CRA experts Seabron Adamson and Kristofer Swanson assisted client McKenzie Electric Cooperative (McKenzie) in a major regulatory dispute with Basin Electric Power Cooperative (Basin).
The case navigated complex regulatory issues stemming from Basin’s transition to Federal Energy Regulatory Commission (FERC) jurisdiction and its attempt to recover significant losses from a fertilizer facility project through FERC jurisdictional electric rates.
After Basin became subject to FERC regulation, McKenzie challenged its attempt to recover large losses associated with the operations of Dakota Gas Company, an unregulated subsidiary that owns a synthetic gas plant and a facility that produces urea, which is primarily used as a fertilizer. By the end of 2021, Basin’s electric customers faced exposure to the DGC subsidiary of greater than $1.3 billion.
CRA’s forensic accounting team, led by Kristofer Swanson with critical contributions from Jordan Kraner and Amanda Kight, tackled the significant challenge of analyzing Basin’s complex accounting of its relationship with the unregulated subsidiary. Seabron Adamson, leader of the energy disputes and regulatory segment in CRA’s Energy Practice, testified at a 2023 FERC hearing on the costs to Basin’s customers (including McKenzie) from the investments in DGC.
In an Initial Decision released in June 2024, a FERC Administrative Law Judge agreed with McKenzie that the costs of DGC could not be recovered in FERC jurisdictional rates and required disallowances of over $450 million for 2020 and 2021. The judge’s reasoning and disallowance amounts were significantly based on Mr. Adamson’s analysis and hearing testimony. Such refund amounts, if confirmed by the full Commission, would provide McKenzie and other buyers of Basin power, significant relief from the high electricity rates caused by improper subsidization of DGC.
