Innovative Energy Alliance Cooperative
Innovative Energy Alliance Cooperative celebrates 10 years
On Jan. 1, Innovative Energy Alliance Cooperative celebrated 10 years of being a helping hand to electric cooperative members. Established in 2007 with neighboring cooperatives Mor-Gran-Sou Electric, Roughrider Electric and Slope Electric, the alliance was created to share management services with the intention of reducing costs and allowing the respective boards of directors to retain local control. KEM Electric Cooperative joined the alliance in 2012.
In the cooperative spirit of working together for the greater good, the concept of sharing resources to streamline processes and add efficiencies gained momentum. The alliance expanded, adding key positions that were necessary at each of the cooperatives and could be shared. Just like the co-general managers, alliance employees were hired to split their time and talents among the four cooperatives. Over the past decade, Innovative Energy Alliance Cooperative has grown to 14 full-time employees including management. Positions range from the chief information officer and chief financial officer to accountants, engineers, human resource professionals, a safety coordinator and a communications coordinator.
Don Franklund has worked as co-general manager/chief executive officer (CEO) of the alliance since its inception. He says it’s important that members continue to identify KEM as their home cooperative. From the linemen in the fields to the folks who work in the office in Linton, these 15 employees are the face of KEM. The alliance employees you may see helping at an annual meeting are a secondary layer of employees who assist with larger or specialized projects.
“The alliance is a helping branch to your cooperative. We’re here for support,” Franklund says.
So, how exactly does Innovative Energy Alliance Cooperative work, and has it done what it set out to do — share services, gain efficiencies, and ultimately save the members of KEM money?
Yes, says Dean Dewald, KEM Electric board director, who was board chair at the time Innovative Energy Alliance Cooperative was founded.
“Our goal was to find stability for the employees and members. We had heard nothing but positive comments from the other three board members,” he says. “KEM joined on a trial basis, and then requested and was accepted as a member of the IEA family. The shared expertise and efficiencies have been good for our members.”
The formation of the alliance
Back in 2007, Franklund had served as general manager/ CEO for Mor-Gran-Sou for 13 years. He knew many of the cooperative’s rural areas were struggling with a declining membership, and Mor-Gran-Sou was seeing an increased cost of doing business. He said it was up to the area’s electric cooperatives to find innovative ways to prepare for the future.
“We saw a changing rural landscape and were concerned about the future of our industry,” he said.
When Slope Electric General Manager Lynette Nieuwsma resigned to accept another job, the Slope board approached the boards of Mor-Gran-Sou and Roughrider, and suggested they form a temporary management alliance.
“It was a bold step toward managing all of our cooperatives’ futures,” Franklund says.
The directors formed a Steering Committee by nominating two directors from each cooperative to serve and represent the interests of their memberships.
The committee hired Franklund and Clayton Hoffman, the former general manager/CEO of Oliver-Mercer Electric Cooperative, to lead the alliance. Serving the Hazen area and surrounding areas, Oliver-Mercer was in the process of consolidating with West Plains Electric Cooperative, which served the Dickinson area and extended communities. The consolidation to become one cooperative corporation, known as Roughrider Electric Cooperative, would become official the same day the alliance was incorporated as an LLC.
After a 20-month trial period, John Lee Njos, president of the Slope board at the time, says his fellow directors decided to make the management alliance permanent. “The management alliance has allowed us to do a better job of serving the members with technology Slope could not have afforded as a single cooperative. When teamed with Mor-Gran-Sou and Roughrider, we made it economically feasible,” he says.
To make the management alliance permanent, the three boards formed Innovative Energy Alliance, LLC, which employed two people: Franklund and Hoffman. They hired legal counsel and developed a new set of bylaws and policies for the newly formed entity. Then, each cooperative elected two board members to represent it on the alliance board. When the alliance board makes a decision, those directors take it back to their respective cooperatives for greater discussion or a vote.
The alliance allowed the three cooperatives to remain as separate businesses with their own identities, assets and obligations, and retain their authority. The only responsibility each respective cooperative board passed on was the ability to hire, terminate and evaluate the co-general managers. This is the responsibility of the alliance board.
