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Tony Anderson- Electric Deregulation

Sunday, May 4th, 2014

energy-101.org:  Let’s start this from the assumption that we’re talking about deregulation, not as a new thing, but we need to define what we’re talking about.

Tony: Sure.

 energy-101.org: It seems to me that it’s more complex than just, there’s electricity and you can buy it.

Tony: Right.

 energy-101.org: So what are the different elements of that pathway that can cause there to be some confusion or opportunities for misadventure?

Tony: Yeah, well, there’s 3 distinct segments of the pathway. You have the generation, the coal plant, the gas plant, the nuclear plant. Then you have the transmission system that carries it to an entity like my cooperative, a distribution system. So you have generation, transmission, and distribution. And there’s a cost to each. Generation is, obviously, the biggest investment, because you’re spending billions, in some cases, for a 30- to 50-year investment. And you’re counting on a customer base to be available to take the power from that purchase. So that’s one piece.

Then you have the transmission piece. And we put our transmission in Michigan in one pot. There’s a rate of return in that piece. And so that’s pretty well defined, pretty well controlled.

And then there’s the distribution piece, which is never going to go away. There’s always going to be poles and wires going to homes. We just don’t want multiple poles and wires. And that’s what people need to understand, is when they have choice, you’re not going to have multiple poles and wires. You’re going to have choice on just the generation piece, the wholesale power piece. And so that’s just a small part… Well, that’s a big part of your bill, but it’s not your entire bill. So you have to think about, what do you want to pay for that? And how do you want to pay for that? And you can’t blame the IOUs, like, DTE and Consumers for not wanting choice because they’re the ones making the investment in that generation. And when you talk about prices in Michigan, that’s going to set the price. You know, if you’ve got a generator and you have less customers to serve, they’re each going to pay more, because you have to pay for that generator whether you serve 2 million people or 10 million people. You have a generator to pay for. And if you have a set customer base, it’s just more economical to do that.

And another thing that raises our prices in Michigan is the fact that if we don’t have generation in the state, we’ve got to come through the grid from out-of-state sources. And that grid takes it through Chicago. And Chicago’s one of the most congested hubs for electricity transmission in the country. And so you pay a higher price for that congestion. So that drives up our price.

I maybe want to incentivize some generation in my state and spend my time on that rather than choice, because choice is going to drive in power supply from out of state, and I just don’t think we’re going to see the price go down. We’re a peninsula in Michigan. We have one pathway to come from out of state.

energy-101.org: There has been a lot of talk over the last several years about deregulation. What do we really mean by that?

Tony: A better definition is choice, customer choice. Can you, as an electric customer, choose your wholesale provider of energy? That means you’d have the ability to shop. There would be alternative energy suppliers. We call them AESs in the business. And an alternative energy supplier would offer you a price for the wholesale piece of your electric bill. And you can take it from AES A or AES B or Company XYZ, depending on whatever price or program they offered you. And then they would sell you that electricity. The AES would essentially rent the poles and wires from the incumbent utility, DTE, Consumers, —, whatever the case may be, and you would pay a poles and wires charge to the incumbent utility with the facility. And then there would be the wholesale piece that would go to the alternative energy supplier, the AES. So you would have a different component to your bill. So you wouldn’t totally escape your present utility. It’s just there’s a wholesale piece and then there’s the poles and wires piece. That would get broken out and essentially deregulated.

energy-101.org: It seems to me that sort of the challenge is, is this is a historically heavily regulated market…

Tony: Yes.

energy-101.org: I mean it’s like health insurance or vehicles or driving. It’s highly regulated. And it seems like the opportunity for a certain amount of chaos exists as you sort of pull at this thread and pull at that thread.

Tony: Absolutely. Electricity is a monopoly business, you know? We can talk about choice and the little bit of competition we have, but DTE’s got a defined territory. Consumers has a defined territory, and all the electric co-ops have a defined territory. We have monopolies. If we were not regulated, what would the price be? You know, we need some regulation to keep the price stable and reasonable, because you could have the wild, wild west and rates go all over the place.

Now, the electric co-ops, we’re regulated by our members. So I feel pretty confident and safe that that’s going to control our rates like it does today. And investor-owned utilities, they’re profit motivated. They’re regulated by the Michigan Public Service Commission. So that’s the entity that keeps the prices within reason. So I think the regulation today we have is good. You take that regulation away, then wow. You know, it’s not like you can go shopping for a loaf of bread. Electricity just isn’t like that, as much as some people want it to be. It’s never going to be.

energy-101.org: And why is that? Is it the investment level? I mean I know at one point it was chaos because you used to see those wirings…those scenes of downtown cities where there were 3000 wires running across a Manhattan street.

Tony: Yeah, and that’s really it. It’s duplication of service. If there’s one provider there, you don’t need another set of poles and wires there. That just clogs things up. Well, aesthetically it’s terrible, but engineering-wise it creates issues too, because you have electricity going all over the place. And economically it’s terrible. You know, if you’re splitting up… I serve 11 meters per mile of line, you know? If you take a couple meters off of that, that changes my economics, so my prices have to go up. You know? DTE and Consumers in Jackson and Lansing, they’re going to have 50 and 60 meters per mile. But you pull 20 or 30 meters per mile off of that, and their economics changes. So it’s just… To be economical, you need to be regulated. And we need to be in our defined territories. There’s a reason it’s worked for the last 76 years and longer in the cases of IOUs.

