Operational Excellence Overview

Operational Excellence panel

Operational excellence is not optional. Basin Electric’s operations and transmission staff work hard every day to keep the lights on for the membership.

Matt Greek, senior vice president of Engineering and Construction; Dave Sauer, senior vice president and chief operating officer of Dakota Gasification Company; and John Jacobs, senior vice president of Operations, answered questions during a panel discussion. Don Franklund, general manager of Innovative Energy Alliance, moderated the panel.

Following are a couple of highlighted questions and answers. Watch the full panel discussion below.

Why did the urea project have so many cost overruns?

Matt Greek: The urea project, like most of the bigger, complex projects we do, starts off with a study, and in the urea project’s case, there were no less than three studies that were done, and there were two engineering studies that are essentially the basis for the project and the basis for the cost estimates that were used in the initial request for board approval.

If we look back at the actual expenses on the project against what those suggested expenses should be, there’s three things that show up as major differences. The quantity variances, the quantity of labor to construct and quantity of materials to construct, were substantially higher than what were in those studies.

The third piece of that is really the cost of labor itself, as is to say the rate of labor. So, the actual dollars we paid, not just for the labor, but for the per diems and other things that we were required to attract and retain the labor, turned out to be much higher than what was projected in those studies. (Watch the video for more.)

With joining Southwest Power Pool (SPP), and with the advent of wind, how has that changed the way you run the power plants?

John Jacobs: We’ve seen a dramatic change in the last three to four years, going into the market. Our plants are still baseload plants, we run them as baseload plants, but we end up, in a lot of cases, more predominately in the spring and fall, chasing wind. So our units are ramping up, backing up, backing up and down, following wind.

We also, in going into SPP, have a new way of operating. We look at a signal that comes from SPP that drives the megawatts, we’re still in control of those units, knowing their upsets that we have to take out that control. But before, we had the luxury between our facilities, if we wanted to do some minor maintenance, we, in North Dakota, we would be able to say, “Well Lee Olds, you stay up and we’re going to take a 50-megawatt cut at one of our other facilities, at AVS.” We don’t have the luxury of doing that anymore. Each facility, each unit has to stand on its own. It’s like it’s independent from the market and our operators have learned to go with the market and be able to adjust to the megawatt demand changes very well.

What does it take to make a ton of urea? I mean, we have a lot of farmers out there that use urea, and what’s involved with it and how do we compete in this part of the country?

Dave Sauer: As far as the price, that’s something that is business confidential from the standpoint that we have competitors. But from our studies that we did internally, and we’re actually just into a fertilizer study, we’re very competitive within our 200-mile marketing area. One of the advantages we have, even over and above that study, is we will be able to operate our ammonia plant more efficiently. We’ve been running it throttled back, if you will, in the wintertime and not able to take advantage of its full efficiencies, so we’ll actually be able to make ammonia cheaper, which, in turn, will, in some of those calculations we talked about, be able to make urea cheaper because the feedstock for urea is ammonia.