How Member Voices Guided Their Electric Co-ops’ Investments
Episode ID S3E03
March 29, 2023
From becoming a trusted energy advisor on EVs in Tennessee, to evolving from energy provider to partner in Arizona, to blazing the broadband trail in Arkansas, electric co-ops are leading in very innovative ways, leaving no one behind. Recorded on the exhibit hall floor of NRECA’s TechAdvantage conference in Nashville, three electric co-ops describe how hearing their members’ experiences put the co-ops on new paths.
Teri Viswanath: Of all the skills of leadership, listening is probably the most valuable — and one of the least understood. Captains of industry listen only sometimes. But, a few, the great ones, never stop listening. A key message from the NRECA PowerXchange conference, that took place earlier this month in Nashville, was “now is the time to lead.” From the conversations we had with co-op leaders, which you soon will hear, is that it is also a time to listen.
Hello, I’m Teri Viswanath, the energy economist at CoBank and your co-host of Power Plays. I’m joined by my colleague and co-host, Tamra Reynolds, a managing director at CoBank. Today, we’re going to talk about leadership, listening, and the innovative ways that our co-ops are responding to what they hear from their members.
Tamra Reynolds: Hey, Teri. That’s right. Utilities across the country and electric co-op leaders especially are being called upon now to address more challenges and provide more value for their members today than perhaps any time before. And, they are evaluating significant generational investments that will impact the future of their communities.
CoBank is a proud partner-level sponsor of NRECA’s TechAdvantage conference and this year, in our booth, a few of our relationship managers sat down with co-op leaders to discuss topics that are top of mind for the industry.
Teri Viswanath: Make no mistake, these community leaders have heard from their members and they are responding…or leading in very innovative ways, leaving no one behind.
Let’s hear from Trico Electric’s CEO Brian Heithoff and COO Eric Hawkins, as they sit down with CoBank’s Landon Reneau.
Trico has about 50,000 members situated in three southern Arizona counties. Their 4,000 miles of line has a density of about a dozen accounts per mile in a very diverse eco-system that includes the desert but also more mountainous area in the state.
Tamra Reynolds: The questions you will hear are being asked by Landon. They are answered first by Brian and then Eric. Here’s what our Trico executives had to say.
Landon Reneau: It seems like Trico has made a pretty conscious effort to educate the consumer on your strategic priorities and how it impacts them. Can you give us a few examples of how you're engaging members and some of the feedback that you guys have received for some of these initiatives?
Brian Heithoff: Our primary organizational goal is to increase our members’ satisfaction. It's heavy on process improvement and keeping the members’ experience in mind as we carry out our day-to-day jobs. We want to secure long-term and cost-effective, sustainable power supply. We're pursuing advanced grid technology to increase reliability and meet members' needs.
One of the premises our strategic plan is built on is that we will be in a competitive environment at some point in the future, so that it drives us to develop new options, new products, new services, new ways of offering value to the membership. Strategic partners is a priority of ours. We want to develop enhanced relationships with strategic partners. Then lastly, it's workforce. We want to attract, develop, and retain a high-achieving and diverse workforce. That's the foundation of all we do.
Landon Reneau: Can you tell us a little more about the projects you've worked on, your experience in developing those projects?
Eric Hawkins: Sure, of course. Our mission is cost-effective and sustainable energy solutions. We're a partial requirements member of AEPCO. We get more than half of our power and our energy from AEPCO. Largely, those are coal and gas resources. We manage those contracts but we also have built our own solar and battery projects that we own through wholly-owned subsidiaries. Those are projects that we've worked on, really, over the last six years. It's been a lot of our focus.
Right now we've got two major solar projects, utility-scale solar projects, 10 megawatts each, Chirreon and Avion. Our Chirreon project, which is actually 10-megawatt solar and then a 15-megawatt battery, is up and going. It was commissioned back in late September of this past year. We made the decision that we wanted to operate the project, the start of the project, so that we could learn. It seems to be operating as we expected. We have had some success being able to catch that peak at the end of the day. That's part of our goal, was to be able to reduce power costs by using the battery, discharging it over the peak at the end of the day, operating well.
Landon Reneau: What are you guys seeing as far as challenges for the co-ops, especially as we talk about adding more EVs to the grid, more requirements for power? How do you guys see this fitting into that overall plan for you guys to help keep the prices affordable and level for your customers?
Brian Heithoff: Well, I think that your question, Landon, gets to the heart of what we're all experiencing, which is we're going through an energy transition. That transition may not always be a straight line, but to us anyway, the trend is clear that we're adding more, cleaner resources to our mix. We see trends in terms of decarbonization, the power portfolio decarbonizing homes, which leads to electrification.