DTE and Consumers will argue that choice is not good because they have to invest in generation. And you kind of have to know who your customers are so you can size that generation. So if they’re constantly losing customers or customers are in flux, that’s tough to make an investment in generation. That’s a legitimate argument. And one that people just have to understand and decide for themselves. That’s their best argument, rather than Eron and blackouts and stuff. It’s, we need new generation in Michigan. All our fleet of coal plants and a lot of our gas plants are getting old. We need to build new stuff. And who’s going to build that new stuff? It’s going to be DTE, Consumers, and electric cooperatives. So if you start taking a lot of customers from them or letting us grab each other’s customers, those generation choices get tough. And then we’re buying generation from out of state, and that’s driving the price up.

energy-101.org: Who does it benefit? I mean who would actually go out and price their wholesale…?

Tony: Any company could create an alternative energy supply arm and go on the open market and buy chunks of wholesale power. You know, you have to buy some significant chunks. For them to go out and buy 700 kilowatt hours a month for you at your house is not realistic. You know, we had that back in 2001. And nobody came to supply that market. The alternative energy suppliers that came about when choice was first opened up in Michigan in 2001 came to serve the large customers, the East Jordan Iron Works, the Herman Millers, the Dow Chemicals, the universities. You know, you have to have megawatts of energy to attract an alternative energy supplier, because you have to go out on the market and buy large chunks of power. Certainly if they could package 1000 or 10,000 homes, they might be able to provide a price, but that’s tough to do.

energy-101.org: What’s your opinion on how well that’s…? I mean as a concept that’s worked. You said it started in 2001…

Tony: It started in 2001, and, like I said, it didn’t work on the residential side. There’s been some success on the commercial side. We have a power supplier, Wolverine Power Supply Cooperative, that provides our wholesale piece. And in 2001, the electric co-ops were against choice. We did not want to go there. We were afraid we would be taken over by the big utilities, lose all our large customers. And we essentially went kicking and screaming into the world of choice. But to Wolverine’s credit, they formed an alternative energy supplier, Wolverine Power Marketing, so they could play in that game, and if we were going to lose load, we were going to get some back. Well, as the story unfolded, we didn’t lose any commercial load. Co-op customers, commercial customers stayed with their incumbent cooperatives. And Wolverine was successful because they have a marketing arm. They have an energy control center where they can buy chunks of power. So today, fast forward more than 10 years now, they have 19 customers they serve in the choice market. And some of those customers are East Jordan Iron Works, Ferris State, Saginaw Valley State. They just signed Michigan Tech in the last year.

The Amway Grand Hotel is the best example. That sits, as you know, in the heart of Grand Rapids. That’s a Wolverine Power Supply Cooperative customer through Wolverine Power Marketing. All those 19 customers return margins to Wolverine that, in turn, get rolled back to my members. So choice at the commercial level, even though we didn’t want to go there, we’ve been successful because we have the marketing experience and the power supply purchase experience. And Wolverine’s been very good at the customer experience as well. They have been able to attract these customers, take care of these customers, and save them some significant money. So we now have some of these bigger companies on the cooperative board and experience in the cooperative model. And we’ve turned what we thought was a bad thing into a very good thing for us right now.

energy-101.org: How about on a more national scale? Obviously that’s not your focus, but nationally is it a patchwork? How does it work? Is it state by state?

Tony: Yeah, it’s definitely a state-by-state situation. There’s no national legislation being proposed that I’m aware of. What we have in Michigan currently is the House Bill 5184. It’s an expansion. In my mind, they want to go back to 2001. We had 100% choice in 2001, but when you have a term-limited legislature, they don’t create a lot of new ideas. So they’re going back and recycling an old idea. And I just don’t see it any different than 2001. They’re arguing that, well, Michigan’s rates are high, is one of the big arguments, that we can drive down electric rates if there’s 100% choice. And we have all these alternative energy suppliers and you create competition and the price will go down. We didn’t see that to a large degree in 2001. We saw it to a small degree. And my argument to that is, the legislature in Michigan has mandated a renewable energy mandate, an energy conservation mandate, and last year we got a low-income, energy‑assistance surcharge on our bills. You want to lower the bills to Michigan businesses, let’s take off the charges the legislature’s put on the last 3 years. And forget this idea that didn’t work.

energy-101.org: But how is it possible that Consumers could arm themselves for that whole debate? I don’t quite understand how reliable… I mean how well you could believe it? It seems like it could be scammy.

Tony: It could. Somebody could come in and offer you a low price and then how do you know they have the contract locked up? And who is regulating that? There is a question. You know, some of the ads are thrown out, Enron and we’ll have blackouts if we have 100% choice. I think those are a little bit of scare tactics. But there is a little bit of snake oil salesmen to the whole thing that we’d have to be careful of and we’d want to regulate and certainly monitor very closely.

Who wants to have deregulation? Some businesses do. Because right now we have choice for the large customers. But utilities can’t lose more than 10% of their load to choice. That change was made in 2008. They capped choice at 10%. That 10% cap got filled in 2009. So there’s… One of the things I read the other day, there’s 11,000 entities waiting for their turn at choice. They’re seeing the Herman Millers, the Amway Grands and other people save money in the choice market. And now they want in on that, but DTE’s met their cap, Consumers’ has met their cap. And so they can’t… There’s no place for them to go. So those people would like their opportunity at choice. That’s why they want either the capped raised, maybe, to 20%, but this bill has it at 100%. And therein lies the argument. You have the big utilities, who don’t want the higher cap. They’d like the 10% cap to go away and then they’d get back all those customers. But they certainly don’t want the cap to go up. So it’s those entities. And then you have the power supply entities, the alternative energy suppliers, who think they can make some money for a short time, they’d certainly like the cap to go up too.

