Greetings to all members of the North Itasca Electric Cooperative. On behalf of the board of directors, I thank you for
attending the annual member meeting of our local co-op. The co-op exists for the benefit of the members including
everyone here today. The board’s responsibility at every annual meeting is to help you, the members, understand the big picture of the cooperative’s business and the long-term challenges and opportunities in front of us.
First, the challenges. The business of supplying electric power has challenges as any business does. Last year I was most concerned about the tariff tax. Everyone here was paying the tariff tax, but it was very sneaky. It’s not like the sales tax which is listed separately on the store receipt. No one could really tell where tariff tax was or how much they were paying. That’s why some politicians like it. With the tariff tax no one can tell where it is or how much it is. The federal courts finally declared the first tariff tax to be illegal. OK, illegal. Did you get a refund? Nope! A few large corporations affected by the tariff tax is filing claims for refunds, but no one who is reading this in the WATTS News or who is present at the annual meeting will get a refund of the illegal tariff tax. North Itasca Electric Co-op also did not get any refund of the tariff taxes it paid. The little guy got pinched again.
This year the much bigger challenge for the North Itasca Electric Co-op and every individual citizen is inflation. We already see the shocking increases in gasoline and diesel prices. Everything that we citizens buy in any
store – it doesn’t matter where you shop – arrived in a truck with a diesel engine. The diesel fuel costs are all passed
through to the consumer. Just like the retail store, everything that the co-op buys to maintain its system gets here on a
truck. We will all be paying more, sorry to say.
Also related to the conflict with Iran, farmers around the world are facing similar large increases in fertilizer prices
and shortages of some types of fertilizer. This will cause inflation for almost all types of food.
Next, the opportunities.
It seems that we see things change slowly or in very small ways in our small corner of the nation. We don’t see new
industries developing here. But right now there is a big exception, and it’s very exciting. Mesabi Metallics, the new
taconite iron ore mine near Nashwauk, is a huge development. I have visited the new Mesabi Metallics plant. The people working there are justifiably very excited about the new investment, its utilization of the latest technologies and the opportunities it brings to this region of the state. It is a little distant from here, but we can anticipate that some of the mine employees will live in the North Itasca service territory and that some service businesses located here will have new opportunities. A small business, Polar Insulating, owned by North Itasca member Tom Kallio and located in Squaw Lake, has already been completing projects for Mesabi Metallics.
Now let’s shift our attention to look at the picture nationwide. For about 12 – 15 years beginning about 20 years ago,
the consumption of electric energy in the US increased very slowly from one year to the next. About 10 years ago I
attended a national electric cooperative conference where the situation of slow growth was discussed. At lunch I sat at a table with people mostly from other states whom I did not know. Several of them commented about the “no growth”
situation, which they recognized as very unusual. The group talked about this situation and wondered about the reasons. Most of the credit for slow growth went to energy efficient devices: LED lamps, Energy Star appliances, newer
technologies for heating and cooling, etc.
More recently the picture has changed greatly. Significant changes are affecting the electric power industry nationwide.
The growth of electric energy consumption is increasing very fast over most of the country. We listen to news
items about artificial intelligence and data centers. Totally new, we never heard those terms 10 years ago. They both
require thousands of powerful computers analyzing information. The large, powerful computers consume electricity in
unimaginable quantities. Many large data centers have already been built in the large metropolitan areas along the east
coast of the United States and some areas in the South, especially Texas. More are now being proposed, and some under
construction, across the rest of the country.
Most people nowadays have experience ordering merchandise online. Amazon is a huge and powerful competitor in
the online marketplace. I will bet that many people here have ordered from Amazon. Amazon has large, automated
warehouses that they call “fulfillment centers.” The modern fulfillment centers, whether owned and operated by Amazon or some other large corporation, process orders and arrange the goods for shipping with very little human input. The computer systems control automated machinery which can get the job done without paying wages to very many people.The computers require a lot of electrical energy. The fulfillment centers are large power consumers.
The other large new loads are needed for very large computer banks employed to enable artificial intelligence,
frequently shortened in conversation to AI. AI is enabled by computers which feed each other information. Supposedly
the networks connecting many computers together and exchanging information are imitating human thinking processes. These systems need very large power supplies to keep their computers working.
I was at a family gathering recently in Duluth. One of my relatives asked me if I was in favor of the new data center
proposed by Google to be in Hermantown. My answer was my opinion doesn’t matter. Large data centers are coming.
They are a part of the way that modern life works.
On the near horizon we can see the modernization of transportation as cars, trucks and buses convert to all-electric
drive systems. All-electric automobiles are becoming increasingly common. Yes, we hear from some doubters, and I
have my own doubts. The conversion trend line will not always be consistent, and we observe the argument going hot
and cold as the political climate changes. There is little doubt that we will see a greater percentage of all-electric vehicles as time goes by. These new loads are causing massive investments in new power sources and modernization of the grid which connects the sources to us the consumers. Regardless that we won’t see an Amazon fulfillment center or an artificial intelligence installation at North Itasca Electric, we will benefit in the long term by the modernization of the grid. The conversion to battery-electric vehicles over the long term will cause growth of power sales and revenue for the North Itasca Electric Co-op.