Also, the general trend of decentralization, which isn't unique to the electric industry. We're seeing a lot of industries experiencing a decentralization occur and digitization, of course, where a lot of analog equipment is becoming digitized, which leads to more data, which leads to what are we going to do with that data?
We're in the process of adding capabilities both in the financial and data analysis side of the house. Those are going to become critical skill sets for us as we go forward. It all fits together, the decarbonization, decentralization, digitization. While those trends are going on, how do we add value to the membership? How do we anticipate what members need, which is important, but also how do we make sure that we don't get too far out in front of the membership either? There's always this balancing that needs to go on and we're trying to thread the needle.
Eric Hawkins: One of our goals for our strategic project is 50% emissions reduction by 2032. We wouldn't have gone in that direction if we didn't think we could do it responsibly in terms of cost as well as reliability. We've put in a lot of work, as Brian said, on the planning side of things, and that helps us to feel confident, when we do make these moves. We see interest from our membership in these programs, in these options, in these solutions, and we think that we can do it cost-effectively and in a way that will keep the power still coming on.
Brian Heithoff: Let me add. Our vision at Trico is to be our members’ provider and partner of choice, and so that signifies a two-way relationship. Historically, the electric utility industry, we've provided services. The future for Trico and for many utilities is going to be we're a provider of grid services, energy and capacity, but we're also a purchaser, which signifies we need to have a partnership with our membership. We'll be buying grid services, whether it's capacity or energy from our members. Historically, we’ve only looked to buy that from the market or a G&T or from a wholesale provider.
We're definitely entering an era where it's a two-way street, and that requires even stronger relationships than what we've had in the past.
Teri Viswanath: “Entering an era where it's a two-way street and that requires even stronger relationships than what we've had in the past.” Well, that certainly feels like the definition of listening to co-op membership.
Tamra Reynolds: Teri, we heard it from Trico but it was a recurring theme in Nashville in conversations with co-ops from across the country. What is being asked of co-op leaders by their membership is going to look and feel different depending on the communities served. We’ve discussed Arizona, but what about other areas of the country?
The state of Tennessee has attracted more than $10 billion of investment to produce electric vehicles and EV components in the past two years alone. The state’s governor has called these investments “record-breaking” job creators, claiming they will position Tennessee at the forefront of EV manufacturing. But when it comes to Tennessee co-ops, how are these organizations responding to growing EV adoption?
Teri Viswanath: Our CoBank Relationship Manager Mike Anthos caught up with the CEO of Middle Tennessee Electric, Chris Jones, along with the COO Brad Gibson, and the manager of the co-ops strategy group, Brandon Wagoner, who hosts a terrific EV podcast.
Tamra Reynolds: Middle Tennessee’s service territory surrounds the greater Nashville area. The co-op serves 11 counties and has a large, fast-growing suburban service area with roughly 335,000 meters. It’s also important to note that the community that this co-op serves has economic ties to EV manufacturing, so it is part of the fabric of this community.
The first voice you are going to hear is our own Mike Anthos, asking questions. CEO Chris Jones will respond first, followed by Brad and then Brandon.
Mike Anthos: Tell me a little bit about your EV fleet and maybe a little bit about when you acquired your first vehicle, and then how that's grown to today.
Chris Jones: Our first EV was a Nissan Leaf very appropriately. In our service territory, again, Nissan is a very important member for Middle Tennessee, electric business member. Of course, the Leaf was one of the very first vehicles to come out in this next generation if you will of electric vehicles. We purchased that, what Brad, how many years? About 10 years ago. Wow. It's been that long. Again, we did that for a number of reasons, but not least of which was to experiment, learn. We have a number of aspirational goals relative to our fleet and EVs, and I'd love for Brad to talk a bit more about that.
Brad Gibson: Yes, so we've had a few different Leafs and we've leased those and tried different things with the Leaf. We then added a few years ago, a Chevy Bolt to the fleet. Again, great success with that, letting employees have access to it. Certainly, as an electric distribution utility, one of the things that was missing was that opportunity to have larger vehicles, that truck specifically. We have a lot of Ford F-150s in our fleet and have for many, many years. When you have the opportunity to work with Ford to bring some of those into the fleet, we've ordered 10 of those, we have nine in right now.
Mike Anthos: Why the Lightning? What made you guys choose that vehicle over some of the other bigger EVs that are out there on the marketplace now?