 

Cooperative: Electrical- Back to Basics

Friday, April 12th, 2013
Transcript: (Recorded 3.15.13)

energy-101.org: What is a cooperative, and how might it be different than what we expect?

Tony: A cooperative is owned by the members we serve. And any money we make, any profit we have, goes back to the members we serve. We call them capital credits.

We were formed out of the Great Depression. FDR saw a need for economic development across the country, and the rural areas weren’t electrified. So he went to the private companies, who were producing electricity at that time, and asked them if they would help him electrify the countryside. And they basically told him there wasn’t enough people there to make it profitable. So he formed the Rural Electrification Administration, which started the electric co-op movement in the late ‘30s. And farmers and ranchers all across the country were able to come together and form individual cooperatives.

Today electric cooperatives serve 42 million people out of the 380 million we have in the country. But they serve 75% of the land mass. We’re called rural electric cooperatives. We’re serving the rural areas of the country nobody else wanted to serve. And we’ve been doing that at Cherryland for the last 75 years.

energy-101.org: How would you describe the difference between a member and a customer?

Tony: A member has a voice. A customer pays a bill, but a member at a cooperative has the opportunity to elect a board of directors that governs the co-op. They have an opportunity to have input at an annual meeting, an open meeting, of the entire membership that we have every year. So voice is the difference between a member and a customer.

energy-101.org: That’s on an extremely local basis. What’s the nature of being a local cooperative?

Tony: We know who our members are. We live with them. We offer to work with them. We have the same daily struggles with the weather or with the economy. All of the revenue we get comes from our local area. And when we give capital credits back,… That’s what we call our profits. When we give those back like we did this past October (we gave $2 million back) all that money went back into the local economy because it only goes to people have taken electricity from us in the past. So we’re definitely very local.

energy-101.org: You’re starting a program that you’re calling Community Engagement. Why are you doing that, and what outcomes are you looking for?

Tony: We actually hired a person we call a grass-roots advocate. And at Cherryland we see the membership as our grass roots, that’s the core of who we are, what we are, where we began and where we’ll end if we ever do end. What we’re trying to do by getting them involved is use their voice. If we have a piece of legislation that’s important to keeping their prices down, we want them involved. We want their voices to be heard. So we’re trying to organize that voice to teach them more about what a co-op is and why they should give their voice and why they should care and make them realize that they can have an impact on their bill. We’ve been in business 75 years, and we’re into the point in our history where people forget about when the lights first came on. People have always had electricity. I’ll be 51 years old next month. I’ve always had electricity. And so many people like me (and now there’s a ton of people younger than me) that that’s all they know is electricity. So why should they care about their utility? Why should they know that it’s a cooperative? That what we need to teach them – why it’s important to belong to a cooperative and what they can do with their voice and how they can help their cooperative.

energy-101.org: I would assume that across… You have 35,000 members. There’s a whole lot of different opinions about how things ought to be done and what things ought to cost. How are you letting what they have to say and feel affect the point of view that you’re presenting?

Tony: We’re about to find you. You know, we’ve always gotten input from a small fraction of our membership. We’ve never had a collective effort where we’ve gone out and tried to get more input. And that’s part of the whole grass-roots movement at Cherryland, is we’re trying to develop a system where we can get more of that input and see, actually, what it is and how we can use it and what value it has and just try to do what we do better and with a bigger voice, a broader voice. So I guess I don’t know until I talk to the membership.

energy-101.org: Is there some role for it in terms of you needing to mobilize the voices of your members?

Tony: There’s an absolute role. And that’s what we’re kind of trying to prepare for, attacks or initiatives that we don’t have a definition to, maybe, today. But if there’s a rule or a regulation that’s going to affect our power cost, we need to have people ready to go, ready to call their congressman, ready to write a letter, ready to respond to whatever avenue of communications we put out there. So we’re kind of preparing for engagement in the future when we need it. We need an army; we need a large voice to call on. And we’ve not done a good job organizing that voice in the past. And we’re trying to improve on that. Seventy-five years ago it was easy. They had a mission. They wanted electricity at every house. What is our next mission? It’s going to be whatever the bill from congress is or the regulation from the EPA is or whoever it may be.

energy-101.org: Obviously, you’re just starting. What are some of the specific things you see doing?

Tony: We’re starting coffee and conversation, which is basically meeting with…inviting members to a local coffee shop. We have 3 different locations over the next month, where we’ll meet on a Saturday morning, and we will just talk to them, answer their questions and have a dialog them. So that’s number 1, is just getting out there.

Number 2 is we’re going to form a member advisory committee. That’s going to be a committee of anywhere from 12 to 36 people who come in 3 or 4 times a year and give us their input on how the utility’s working or how the cooperative is working and where we can improve. At the same time, we can tell them what we’ve got going on, what we see coming down the pipe. So we can have face-to-face dialogue, rather than them reading a newsletter or email. Face‑to‑face conversation to get them more involved, so they feel more ownership in their cooperative, is what we’re going for.

energy-101.org: I don’t understand the solar garden thing, but it’s a good thing of it’s-small-but-it-has-insight type of thing. What is the solar garden?

