're in the community, and I know they get involved in a lot of things. And and I know it's an encouragement that you, your, your organization gives to your team members to be involved in the community. Right. And we do give people a certain number of volunteer hours every year. And that is, um, used extensively by our teammates. And it's it's gratifying to see that, um, you know, Basin allows them to do that. They take advantage of it. And, um. Again, it's an extension of our good corporate citizenship by all of my teammates. Appreciate that. Um, as we look into the future and what we've gone through, energy is, is a major need. We're using it all over the place. What kind of strategy does Bass Electric have and to continue to develop additional electricity, because AI and data centers are are huge users and it's it's what's coming. Right. So, um, in addition to being the largest electric utility by retail footprint in the country, we also think that we've been the fastest growing electric utility in the country this century. Our unit sales have grown about just north of 5% a year this century. Um, if you look at the national average across the electric utility industry, the utility industry is growing. Unit sales less than 1% a year. So we've grown five times faster at basin than the industry as a whole has. What that has meant is that a basin and our members have spent about $2 billion over the last 10 or 12 years to build out our infrastructure, just in North Dakota. Um, the number is larger. If you look at the other states where we serve, uh, going forward in order to, um, satisfy the demand that we've seen, we've got multiples on that number, on that investment dollar that we've done over the past 10 or 12 years. We announced last year that we would build Bison generation station, um, northwest of here. And so that will be a 1500 megawatt natural gas facility. We just in August bought online Pioneer Generation Station phase four, which is 580MW of natural gas fired generation. That costs about $800 million to build. On the transmission side, to move the electrons around the Great Plains and our service territory will spend $3 billion over the next ten years on transmission, with more than $1 billion occurring here in the state of North Dakota. Wonderful. So how do you see data centers and AI and affecting the the need for more energy is we're in a more community computing world. Yep. And we live it. And every day It's. It's only advancing, I think, at speed. I can't imagine how is that going to affect and how is it affecting the industry as a whole, but in specific to your, your business and Bass Electric, what's, you know, what's the forecast? Sure. So at basin, we like to say that the electrons that we produce are the raw materials of a modern economy. And that's kind of the genesis of your question. Um, so let me give you some context here. If you look at the Bismarck metropolitan area, the peak demand of electricity for that area is about 240MW. So a large load for basin. And our members used to be 5 or 10MW. What did that look like? It was an ethanol facility, probably, um, you know, something that most of us understand. You know, the second thing would be, um. A natural gas processing plant, each, you know, 5 to 10 megawatt loads, depending on how they're constructed and how large they are. Well, now a data center brand name. Technology companies come to us and they say we'd like 1000MW from you. So it's that's four times, maybe almost five times the size of the Bismarck metropolitan area, consumption of electricity. So we're talking about multiple city sized loads in one data center. So part of the challenge that that poses to Basin Electric is that our peak load has the record peak we've had is about 5100MW. So 1000MW from a data center would result in us growing by about 20%. And there's a big cost differential between what we've been building for the last 65 years and what we are faced with building today for a data center. Um, so we've got to figure out a way to say, okay, this is a huge risk for us to take on. And we've created a large load business model that allows the brand name technology company to come in and actually invest in their own generation. So what that does is it alleviates some of the rate pressure, much of the rate pressure that our existing members would feel by us putting in another $4 billion generation plan. And I think that's important for people to know that, you know, the electrical utilities are going to push back on some of this demand from those users and say, sure, but you got to help pay for to keep the cost down for our residential users, because we are not going to put them in harm's way just to take care of you. Yeah. And the the biggest nightmare would be that if we said, sure, we'll build you, build you that thousand megawatt generator, we invest 3 or $4 billion in it. And then at the end of the day, the data center says, guess what? We don't need the power now. And we're stuck with a 3 or $4 billion investment that we don't. We're not able to sell the output of. To monetize. It. Yeah. Um, so I think it's interesting, though, when what we saw was with our 5100MW of, you know, current peak demand, we saw inquiries of interest from technology companies for data centers of about 17,000MW. So that's three times the size that basin currently is. And so when we instituted our large load commercial program to serve those data centers, um, that cut the inquiries of interest about in half. So just under 10,000MW. Um, and then the next step from that is you had to fill out a form. So we knew we were we were doing business with. Um, they had to tell us where they wanted to locate the load, which helped us plan for transmission and generation. Um, so just by asking those questions and asking people to fill out a form, we, you know, cut the inquiries of interest about an half. And then the second step of that is okay to again insulate our existing consumers from having to pay these expenses. We needed to we had them do a funding agreement and the large loads that have actually said, okay, we'll participate in the funding agreement portion of this, you know, cuts that down by another 75%. Well, it sounds like a great strategy to manage the business. Todd, thank you for joining me today. We probably touched on half of what we had here, but we've given some information to our local viewers of what Bass Electric does and tries to do and, and how you're trying to be responsible citizens and maintaining a low cost electricity for, for your users. Well, it's great to be here. Thanks for having me. Merry Christmas. You too.

00:30:35,067	Thank you for watching Bismarck Insights with mayor Mike Schmitz. If you have specific topics or questions you'd like addressed in future episodes. Email em Schmitz at Bismarck Undercover.

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