Brad Gibson: One, just our familiarity with having the F-150, the internal combustion version in our fleet was very valuable for making that transition. The other step is Ford made a huge investment in west Tennessee, and they'll be building these in the future, in the next couple of years I believe. We wanted to continue to support what's happening with the EV revolution right here in Tennessee.
Mike Anthos: Tell me a little bit about your strategy, what you're looking at internally, externally, for your members as well as for yourself.
Brad Gibson: Internally, Chris has set a target for us to electrify our entire small vehicle fleet by 2030. Our members are converting to EVs, they're asking us questions. Brandon, if you would maybe talk about some of those items in our car club specifically?
Brandon Wagoner: For our external strategy, we've noticed that folks who have EVs, tend to be very passionate about them. We also know that satisfaction research shows that if you can be proactive with your members, that translates to increased satisfaction. This gives us a chance to be proactively communicating to them about something they're excited about.
One thing that we did in September of 2021, we launched an EV car club. We've currently got over 350 members in that car club, and we've had a chance to bring them in, learn more about what they want. We're looking at opening a rate here in just a month or two that will be a derivative of what we've heard them tell us they want.
Brad Gibson: It's so important that we listen to what our members are asking, and we do that through a variety of different methods. One is we participate in JD Power Survey. We also participate in the ACSI process, and so we have some questions specifically around EV adoption.
The other thing we do is we have, the group calls, the Front Porch Forum, our cooperative community forum where we have 75 members a year participating on this online group. We can put a survey together, but when you hear those experiences, the struggles they're having with charging, range anxiety, things like that you hear in the press a lot, but then they get dispelled because you hear people that own them talk about how they actually use the vehicle is very different than an internal combustion vehicle.
Brandon Wagoner: We can, for one, relieve their fears that the grid cannot support EV charging load because that doesn't seem to be the case, the data just doesn't show that. The other thing, we can start to look at ways to incentivize behavior that even greater supports our existing infrastructure, allows us to save some wholesale costs and share those savings with the members and leverage EV adoption for our entire membership, whether you're an EV owner or not.
Chris Jones: I'm afraid we have a number of presumptions that we're carrying, generally speaking, within the electric utility space, that are more based on speculation than reality. We welcome the idea of greater adoption across our membership with EVs because we think there's great opportunity there for us and for our members.
We want to earn that notion of trusted energy advisor. We want to be that for our members. We want to do our utmost to educate members in general, but also of course for those members reaching out to us with questions to be in the best position we can, to empower them with correct information.
Mike Anthos: When you're looking at collaborating with other organizations, are you seeing that cooperation between them and Middle Tennessee?
Brandon Wagoner: One thing I feel like I talk about a lot with our with other utilities is how do I shape my load profile, because whatever I can do to increase my system load factor, I'm going to reduce my wholesale costs. EVs, I think today, we're talking about possibly doing a demand reduction in EVs. Maybe five years from now, we're talking about doing a virtual power plant with EVs.
Chris Jones: Again, we as co-ops, part of a key principle is cooperation among cooperatives. We need to have more discussions, be strategizing together better in this space. I think number one if I could, then it would be suggest, that we just talk more and learn more from each other in this space.
Teri Viswanath: So, leadership is about learning, right?
Tamra Reynolds: That’s right. To zero in on another theme from Nashville this year, leading through adversity is sometimes necessary too. And that really surfaced during 2020 with broadband.
There were some important lessons during the pandemic that were learned about how co-op leadership had to manage through this crisis and the impact the digital divide really had on the nation’s rural areas. Those with broadband access could work, they could attend school, they could shop, and they could even be seen by their doctors without leaving home, but those without access just couldn’t do the same things. And this disparity really surfaced during COVID and was a primary concern for co-op leadership across the country.
Teri Viswanath: Our own Mike Cowley, sat down with one of those co-ops, South Central Arkansas Electric Cooperative out of Arkadelphia, Arkansas. For the most part, this co-op serves a very rural area of the country. And, in fact, 87.3% of all Arkansans qualify for Digital Equity, an opportunity program now made available by the federal government. More than 40% of Arkansas students live in rural communities that have spotty access to broadband.
You are about to hear a terrific story about deep community commitment and well, pure tenacity of seeing a community need and simply doing more to meet that need. On this interview, you will first hear an important “call to action” by Colby Wells, the CEO of South Central Electric and South Central Connect. We will then follow up with Mike’s interview with Colby.
Colby Wells: My words of encouragement to anybody. There's a path forward. If we could build electricity out and in the late '30s and early '40s to less than 4.5 passings per mile back then, you can figure out a way to do broadband.