Tony: Well, think of a community garden when you drive through a neighborhood or a community, where everybody has a little plot of ground, and they share a space. It makes the watering and the weeding and everything more efficient because instead of having 10 gardens spread around the community, you have one community garden.

We’re taking that concept to the solar level. We’re going to install as many panels as the community would like in one location. But we’re going to lease them individually to members. A member will be able to lease a panel for somewhere around $470, a one-time payment. And they will have the electrical output from that panel for the next 25 years. So they will get a monthly credit on their bill for the electricity produced by that one panel. Or they may want to lease 10 panels. And we can do that all in one location, and we can make solar affordable for everybody, because now that one home owner doesn’t have to buy 10 panels and an inverter and tie it into their house and have their meter. We can do it all in one location. And we can decide if solar’s going to be successful in Michigan. I think it’s a great model.

It also goes back to our history. Seventy-five years ago, people came together and formed a co‑op so they’d have electricity in their homes. We’re taking that cooperative model and moving it into, “Let’s have solar electricity today cooperatively and see where that goes.” And the people who like solar energy will be able to participate. The people who may not support it don’t have to worry about it. They’re not subsidizing it. It’s a cooperative project, a community project.

Tony Anderson – Our Aging Power Plants (2012.03.20)

Tuesday, March 20th, 2012
Transcript:

Tony Anderson : My reality is that the biggest bill I pay is to my wholesale power supplier who has to deal with wholesale energy at the generator. So, my reality is: “Where is that coming from in the future and at what cost?”

The coal fleet in Michigan is old. We haven’t built a coal plant in Michigan in fifty some years. So it’s old, aging and getting older all the time and we have to clean it up. No one is arguing the fact that it needs to be cleaned up. It does. But we have to get started on that. For some plants it will be too costly to clean up, they will shut down. For other plants it will cost millions to clean them up and we’ll get that done.

My concern is what are we doing today to get ready for my power bill four, five and ten years from now. If we have to shut down some of these plants because they don’t met the clean air standards, fine. But what is going to replace them? Do we have enough generation in Michigan that we can clean-up and keep on? Or do we go out of state and take the jobs and that money and send it to other states where there is generation that’s been built? Michigan is kind of behind. Indiana and Illinois have built plants while we have done nothing. The concern is what happens when you shut one down? Where do you replace that from? The EPA in December 2011 made it almost impossible to build a new coal plant. We were looking at a plant in Rogers City and the EPA emissions requirements are so restrictive that the technology isn’t available too meet them. The vendors can’t guarantee they can meet the emission requirements under the new EPA regulations. So, that takes us to look at how do we retrofit the old stuff, how do we clean that up? There are different regulations for the old and the new. Existing plants have one set of numbers and new plants have a more restrictive set of numbers. You can argue if that’s good, bad or indifferent but that’s the fact today. Today we feel that new is out and we have to look at what is existing and how do we clean it up. It seems like that is where the vendors and manufacturers are focused as well. They’re not spending time on building new boilers and improved boilers for coal fire plants. They’re spending their time on scrubbing systems and how to clean up the old plants. When all of that works is done then maybe they’ll get around to the new plants and that technology.

energy-101.org : If coal is under challenge, what other options are there?

Tony : The other options beside coal are nuclear and natural gas. If you want 24/7 base-load those are your three options in my book: coal, nuclear and natural gas. If you take coal off the table then you have to do nuclear. There is some work being done on small-scale nuclear, 100 megawatt and 200-megawatt units. That’s ten to twenty years down the road. So, the most viable today would have to be natural gas. Our power supplier owns a good-sized peaking plant down by the Wayne County Airport with four different jet engines that produces over 340megawatts of power on peak at peak times. We could take one of two of those and move them somewhere and have a 24/7 base-load natural gas plant. That could happen in our future. Natural gas is definitely in our future…it’s just at what level and what price? Natural gas is viable below four dollars and I’m told it may viable below five dollars and fifty cents but above that it gets to be a problem.

When you look back at history natural gas doesn’t have a good history to make you want to build a 24/7 base-load natural gas plant. We’ve seen it as low as $2.80 and as high as $14 in the last ten years. That’s tough. There’s just not a steady fuel supply price is what history tells us. Maybe with all the fracking and the development we have going on in the country right now maybe that will be different in the future but I have to look back at the history and I’m pretty nervous about building natural gas base-load.

The renewables are problematic in the fact that you still need to have the big three behind them and the big three being coal, nuclear and natural gas. Certainly the renewables like solar and wind are forms of energy but obviously the sun only shines part of the day so that’s only a part time solution. During the winter months in Michigan the output isn’t great because the sun doesn’t come out that often. So, you always have to have something to back up the solar. When the solar panels are not producing you have to have something behind it that something is coal, nuclear or natural gas. Wind is the same way. The wind can blow 24 hours a day but the wind is not going to blow everyday so you need something to back that up.

energy-101.org : If you had to evaluate which directions do you think this is going to go?

Tony : I think we’re going to clean up our old coal plants. Our emissions are going to vastly improve over the next ten years because some coal plants will shut down. That’s going to lower your emissions, clean up your air and the coal plants that stay on are going to be cleaner. So, I think overall there’s going to be some general improvement. I think there could be more improvement if the EPA would lighten up a little bit and we could build some new plants because I feel like the new plants would be better then anything we’re going to retrofit but we’re just not able to do that right now.

