The 50s

In 1936 Congress passed the Rural Electrification Act, which created the Rural Electrification Administration (REA). The REA was authorized to make low-interest loans (2 percent) to electric cooperatives organized to serve rural areas that did not have electric service. Few farms had electricity in those days. The cooperatives used those loans to build substations and distribution systems.

At the time Otter Tail Power Company was serving several thousand farm customers. Unfortunately, the revenue received from most farm customers was so low that the cost of providing them electric service could not be recovered in a reasonable period. The rule of thumb then was that the company would provide electric service to a farm if the cost of providing that service was no more than three times the estimated annual revenue. If it was more than that, the farmer had to contribute to the cost of the service, and in those hard times few farmers could afford that expense.

The first rural electric cooperatives were organized in the Otter Tail Power Company service area in 1937. Some construction work was completed in the next few years, but that stopped when this country entered World War II in December 1941. The shortage of men and materials made it difficult to continue.

After the war rural electric cooperatives sprouted up all over the Otter Tail Power Company system, and from 1945 to 1950 they went through a construction boom.  The company served those cooperatives as wholesale customers.

By 1950 that wholesale load was so large that Otter Tail Power Company would have to add generation at considerable cost to carry the system peak load. The company didn't want to do that because in a few years the cooperatives would be eligible to purchase power generated by the new dams being built on the Missouri River at a lower cost. The cooperatives would leave the Otter Tail Power Company system and the company would be left with excess generation.

To bridge the gap, the company persuaded the cooperatives to build their own generating station near Voltaire, North Dakota.

Generally the company had a good relationship with the electric cooperatives even though they were competitors in some areas. One source of friction involved new customers who were located just outside the city limits of towns served by Otter Tail Power Company. The cooperatives viewed those customers as fair game, whether or not they were farms. A third party had to arbitrate some of those disputes.

In 1944 congress passed the Missouri River Flood Control Act that authorized the corps of engineers to build a series of dams on the Missouri River, which would control floodwaters, provide water for irrigation, and generate electricity. One of those dams was near Garrison, North Dakota. Certain customers, called preference customers, would have first call on the electricity generated by those dams. Those customers were rural electric cooperatives, municipalities that owned their distribution systems, and other government agencies.

That policy was a strong incentive for retail towns served by Otter Tail Power Company to convert to a city-owned distribution system. Then the cities were eligible to purchase electricity produced by the Garrison Dam at a lower rate than their residents were paying Otter Tail Power Company.

The 1950s were stressful times for the company's district and division managers.  Every time a town franchise was about to expire, they had to convince the city council that they should renew the franchise rather than go to a municipal system and purchase government power. Thanks to their efforts and with help from other employees only a few towns were lost, all of them small.

One of the preference customers on the company's system was the city of Fergus Falls. The city owned the distribution system but the company still served the industrial customers. As a preference customer, Fergus Falls was eligible to purchase government power produced by Garrison Dam when it became available and at a lower price than they were paying Otter Tail Power Company. 

By the early 1950s the company was outgrowing its General Office on Mill Street in Fergus Falls. It was time to build a new and larger office, but it didn't make sense to build it in a city that the company did not serve.

So the company made an offer. If the city of Fergus Falls would sell the distribution system for $500,000, the company would build a new General Office in that community. If the offer was turned down the office would be built elsewhere, probably Wahpeton or Jamestown, North Dakota.

After some procrastination the city council put the question to the voters in a special election held on April 7, 1953. At least 60 percent of the voters had to approve the sale.

To sell or not to sell became a very emotional issue, especially to opponents of the sale. To them losing the municipal system was as tragic as losing a family member.

As it turned out 68 percent of the voters approved the sale. That vote was due in large part to the support of the business community. Businesses recognized that losing the General Office, along with several hundred employees and their families, would be a serious setback for Fergus Falls.

Written by Myron Broschat, Otter Tail Power Company retiree
Sources: The Power People by Ralph Johnson and Otter Tail Power Company by Thomas Wright