The 90s

From its first sale of electricity in 1909 to the Second World War, Otter Tail Power Company's annual revenue continued to grow as the company added new towns and new customers.

After World War II load growth from existing customers continued to raise annual revenue. During the lean years of the 1980s that load growth shrunk to barely one percent. With no turnaround in sight, Otter Tail Power Company's management knew that if the company was going to survive it would have to diversify.

As a first step Otter Tail Power Company created a subsidiary called Mid-States Development in 1989. Mid-States was set up to buy and oversee diversified companies that operated outside the regulated utility industry. Those companies had to meet certain criteria. They had to:

• Be profitable with a good potential for future growth.
• Have a good, competent management team.
• Provide competitive goods and services to a growing market.
• Contribute immediately to Mid-States' earnings.

Utility leaders kept the managers of those diversified companies in place and did not interfere with their operations. Each company had to stand on its own.  Companies could not borrow money from Mid-States unless there was a major expansion. They had to raise their own capital, pay their own bills, and solve their own problems.

Otter Tail Power Company's venture into diversification proved to be a wise decision. By 1997 Mid-States owned 13 companies, which were divided into four categories: manufacturing, construction, health services, and communications.

In 1998 Mid-States Development was renamed Varistar to better reflect its mission. By that time the company had 1,200 employees.

Varistar continued to be profitable. In 1999 it contributed 47 percent of Otter Tail Power Company's net income and 45 percent of the company's profit.

In 1991 Big Stone Plant began burning used tires as a supplement to coal, which was called tire derived fuel or TDF. Big Stone was the first power plant in the country to burn used tires. By the end of the 1990s many other plants around the country did the same. Soon the capacity to burn old tires far exceeded the supply.  Today Big Stone still burns TDF but the amount is a fraction of what it was in the mid 1990s.

On April 4, 5, and 6, 1997, the company's service area was hit with a massive winter storm, one of the worst in the company's history. High winds and sleet downed almost a thousand poles and put 2,300 miles of transmission line out of service. About 25,000 customers were left without electricity.  Working 16-hour days under the most difficult conditions, crews put the system together again. By April 10 service was restored to all customers except for one small community in North Dakota.

In the 1990s personal computers began to replace the mainframe computers. By 1999 a personal computer stood on almost every desk and the general office had only one mainframe left.

In the late 1940s Otter Tail Power Company served nearly 500 towns. By 1995 that number was down to about 425 as a result of changing times in the agricultural areas. Farms got larger and the number of farmers and farm families declined.  That was the equivalent of a death sentence for the small towns, especially in North Dakota and South Dakota. They lost their vitality and they went into a slow decline. Some of them disappeared. The loss of those small towns was more than offset by the gain in revenue from large industrial customers.

In the 1990s Otter Tail Power Company continued to place high priority on economic development in its service area. That benefited the company because a growing economy generated more revenue.

The company found that the best way to bring new economic activity into an area was through loan pools. When a business wanted to locate in an Otter Tail Power Company town, the biggest obstacle was almost always financing. Businesses couldn't get loans from conventional sources because of the risk involved. 

Under the loan pool scheme, Otter Tail Power Company agreed to put money in a pool to attract new businesses to a community if at least three local organizations contributed to that pool. They could be local banks, city or county governments, other utilities, or local economic development organizations. Money in the pool was loaned to new business prospects with the local bank acting as the lending agency.

Loan pools were very successful. By 1997 there were 102 pools with 296 local partners. Otter Tail Power Company contributed a total of $6.7 million. The losses from those loans have been surprisingly low. By 1999 those loan pools created or saved nearly 12,000 jobs in the company's service area. That is an impressive number.

 Written by Myron Broschat, Otter Tail Power Company retiree