I think we’re going to clean up our old coal plants. Our emissions are going to vastly improve over the next ten years because some coal plants will shut down. That’s going to lower your emissions, clean up your air and the coal plants that stay on are going to be cleaner. So, I think overall there’s going to be some general improvement. I think there could be more improvement if the EPA would lighten up a little bit and we could build some new plants because I feel like the new plants would be better then anything we’re going to retrofit but we’re just not able to do that right now.

energy-101.org : If the fleet of power plants is aging, then what are the barriers to just building new?

Tony : Regulatory barriers. Are the regulators going to restrict the clean up or the retrofit in any fashion? Community barriers. Does this community still want that in their area? Economic barriers. Does the utility want to borrow the money to clean it up? A lot of big utilities have several coal plants in their fleet or maybe even dozens. If they have one that needs to be cleaned up, they may have some others that they have improved before that. They may just say we’ve got enough, we don’t need that one, we’re going to moth ball it. And not clean it up because we don’t want to borrow the two to three hundred million it takes to clean it up. It is always supply and demand business, too. If the demand is not there … like some utilities have seen the demand drop off with the recession. I think it’s coming back now but demand is an issue and the balance sheet is an issue. Everybody wants to look good to their investors and their rate payers. And can you afford to borrow two or three hundred million put that in your rate base and still be competitive?

energy-101.org : Let’s go to the other extreme and say so we go out of the power business, Indiana and other states have got it we can just buy it, is that on the table?

Tony : Sure we can shut down coal plants and we can buy from somewhere else but I always go back to simple economics, supply and demand. The country continues to get bigger. The last seven years, I think our energy sales have gone up 1.7%. In the last fifteen years it’s 2.5%. We’ve seen almost a percent of growth go away in the recession but if you believe that the country is going to come out of the recession, that’s going to come back. So you’re sitting on two or three percent growth in a few years when the recession goes away. Do you want to be dependent on the market? Do you want to go out of state for your power when you could have those jobs and have that generation here and not be as dependent on the market? As you take away the supply while demand is going up, well that’s eighth grade economics. The price is going to go up because you’ll have a greater demand. Then you have supply which drives up the market price and that’s not going to be good for the ratepayer, there’s a fine balance there of keeping the supply up with demand.

energy-101.org : As you make these decisions and as you think about where you are going to source your power, what the influence of ratepayers or what’s their response of the complexity of the issue you are dealing with?

Tony : The average ratepayer, their response is what am I going to pay? They want their lights on 99.9% of the time and they want an affordable price. They have jobs, kids and families and we don’t hear from them. At an electrical cooperative like Cherryland they’re members. They’re member owners. So we take it upon ourselves to try to get them the best power we can and that’s reliable power at an affordable price. You’re going to always have a vocal minority who want everything green. And energy conservation will solve all of our problems. But you can’t let the vocal minority control what’s good for the majority. The majority of our people we don’t hear from until their power goes out or their rate go up. So for us it’s reliability and price. And how do we do that as clean as we can? We’re not fighting the fact that we need to clean stuff up. But we are fighting the fact that it needs to be affordable and reasonable.

energy-101.org : What role does conservation have to play in this discussion?

Tony : Conservation’s always going to be a factor. I like to think of it more as let’s not waste our product. Let’s not use it needlessly. Conservation is a factor … it can help. But can it avoid a power plant? Over millions of people you can probably do the math that says,
“Yes if you save a bunch of energy you can avoid one new coal plant.” But what we are seeing at our electrical cooperative is that growth still continues. We’re 1.7% growth in the last seven years and that’s in a time when we’ve had an energy conservation mandate in the state of Michigan for three years. I think we are in year four now. We still see growth going up. We are handing out CFL bulbs and refrigerator rebates. We’re changing out a lot of equipment with new lights in manufacturing plants and growth is still going up. So, are we reducing growth with conservation? Yes. Do we still need to build new plants or retrofit old plants to prepare for the future? Yes.

Again it goes back to not having all your eggs in one basket. I talked about the big three being coal, nuclear and natural gas. Well, certainly somewhere down the list is energy conservation. We can’t let it go. We have to continue. We might not need a state mandate but it’s a player.

But we still have a future of growth we have to prepare for.

Tony Anderson – Smart Grid/Meter

Tuesday, October 26th, 2010
Video Transcript:

The smart grid, I guess I get a little frustrated with that term because I think it’s what we should be doing on the grid and what we are trying to do locally started five years ago when we spent six million dollars and we automated all the meters on our system. We have thirty three thousand meters we serve; we put in a new electronic meter on each account that allows us to read that meter from the office. You can call that smart meters you can call that AMI, which is automated metering infrastructure or AMR, which is, automated meter reading. But these smart meter, the new electronic meter give us the ability to read them anytime we want. If a storm blows through the area we can read all our meters and see which one’s are responding and which one’s are not to determine where the outages are. On Friday’s we read them all and if we have any issues with seasonal cabins we get those issues resolved before somebody comes up from downstate and discovers they don’t have power. So it’s helped us become more efficient and it’s what we should be doing to keep the lights on better then we have in the past. We started that five years ago before the word smart meter and smart grid became popular. It’s just a commitment we made to serve our embers better. Now we have since taken it into our substations where we have electronic regulations and controls in the substations that allow us to read what’s going on in that substation, what is the voltage, have the breakers tripped in the substation? We can now do that in the office, which helps us respond to big outages quicker and on a greater scale. In the years to come we will move that technology down line to the breakers on different sections that are tied into those substations so we can sectionalize better, restore areas of outages better and just know what the voltages is on our system at all times. As people get more and more technology and electronics in their house voltage is very important and the better we can control that voltage, watch that voltage from the office the smarter people think we are but again it’s something we should be doing. It’s about customer service so I don’t think the smart grid is anything new and different it’s just stuff that’s available that we should be doing that we have been doing for several years and it’s just getting a lot of press and media now. It’s just what we do everyday.

