Dakota Energy members will not vote on East River Electric exit

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Note: This story originally appeared on the Daily Leader Extra


By MARY GALES ASKREN, Staff Reporter

Apr 9, 2021

Dakota Energy, in a carefully curated town hall meeting on Thursday night, once again avoided answering tough member questions regarding the lawsuit which it initiated in November against East River Electric Power Cooperative.

Dakota Energy, a locally-owned distribution cooperative which serves Beadle, Hand and Hyde counties, is seeking to leave East River, a wholesale power cooperative. At issue is whether Dakota Energy is legally obligated to fulfill its Wholesale Power Contract (WPC) with East River or whether bylaws allow the cooperative to withdraw from membership.

The town hall meeting was held in the Women's Building Auditorium on the South Dakota State Fair campus in Huron on the eve of the co-op's annual meeting. Members could attend in person or virtually. They were told as the meeting began that questions would be vetted and only those that did not affect pending litigation would be answered.

Chris Riley, CEO of Guzman Energy, which is "partnering" with Dakota Energy -- according to board member Chase Binger -- made it clear that questions regarding the distribution co-op's actions were unwelcome, calling them "classic misdirection."

"All of these things are fine things to talk about but have nothing to do with the question," Riley said.

He said the question, as he defined it, was "actually really simple and straightforward" and "shouldn't be remotely controversial." For him, the legal question is moot. Riley indicated the only question which must be answered is the amount Dakota Energy would have to pay to fulfill its contractual obligation to East River.

Luis Reyes, CEO of Kit Carson Electric Cooperative in Taos, N.M., which ended its cooperative agreement with Tri-State Generation and Transmission Association of Denver to purchase power from Guzman Energy, explained this concept during the Q&A portion of the meeting. He said the exit fee, also called a buyout price, would ensure neighboring cooperatives do not have to subsidize Dakota Energy's exit.

"Whatever number they [Dakota Energy] get keeps the power supplier whole and doesn't hurt anyone else," Reyes indicated.

Neither man recognized or addressed East River's legal obligations to Basin Electric Power Cooperative, the generation and transmission cooperative from which it purchases its power, or Basin's position -- as indicated in court documents -- that "East River assisting member buyouts would be contrary to East River's obligations to the cooperative."

Attorney Lee Schoenbeck, who is representing Dakota Energy in the lawsuit, spoke briefly but did not address any of the legal issues. He said that East River moved the case from state court to federal court because a local decision "wasn't good enough" and that Basin Electric was granted legal standing in the case because moving the case into federal court "wasn't good enough."

During introductory remarks, Chad Felderman, CEO of Dakota Energy, indicated the local co-op wants a buyout number to determine whether leaving East River is in their best interests, implying no decision has been made. However, a question posed by the Daily Leader was among those that were not addressed: If no decision has been made, why has Dakota Energy signed a Letter of Intent with Guzman Energy?

Members did learn they will not have a voice in whether Dakota Energy leaves East River or not. Some members have been vocal in expressing their belief that Dakota Energy should not change its business model without a vote of the membership.

"There is nothing for members to vote on," Felderman stated. "It would be a board decision."

While most of the questions fielded were softball questions answered in a way that avoided the legal issues -- such as "Why won't East River provide a buyout number?" -- some questions which previously remained unanswered were finally addressed, primarily by Reyes.

Riley tended to discount member questions by saying things such as, "That has nothing to do with the question being asked," or "That's putting the cart before the horse." He described questions being raised as "misdirection and fearmongering."

When pressed about contracts, he indicated, "We enter into fixed-price contracts. It is our job to deliver at that price."

Reyes explained how that worked when the winter storm in February caused power outages in Texas and parts of New Mexico. While other cooperatives saw a price increase and experienced outages, Kit Carson customers did not see an interruption of service or an increase in cost.

When asked where the company gets its power, Riley said Guzman Energy purchases energy from the Southwest Power Pool, where Basin Electric also purchases a portion of its power, and has agreements with some generation stations.

When asked about infrastructure repairs following storms, Reyes said Kit Carson has hazard sharing agreements with neighboring cooperatives. However, the company also relies upon local contractors, which the cooperative views as an opportunity to support local businesses.

When asked about transmission, Reyes explained that those costs are regulated by the Federal Energy Regulatory Commission. He explained that East River would not be able to discriminate against Dakota Energy by charging a higher wheeling tax than it charges other customers for whom the cooperative provides the same service.

Questions addressed to Felderman remained largely unanswered. Each time he would state the question could not be answered because Dakota Energy did not have a buyout price from East River.

Ironically, after declining to answer most of the member questions addressed to him, Felderman said in response to the question about East River's position regarding the buyout price, "If you want to keep a cooperative together, you communicate."

Felderman also explained why Guzman Energy was given a voice at the town hall and has been a visible presence since Dakota Energy issued a press release in November regarding the lawsuit.

"We needed someone we could rely on for their expertise," he said.

Organizers closed the meeting by asking members to support them with letters to the editor, by spreading the word on social media, and by signing an online petition indicating support for the board of directors' actions.

As the virtual meeting ended, voices from the audience could be heard, although their words could not be distinguished. Schoenbeck made it clear that organizers were not interested in what those individuals had to say.

"This wasn't meant to be a town hall debate," he stated.

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