North Star Electric Cooperative’s board of directors approved an overall rate increase of 7.8% at the January 2025 board meeting.

This was necessary to address the impact of Minnkota Power Cooperative’s wholesale rate increase of 8.6% and the rising costs of electrical distribution equipment. For the last six months, North Star has taken an extensive look at all rate classes with outside consultants and our management team. We have not had a detailed rate review performed since 2008. Needless to say, many things have changed since then. Whether it’s the cost of a dozen eggs or a pound of hamburger, everything has been impacted, and your electric cooperative is not immune to these increases.

We do not take rate increases lightly. That’s why Minnkota and North Star Electric Cooperative work together to ensure rate adjustments are thoroughly vetted and assessed before action is taken by the member-governed boards.

Minnkota has worked alongside its membership to keep electric rates stable since 2017, even as prices on the materials to generate and transmit power began to skyrocket. Since 2020, the cost to build a mile of 69-kilovolt power line has risen 40%, and we’ve seen a 67% increase in the cost of transformers. And that’s just the start. Some material costs have risen more than 200%. For the sake of our members, we found efficiencies to ease that extra burden through the most volatile times. However, Minnkota has reached the point where a rate increase is the only way they can balance reliable service and financial responsibility.

North Star and Minnkota aren’t alone in facing supply chain and inflationary pressures. Many utilities in our region and across our nation are considering or implementing rate increases to recover the higher cost of materials, equipment and services.

North Star remains a competitive power supplier, and we are well positioned to continue providing safe, reliable and sustainable electricity.

As your general manager, I will always remember that we are driven by service, not profit. We only raise rates when necessary to be able to continue to provide
quality service to you, our member-owners. We will continue providing more details on the changes.

As always, our commitment to transparency continues. Feel free to contact your cooperative with any questions.

Stay safe, Kevin

This fall, the board of directors for Minnkota Power Cooperative (North Star’s wholesale power provider) approved the cooperative’s capital and operating budgets for 2025. The budgets include a rate increase for Class A member cooperatives – the first adjustment to rates since 2017.

“Persistent supply chain and inflationary pressures are impacting almost every aspect of our business,” said Mac McLennan, Minnkota president and CEO. “The cost increases for materials and equipment have been significant, forcing us to adapt our strategies and prioritize projects carefully to ensure we continue delivering reliable service to our members while maintaining financial stability.”

As a not-for-profit cooperative, Minnkota collects enough revenue to cover its costs as well as a small margin to operate the business. At the same time, it makes investments to ensure safe, reliable and sustainable electricity is available for its members well into the future.

In 2025, Minnkota has budgeted operating revenues of $479.2 million and expenses of $474.8 million. The cooperative anticipates using its Revenue Deferral Fund to meet its target margin level of $14.2 million. The 2025 average rate change of approximately 8.3% will be implemented on April 1. Minnkota’s capital budget includes $101.7 million in projects, tools and equipment. Of that total, approximately $23.3 million is reimbursable to the cooperative through other
entities.

The capital budget is highlighted by Minnkota’s ongoing commitment to addressing aging infrastructure and improving service to the members. Approximately two-thirds of the budget is focused on power delivery system improvements or additions. The cooperative plans to start and/or complete work on five distribution substation rebuild projects and complete reconstruction of three major sections of 69-kilovolt transmission line. Upgrades to demand response infrastructure and the addition of distribution automation technology to improve power delivery system visibility at 14 substations will continue.

From a power supply standpoint, Unit 2 at the Milton R. Young Station will undergo a 44-day scheduled maintenance outage to complete projects and conduct thorough inspections in an effort to keep the coal-based unit operating reliably and efficiently. Major outages are scheduled on both Young Station units every three years.

“We have major projects planned, including important upgrades at our power plants and across our entire power delivery system,” McLennan said. “While these investments come at a time of rising costs, they are essential to maintaining and strengthening the reliability of the power we provide to
our members. The scope of these projects will demand an extraordinary level of focus, dedication and hard work from our employees, ensuring that
we are well prepared to meet the evolving needs of our membership now and for years to come.”

Minnkota’s financial position is supported by previous years of strong operational performance. The cooperative has a Revenue Deferral Fund in place to
manage shortfalls and rising expenses, as well as a Resource Transition Fund to address extraordinary market events and future power supply needs.

Minnkota is rated as an investment-grade utility in 2024. The cooperative currently has an A- rating and stable outlook from Standard and Poor’s. Fitch
Rating Services rates Minnkota at BBB+ with a stable outlook.

“We’re faced with a significant amount of industry change that may require major investments in the not-too-distant future,” McLennan said. “Maintaining
financial stability is crucial as we navigate future power supply opportunities, while continuing to address aging infrastructure needs spread throughout our power delivery system. We remain grateful for the support and guidance from our membership as we continue forward in the energy transition.”