Probably my largest regret that I've had in my career to date is the fact that we didn't have all of our electric membership built out when the pandemic hit. Remember we started, we approved the project in 2016, and we got started in 2018. If had we truly hit the ground running as hard as we can run, we're built out by the time the pandemic hits.
So, all the things of work-from-home, education, healthcare, and all the things that were needed are not a problem for my members if we are proactive and get that done. When is the next event? We can speculate on that forever, but it's just the reality that get started today.
Mike Cowley: Where are you guys today with that project?
Colby Wells: We decided to move forward with building a fiber backbone across our electric service footprint that would allow us to leverage our protected devices, our substation devices, and other downline devices in a way to have a more reliable-- at the end of the day, it actually drives us into more affordability also, but mainly, increasing reliability was the main goal with the smart grid branch that we started building out.
After discussions with a consultant, we realized that it would be a good idea to go ahead and build the extra capacity and to do a fiber-to-the-home project in addition to just the smart grid project. For it to serve all of our members, all of our residents, it ended up being only about 1,400 miles of fiber that we had to build because a lot of the other 400 miles go to well pumps and things like that.
Mike Cowley: Why did the co-op first consider building off-system initially, and was there any reluctance at first to building off-system?
Colby Wells: Mike, the reason we originally decided to build off-system is because we don't have a contiguous electric footprint. We've got an investor-owned utility that cuts our service area off in several areas. So when you think about connectivity and building out a network, you got to have that contiguous footprint to make everything work. We could have looked at maybe trying to find another investor-owned telecom company to lease some fiber across those deserts, if you will, for our electric footprint.
Instead, we decided just to go ahead and build through those areas to keep a contiguous network built out. Fortunately for us, all of those areas were with the same investor-owned electric utility. It made it semi-smooth to be able to work for it and get that project going.
Mike Cowley: What are some of the other benefits out there for these areas that you're building off-system to?
Colby Wells: One of the great benefits that we are seeing, is we're working with a local municipality now and getting ready to build out fiber in their area. This particular municipality has its own electric infrastructure, its own sewer, its own water. We are having conversations currently on how we could assist them on their electric metering, their water metering, and possibly putting in some smart devices on their sewage and their wastewater to provide a better, just overall municipal system for their citizens there in that town. The benefit of the electric co-op, bringing this type service to a municipality is, we already understand, part of the game.
The board decided that we should try to reach out and gain a larger service area that is very in need. The south-central region of Arkansas has been extremely underserved by traditional telecom for the past 40 years. We decided that it made a lot of sense to basically wrap our electric footprint on the outer edges all the way, every north, south, east, west basically just make us a contiguous footprint for broadband. The main driver being that area was just as deserving as broadband service as our electric area.
The reality that we saw was going back to our density in our passings, we were 4.5 to 5 passings per mile when you look at just electric co-op membership. You can make a feasibility study almost work on that kind of density, and you can definitely get there to where over a long payback period that the co-ops are used to doing. Electric co-ops are used to a 30, 40-year return. We can make justification to build broadband out there. Again, we have all the backbone infrastructure in place. Why not branch out into an area that you can get a 3, maybe an 18-month return on that's still underserved as well?
The how and the why you get that 3-year to 18-month return is because the increased density. We went from a 4.5 mile passing area to approximately 15 to 20. In some areas, we've even got some areas that we're going to build out now due to some state funding and stuff that's in a 30-mile-per-passing area. It seems like a whole lot of money, and it is a whole lot of money, but the return on investment is 10x compared to where we were originally.
Mike Cowley: All right. If you could give a piece of advice to other cooperatives just beginning to evaluate providing retail broadband, what would you say to them?
Colby Wells: This is going to be pretty pointed, I'll be honest. If I was to tell any other colleague or electric co-op person that ends up hearing my voice, what I think they should do today is if your electric service area does not have a true broadband provider, you need to get started today. There is a path forward, whether it be with grant funds or a partnership with CoBank or others. It is a necessity in my opinion for life, just to be honest.
Teri Viswanath: I think I mentioned tenacity, right? This is true grit and leadership.
Tamra Reynolds: I feel upbeat by the stories I’ve heard about our co-op leadership, and particularly around broadband. During crisis, these managers had to communicate effectively. They had to be honest, get personal, and convey hope to their members and communities.
The country will witness to a once-in-a-lifetime wave of capital spending on physical assets between now and 2030. On this program, our co-op leaders outlined their roadmap for this investment.
Teri Viswanath: I do hope that you’ve enjoyed this program and revisiting some of the major investment themes we heard about in Nashville earlier in the month. And, I hope you will join us next month. Bye for now.