KEM joins alliance
Yes, population was declining and the cost of doing business was rising. But KEM Electric Cooperative in Linton had another, more pressing problem: management challenges. Longtime General Manager Mike Rudolph had retired, and for several years after his resignation, the cooperative went through a period of manager turnover.
Knowing they needed stability — and seeing the alliance thriving after five years of service, the KEM board approached the alliance board and asked if they would consider an additional partner. Based on the cooperative’s proximity, it made sense.
The alliance board agreed to a temporary trial period in 2012, and on Jan. 1, 2013, KEM joined the alliance on a permanent basis.
Dewald, who served as chairman of the KEM board at the time, says the co-general managers brought steadiness and strength to the board room, office and membership. In addition, the benefits of having shared equipment and manpower has brought tremendous benefits. “There is absolutely no way, as small as we are, that we could have afforded a portion of the alliance employees and their services,” he says. “Before we were part of the alliance, when we had an engineering issue, we had to hire contract employees who would need to take time to become familiar with a project before they could assist. Now, we have those employees in-house, and they know exactly what is happening 24/7. That, to me, is so important. Any project KEM has going on, the alliance employees already know what’s going on and what needs to be done. It’s already part of their everyday operation.”
Sometimes, the directors take questions from members who are concerned the alliance is taking jobs from local residents.
Dewald says the directors explain how the shared services work, in that one day an employee might work in the Linton area, and the next in the Bowman area. Local is anywhere in four cooperative service areas for alliance employees. Dewald also notes that because the jobs are specialized, alliance employees have a unique set of skills that would be difficult to find locally.
“In rural areas where population is declining, it’s hard to find people who have the knowledge and experience necessary,” Dewald says. “Yes, we’d like to hire locally. But it greatly limits the talent pool. The alliance has allowed us to hire the highest caliber of employees. Their positions are critical to KEM Electric, and it’s something we couldn’t even consider doing on our own.”
Changes in management and name
The beginning of 2013 marked the addition of KEM joining the alliance, and also the retirement of Co-General Manager Hoffman, who retired with 30 years of cooperative service.
Chris Baumgartner, the former manager of member relations for Basin Electric Power Cooperative, was hired to replace Hoffman. He worked for the alliance for five years, before returning to Basin Electric where he again works; this time as senior vice president of member services and administration.
In December 2017, the alliance board of directors hired Travis Kupper, the alliance’s chief financial officer, to fill the co-general manager/CEO position. Because of his background and 19 years of cooperative experiences, along with his understanding of the strengths and challenges the cooperatives face within the alliance family, Dewald says he was the package deal. Kupper started in January 2018.
Another noteworthy change occurred in November 2016, when Innovative Energy Alliance, LLC converted to Innovative Energy Alliance Cooperative. The LLC was officially dissolved at the annual meeting on Feb. 10, 2017.
In addition, Mor-Gran-Sou, Roughrider and Slope also own WDUS Holdings, LLC, which includes 3C Construction and West Dakota Utility Services (WDUS). They have been managing this group since 2010.
Ten years ago, Innovative Energy Alliance Cooperative was formed to share management services with the intention of reducing costs and gaining efficiencies by sharing equipment and employees; all while allowing cooperatives to retain local control.
A question directors and managers are regularly asked is, “What have we saved?” “As an engineer, I’m a numbers guy and I keep doing the math,” says Franklund. “Not giving up any services we have now — perhaps buying portions of them, but doing everything we are doing now — for the average co-op to do it, it would cost about $400,000 to $500,000 a year, each.
“We estimate among the four co-ops, we save $1.5 million a year,” he continues. “I’ve been told I’m light because I haven’t taken into account, ‘What is the idea exchange worth? What is the exchange of equipment and inventory and everything else?’ I was told to add another half million on top of that, for a savings of more than $2 million a year. I can sleep at night when I say $1.5 million.”
That savings doesn’t include the synergy of working together. On transmission line projects, the four cooperatives can bring equipment and manpower together — quickly going from 10 linemen to 50 linemen who can start and finish a large project in a day — reducing potential outage time to the member-owners.
Or, if Roughrider in Dickinson employs an expert in advanced meter-reading technology and KEM has an apprentice meter man, the two can work together to share information. The alliance has taken the cooperative principle of education, training and information to another level.
“These are the kinds of things the alliance allows us to do. That’s where the value is for the member at the end of the line,” Franklund says.