Tony Anderson – Energy Optimization (2010.10.26)

Tuesday, October 26th, 2010
Video Transcript:

Energy optimization is our whole array, a whole menu of different measures that we have available to our customers to safe money. They came about because of state act- public act 295, it’s a state mandate that requires us to reduce our revenue by a certain percentage every year and that percentage is going up every year. We now have a directive or a mandate from the state if you will to conserve energy. That requires us to put a separate line item on our bill as well to fund the conservation measures. At Cherryland Electric Cooperative we call that public act 295 state tax. We call it a tax because it’s a mandate from the state. What that tax or mandate funds is water heater rebates, home energy audits, CFL bulbs which we’ve been giving those out like crazy, we have a bounty on old inefficient refrigerators where we will pay you fifty dollars and pick up your old refrigerator and then you can go out and get something more efficient. We are also doing a lot of work with our commercial customers changing out lighting so they can be more efficient as well. So we have a whole menu energy conservation measures we’re distributing across our system. Unfortunately we have to charge for that; there is an expense to that which our members are paying through the fee on their bill. We are authorized to go up to a dollar seventy-four with that fee, but by keeping it all in house and doing it locally and not hiring downstate contractors we’ve been able to keep that average fee around fifty to sixty cents for our membership. We are very proud of that we saving money at the least cost possible.

Tony Anderson – Availability Charge

Tuesday, October 26th, 2010
Video Transcript:

Availability charge is one pot of money we have to recover revenue at Cherryland Electric Cooperative. The other pot is the energy charge. The availability charge is a fixed pot, that’s a fixed line item on your bill and currently it is thirteen dollars a month at our cooperative. The availability charge is designed to recover for all the costs the cooperative has invested in poles, wires and transformers, to have electricity available to you. If you want the ability to flip a switch and have electricity there is a cost and that cost is wrapped in to all the infrastructure that delivers electricity to your home. That’s what we put into the availability charge, that pot of fixed money. Therefore if no one on our system uses electricity we still have everybody’s availability charge and we are still able to pay the bank and keep our operation going. The rest of the revenue comes from the energy charge, which is a whole different issue when you start to use electricity in your home. But the fixed monthly charge is the availability charge and that’s to have electricity available.

Tony Anderson – Transparency

Tuesday, October 26th, 2010
Video Transcript:

Transparency to me as the general manager of Cherryland Electric Cooperative involves my board of directors. I have a board of seven that’s elected by the membership, the thirty three thousand members we serve democratically elect these seven board members and they represent the entire membership. It’s my duty at board meetings and when I get questions outside of board meetings from these elected officials that I give them all the options, all the issues, all the sides of an argument so they can make the best decision possible. They are certainly welcome to go out on there own to do their own research and many of them do that they don’t trust just me to get the information from because they are responsible individuals. But when I think about being transparent and the face of that transparency it’s that board of directors I answer to. I have to be honest with them, I have to be fare with them, and I have to give them every side of every issue. Even the bad sides I may not like I may not agree with, they need to have all the tools available to them because they have to answer to the membership. When they leave the boardroom they have to listen to all 33,000 members we serve. So it’s very important that I’m totally transparent to that board of directors. Because they have to pass that down the line to the people who elect them and when I focus on transparency it’s those elected officials who I get direction and guidance from.

Tony Anderson – Affordability/ No Silver Bullet (2010.08.03)

Monday, August 23rd, 2010
Transcript – (Recorded 3.15.13)

energy-101.org: Power doesn’t come free to any of us, but what is the role of affordability from your perspective?

Tony: Affordability is a core of what we do. I feel like people want 3 things from me. They want reliability. They want affordability. And they want it clean. And when I look at my membership of 34,000 people, I have people who will list one of those 3 as number 1. And sometimes clean is number 1. Sometimes affordability is number 1. And sometimes people just want it reliable, and they don’t care how clean or how affordable it is. So those are the keys. And so affordability is one of the 3 pillars that we’ve got to try to pay attention to.

energy-101.org: Is affordability what you hear the greatest amount of noise about?

Tony: I would say yes. You know, my membership, a lot of it’s driving by the window here on the way to work or the way home from work. And they don’t have time to pay attention to what I’m doing. They just know they don’t want their bill to go up. They want the lights on, their bill not to go up. So for me affordability is key and very important. And I believe it is for my membership as well. But that said, there are all the different factions, you know? Other people will have different priorities. But I put affordability out in front. Try to bring the other 2 as close behind as possible.

energy-101.org: As you tell us what you do here, there’s always sort of a juggling thing going on.

Tony: Yes.

energy-101.org: Could you describe from your perspective: The need for power is there and growing. You don’t have a single approach here. What are you juggling to make this all work?

