HURON, S.D. – In 2019, some board members of the rural electric cooperative Dakota Energy wanted to find out if they could get a better deal for wholesale power on the private market.
Rates, and electric bills by extension, had doubled in 15 years for the 2,300 member-owners who pay the Huron-based co-op for electrical service. Wholesale costs soaked up 70% of the Dakota Energy budget – significantly more than decades past.
But there was a problem. Dakota Energy, which doesn’t generate any of its own electricity, was under contract to buy power exclusively from a co-op named East River Electric until 2075.
Madison-based East River gets power from the Oahe Dam and buys power from a co-op named Basin Electric, headquartered in Bismarck. The Dakota Energy leadership in 2019 felt both partners had too much debt and offered too little predictability on rates.
A for-profit Colorado company called Guzman Energy had offered to buy out Dakota Energy’s contract with East River in exchange for the chance to sell Dakota Energy power at a lower market rate.
East River refused to give a buyout number.
The dispute bubbled into a yearslong legal battle over the rights of ratepayers and the contractual obligations of nonprofit co-ops.
Dakota Energy sued East River, and later some of Dakota Energy’s own member-owners who’d sought to force a vote to shut down the Guzman deal.
East River pushed the case into federal court. Basin Electric signed on to countersue. Lawyers for Guzman got involved. A coalition of co-ops did, too.
A town hall was held, radio ads appeared, statements were released and letters to the editor were submitted.
East River set up a website called “Keep Our Co-op.“
Some of Dakota Energy’s member-owners, even now, feel that their local co-op leadership conspired to upend a long-term relationship with East River.
Bill Folk, one of the Dakota Energy member-owners the co-op sued, said he and many others learned about the Guzman talks on television news.
“They planted a bunch of stuff in the paper,” Folk said. “They started running down the manager of East River, printing his salary and everything and saying he was mismanaging things. But this had nothing to do with him. The guy from East River is a good person. It was just totally wrong what they were doing.”
Last spring and summer, the courts made the call: East River was not obligated to offer a buyout number, and Dakota Energy is legally obligated to stick with East River until 2075.
The 8th Circuit Court of Appeals cast the final die last month when it affirmed a spring 2022 decision saying so, issued by a Sioux Falls judge and appealed by Dakota Energy.
The decision settled the dispute, but it also created a legal precedent likely to have ripple effects for the electric co-ops that serve rural Americans from coast to coast.
For Dakota Energy, its loss before the three-judge panel means it can’t try to save its member-owners money by breaking its contract for what it saw as a better deal.
“We are disappointed that the ruling ties our hands and prevents us from finding ways to bring real cost savings to our members,” said Chase Binger, Dakota Energy board president, “but it is clear to the board that it is time to end the lawsuit. Dakota Energy will remain a full and active member of East River.”
