WATFORD CITY – A rural electric cooperative’s lawsuit against its power supplier is moving forward after a Northwest District Court judge rejected a request for dismissal.

In November 2019, McKenzie Electric Cooperative, Watford City, filed a civil lawsuit and submitted a protest to the Federal Energy Regulatory Commission over the rates charged by Basin Electric Cooperative.

McKenzie Electric argues Basin’s operation and expansion of its for-profit coal gasification subsidiary, Dakota Gasification Co., which lost nearly $919.7 million between 2015 and July 2020, have driven up rates. Basin imposed a 22% rate increase in 2016 to pay for losses, projected to reach more than $1.5 billion by 2030, according to the lawsuit.

The lawsuit aims to force Basin to comply with statutory and contractual obligations, which McKenzie Electric alleges Basin is violating by charging rates that exceed the prudent costs of producing power. Upper Missouri Cooperative, the intermediary through which McKenzie buys power from Basin, also is named in the lawsuit.

Northwest District Judge Daniel El-Dweek rejected motions by Basin and Upper Missouri for dismissal, and the case is proceeding into a discovery phase.

McKenzie’s protest with the FERC focuses on demonstrating that Basin’s rates, which recently came under FERC’s jurisdiction, are not just and reasonable under applicable federal law. In response, FERC has initiated an investigation.

McKenzie Electric stated its objective is to reduce power rates to members. It serves members in five western North Dakota counties and two eastern Montana counties.

Short of that, McKenzie Electric stated it wants to buy its way out of the existing contract so it can find a lower cost alternative source of power. Basin has not allowed a buyout.

“The board’s decision to file a civil suit and FERC protest against Basin and Upper Missouri is the result of several years of careful review and concern about increasing energy costs,” the cooperative stated. “We’ve researched and discussed this topic in great depth,and we are unanimous in our determination that the rates we’re charged – and must pass on to our members – must result from prudent business and governance decisions.”