Tony: We’re juggling all the forms of electricity. You know, we’re juggling wind and solar and coal and nuclear, hydro. We’re juggling it all. You know, we’re working on a solar project now, a community solar project, and I have people who love me to death now that we’re getting into solar. But I also have other members (I got a call today even) that said, “Don’t spend any of my money on solar. We have no sun in Michigan.” And those are people that I will have on both sides of that story. So you’re juggling all these balls in the air to get to what is right for a diverse membership of 34,000 people. And at the same time you’ve got the affordability ball that is of utmost importance as well. So it’s a lot.

energy-101.org: Everybody believes that one way or another something’s going to land or something’s going to emerge, some technology is going to solve this enough-electricity question.

Tony: Yes.

energy-101.org: What’s your sense of that?

Tony: My sense is everybody’s looking for the one silver bullet. And there is no one silver bullet that’s going to solve our energy needs. What’s going to happen is we’re going to do what we’re doing today. We’re going to do it better. Maybe bigger, a lot cleaner. Maybe a little more efficient. I think we just have to look at all the forms of electricity we have today, and we will be doing them better. That’s going to be our bullet, is each form of electricity will have one bullet or a couple bullets that make it better.

energy-101.org: I think there’s a sense that, especially because of the press and reports and all of that, that somehow fracking and natural gas is going to be the solution, the way out of any shortages and the lack of cleanliness of coal. What’s your sense of that?

Tony: My sense of that is better today. You know, we’ve been fracking in Michigan for over 20 years. I think we’re going to be able to continue frack. And I think there is a vast supply of gas there. Is it vast enough to get the utilities to build natural gas 24/7-baseload power plants? I think we’re going to find that out in the next year or two. I think we’ll see more of that. There are some coal plants shutting down because they aren’t clean, and it’s unaffordable to make them clean at today’s standards. So, yes, I think gas is going to become more viable. But you’re going to see utilities tentative to enter that because of the volatility of the gas price in the past. I don’t know that we have a comfort level with a vast supply we have that’s going to make us go too far down that road right away. Because we’re still going to be cautious about that price going up. That’s been the history on gas is it goes low, and then it goes way high. And we see those extreme price swings. And we’re still fearful of that even though we are sitting on much more supply than we knew we had 3 to 5 years ago. So it’ll be a cautious entry, but, yes, you’re going to see more of it.

energy-101.org: In terms of the energy usage and conservation, what role does that play? Could that be the magic bullet?

Tony: No. We’ve had an energy conservation mandate in the state of Michigan since 2008. They passed PA295 in 2008. It became in 2009. So we’ve been doing various energy conservation measures. And very effective. I think it stems the tide a little bit. It’s a little bit… It’s better than a thumb in the dike, but it… We’re still seeing growth. In a down economy with an emphasis on conservation and hitting all of our state-mandated conservation targets, we’re still seeing energy sales go up. So, again, that’s not a silver bullet either. It’s one piece of the pie. You know, certainly conservation can replace some generation. But it’s not going to stem the tide of growth. It’s still happening. And when the economy picks up even more, then the water will go over the dam. Conservation will still always be a piece. It’s been a piece for the last 50 years. But it’s not going to stem the tide of new generation.

energy-101.org: As we talk about maintaining and expanding opportunities to produce electricity, is there a role for government and for mandates within that scene?

Tony: Yes, there’s an absolute role for government. Without government and regulation, you have the Wild, Wild West, and you’re producing all kinds of energy, and you’re not worried about the environment. With government, you can be worried about the environment, but you have to balance it. You know, government can go to the other extreme. Instead of the Wild, Wild West, you have everybody locked up in captive, in prison, and we can’t build anything to produce any amount of electricity. Somewhere between the prison of regulations and the Wild, Wild West, there has to be a meeting of the minds, a middle ground, where this is clean enough. Everybody wants it clean to zero. Maybe today we can’t get it clean to zero. But maybe we can get it cleaner than it was 10 years ago. And people have to agree that maybe that’s good enough for now until technology improves and we reach that level. And then we can bump it up again in another ten years. There are too many people and too many regulators that want to get us to where we can’t technologically get today. We need some middle ground, some common ground, some compromise.

energy-101.org: We talked for a moment about what you have to juggle. As an example of that, what is this project that you have going in Marquette about the need to be flexible and cooperative and interactive with the whole industry.

Tony: It’s the Presque Isle Power Plant in Marquette, Michigan. Our power supplier, where Cherryland buys its power from is Wolverine Power Supply Cooperative. They’ve been in the market trying to fill our baseload needs for years to come. And because they were, they’ve run across this opportunity with Wisconsin Electric at Marquette, a power plant that was in need of being cleaned up or shut down. They were going to shut it down. Wolverine comes to the table with some cash and has the ability to clean it up and make it affordable for both utilities to own. So I guess that project just shows you have to be looking. You have to be looking under every rock and be ready for what you find. And we found an opportunity simply because we were asking; we were looking. We were actually talking to them about another opportunity, and they said, “What about this?” So just having the conversation creates other opportunities. And that’s kind of what the Marquette thing was. “Let’s sit down and have a conversation and see what we can work out and see what pops up.” Something great for the UP and Michigan and my members came about in a conversation.

energy-101.org: It would seem like at some point you could say, “Ok, we’ve got the perfect balance going here.” It’s not something you can really set it and forget it.

Tony: No. You’re always tweaking the balance. You know? Because you just are. It just depends on the price and the opportunity and what pops up this year, next year. It’s just you have to be ready for whatever comes. And you have to always be looking. You know? It’d be easy to lock in and say, “We’re all set. We’re all done. Whatever. We won’t look anymore.” But then you might miss an opportunity like Marquette if you did that. It’s easily done. We did it for decades, you know? In the past, we’d just have a purchase-power agreement and pay the price and be done with it. But those days are gone. You know, the market, there’s less supply on the market. So we’ve moved to more of an ownership mode, and that requires us to be always looking and always flexible.

energy-101.org: What’s your point of view on renewables now? Is it the wave of the future and always will be? You being a provider and a customer, a consumer, of power, what is your view of the renewables market?

Tony: They will always play a part. They will always be something we look at. But they’re going to have to be competitive. I think wind has gotten more competitive in recent years in Michigan. I would like to see the state allow us to buy renewable energy from out-of-the-state boundaries to meet our mandate. I think that would make renewables more affordable. And I think, as a utility group, we’re going to propose that in 2013. We’re going to ask the state to change our mandate from 10% of renewables to 12%. In exchange for that higher amount of renewables, we want the ability to go outside our state boundaries to get that supply, so we can balance that affordability then. So long answer, but renewables are here. They’re going to stay. And we’re going to use more of them, but we still can’t look beyond the fact they have to be affordable. People should not have to subsidize them to a large degree. And I think we can do that if we can move outside the confines of Michigan.

energy-101.org: So what is the role of nuclear in this?

Tony: Nuclear definitely has a role. The deal with nuclear is the fact that today we’re building it at 1200 megawatts, 2000 megawatts. You don’t have to understand what a megawatt is, but when I serve all my customers or Wolverine serves all its customers, we only need 500 megawatts. So we can’t afford to build 1200, 2000 megawatts of nuclear. If we can scale it down, do small‑scale nuclear in some fashion of 100 or 200-megawatt blocks, it then becomes affordable. And I can put that in my mix. I can still have my wind and my solar and my gas, and I’ll probably have less coal if I can bump up my nuclear at an affordable level. So I’m cleaner all the way around. So on a small scale, if you can build it affordably on a small scale, nuclear is going to be very important to our future and the Co-op’s are working to that end.

Tony Anderson – Transmission (2010.08.23)

Monday, August 23rd, 2010
Transcript:

energy-101.org : Tell me a little bit more about the transmission issue, because it seems to me that’s a really big one. I know that South Dakota… I mean I just moved here from Minnesota, and they kept pointing out to South Dakota and the winds blowing off the plains. Maybe you could be a little bit more focused just on that whole transmission issue in terms of as a general issue. I mean because there’s massive loss of power off the transmission process.

Tony : Yeah, there’s line loss at every level. Every time you put electricity on a wire, some of it’s going to drop off. That’s just the nature of the business. You certainly have to size the wire right. What you have when you have a wind farm, even in the Dakotas, the wind is only blowing 45% of the time. I grew up there, and I could have sworn it blew 100% of the time, but it’s, at best, 45% of the time. So when you have massive wind farms, and the wind is blowing, you have to have wire sized for that output. Then when the wind quits blowing, you’ve got wire and transmission towers that are literally doing nothing because they have no electricity to carry. So you’ve got an investment that’s only being used part of the time. Again, going to the 24/7 coal plant, nuclear plant, those transmission lines are used around the clock. That’s a pretty good investment. So your rate of return on transmission just for a wind farm has got to be a lot less.

energy-101.org : It’s almost like having a factory that you’re running at half speed.

Tony : Yes. It’s not efficient. At some point we’ll learn that. At some point maybe we’ve got enough wind in the country because we can’t afford to put up the extra transmission lines and have them sitting there just for wind. It might be more cost effective to upgrade the present transmission lines we have for the coal plants, and just let a little bit of wind ride that highway. But there’s such a push to build all the wind possible that it’s going to come to a head at some point, because they’re going to need transmission to send it somewhere else.

Tony Anderson – Home Wind

Monday, August 23rd, 2010
Transcript:

energy-101.org : What about some of these other solutions that people, in terms of wind, say home scaled winds, is their impact? Is there potential…? What’s the impact, potentially, from that kind of investment?

Tony : Next to nothing for us. We have a net metering policy here. If you want to put a home windmill onto your home, we will make that easy for you to do. And that’s a personal choice. Your payback is going to be 20, 30 years on that investment. And you’re going to have to make personal choices to maybe not have air conditioning or you’re going to have to have the utility there when you turn your air conditioning on. A home unit isn’t going to power very much of your home. The price of the home wind is so expensive that, as a utility, I’m not concerned about all my members running out and putting up a windmill. If we go back to the beginning of the cooperatives in the 40’s and 50’s, we had wind chargers in the 50’s. I’ve worked out west at co ops, and I’d talk to ranchers who had a windmill on their house that charged batteries in their basement that allowed them to have a few lights in the home. As soon as the co-op came by, as soon as they got central-station electricity, they tossed those batteries out. They hated those batteries. Fifty years later, we’re talking about the same thing. It will come full circle. Some people will put them in, and they’ll come out eventually. There’s a market for it for those people that can afford to make that personal choice of, “I want to be a little green. I want to generate some of my own electricity.” Go for it. That’s fine. Just don’t make the people that don’t want to do that, can’t afford to do that, subsidize your choice. We’re already doing it a little bit with all the tax credits, you know? There’s a lot of tax credits to incentivize the renewable energy pieces. We’re all paying that as a country, but let’s not go any farther and make my local rate payers pay for that. That’s where we get back to the feed-in tariffs. Let people make their own choices.