President’s & GM’s Message: Reckoning cooperative values with market-based incentive systems in our collective shift away from fossil fuels

Coop CurrentsCoop News

Rate case, response to net metering issue, new CVFiber column, Coventry update, member cookout

Co-op Month: Reckoning individual incentives with cooperative values

Steve: October is Co-op Month. When I joined Washington Electric’s Board of Directors and was figuring out my responsibilities, a wise Board member told me, whatever decision we make should be made on the basis of what is good for the majority of the membership. I came to realize the way a co-op is different from an investor-owned utility is that at every point, we ask ourselves, “Is this going to benefit as many member-owners as it possibly can?” In our Co-op, we’re all members seeking reliable electric power, not investors expecting a profit, and we should try to treat ourselves as equitably as possible.

That’s the advantage of a co-op, and it’s also the disadvantage of a co-op, with state-mandated incentives for EVs and net metering in which the financial benefits paid for by all WEC’s members are targeted toward individual members. 

I expect most of us would agree that working to reduce the use of fossil fuels in our vehicles and heating our homes while producing electricity and other forms of usable energy in a renewable manner is a priority, as long as what we end up with is as or more reliable than what we started with. It’s curious to me that in this state, a program of such global importance is largely tasked to the electric ratepayer to fund, and not spread out among all Vermont taxpayers who would benefit from mitigating climate change if it’s possible. As it stands now, whether we like it or not, the cost of some of the expenditures we make on behalf of individuals are transferred to the rest of the membership. 

I think our cooperative model is kind of under a strain now. As a collective of equal members, our natural inclination had been to provide rates that incentivized efficiency for all, and, over the last few decades, to go fully renewable. Each of these benefits was accessible to all our members 24 hours a day. They weren’t intended to be reserved for some over others.

Louis: On one hand, the cooperative model seems antiquated and something time has maybe passed by, the idea that non-expert citizens would get together to operate in an economy and world and business in which expertise is growing rapidly and complexity is growing rapidly. On the other hand, cooperative principles are values, in Vermont and nationally too, that have become increasingly important and relevant to people.

There’s a give and take there: between time, tech, and economic systems becoming more complicated, and a stronger than ever desire among people to have their lives and businesses adhere to longstanding cooperative principles. I don’t know where that leaves cooperatives. I see a strong movement toward ESG [Environmental / Social / Governance] principles among businesses around the world; co-ops have been doing this for decades. 

So while it might seem antiquated that a bunch of non-expert volunteers could get together to do something as complicated as deliver electricity in the 21st century, the principles that underlie that structure are more welcome and interesting to people than they have ever been.

Steve: The GM and staff run the Co-op, but the Co-op is overseen by ratepaying members who, in my experience, support cooperative principles. The values that a co-op expresses are just as important now as they’ve ever been. We’re just finding the culture of the cooperative is being challenged by the modern world.

Louis: It’s important to remember WEC would have to be replaced by something. People still need the electric grid to get power to their houses. The reason Washington Electric and other co-ops needed to come into existence in the first place remains true: there aren’t investor-owned utilities clamoring to come do business in a heavily forested, rural area like ours. Our service would have to be replaced by something, and that something hasn’t come into being yet. Perhaps microgrids, battery storage, might change the complexion of our Co-op and territory, but right now, there isn’t another entity offering to do the service Washington Electric supplies.

WEC files for 14.19% rate increase

Louis: Washington Electric has filed for a 14.19% rate increase. It’s a substantial increase. And that has an impact on our members, especially lower income members. It’s in line with the increases of other costs, and it’s basically a function of two things.

The first is the unexpected reduction, and length of reduction, of generation from our Coventry plant over the last year or so. Second is the simultaneous and extraordinarily high prices for electricity in New England driven by natural gas supply. The cost of natural gas is driving up the cost of electricity. 

It’s a fair question why the price of natural gas drives up costs at a utility that provides 100% electricity to its members. The answer is, in the winter, we have to buy electricity on the open market, and those prices are set to a large extent by the price of natural gas. The war in Ukraine, the increased purchase of natural gas in Europe, and the return of the economy as the COVID slowdown has changed, have driven up costs in New England and made them less predictable. 

There are other factors that figure into our rate case. We need to have a certain amount of operating margins to borrow money from our lenders and continue to operate the Co-op. Net metering, staff wage increases, and the costs of materials are factors, although smaller than the ones I just mentioned. All info about the rate case can be found in the ePUC system. You can read the full spreadsheet the rate case is based on as well as testimony regarding the reasons for the rate case.

While it might seem antiquated that a bunch of non-expert volunteers could get together to do something as complicated as deliver electricity in the 21st century, the principles that underlie that structure are more welcome and interesting to people than they have ever been.

– Louis Porter

This may not be much comfort to our members, but other utilities in Vermont are likely to file for rate cases if not at the level, close to the level we’ve filed at. In deregulated parts of New England and those areas without long term power contracts, increases are many, many times what our proposal is, but a direct comparison is difficult.

Steve. We expect production at Coventry will rebound; it is already increasing. As Louis said the problem we face occurs fairly regularly in the winter, when our loads get higher because of wintertime temperatures. The wind resources we contract for are typically higher in wintertime but solar is not nearly as productive in those months.

For now, we’ve got a cash flow problem. If we’re fortunate to solve it sooner rather than later, I hope we will be able to return more money to members in capital credits to mitigate the rate increase. But time will tell on that.

Response to net metering issue

Louis: We’ve gotten some response to our September issue focused on net metering. Some are supportive of Washington Electric’s position, some are very much in opposition to it. We have an obligation to provide information to our members about what affects their power bills and the future of the utility that they own. That requires us talking about the impact net metering has on members’ bills. Whether or not you agree with WEC’s position – that there should be change to net metering regulations in the way in which solar production is compensated – or not is a legitimate discussion point. But I firmly believe we do need to talk to our members about net metering and the effect it has on the Co-op.

Steve: Some respondents criticized WEC for being discouraging of net metering, some for being encouraging of, or allowing net metering. We appreciate the dialogue. Our intent is not to criticize solar energy, which is a key renewable energy technology. It is, primarily, to inform the members of the growing impact on their bills. There are a number of accepted schemes of fairly compensating home solar producers who don’t use batteries to store the energy they produce. While the specific scheme of net metering has been effective in incentivizing the installation of solar, it comes at a cost. The greater the number of net metered installations, the greater that impact is going to be.

This is a complicated subject, and it’s important to start having that discussion now, with our members, other stakeholders, and legislators, before the impact really becomes serious in the coming years. WEC is not against solar or home solar owners. We assume that anybody should be free to consume the energy they produce onsite. Going forward from here, we feel that solar power exported to the grid, in comparison with that from other renewable resources, doesn’t need to be as costly to the ratepayer that many net metering advocates claim it has to be. What I understand from the Department of Public Service’s annual energy report last year is that they feel the same.

Louis: Taking it a step further, WEC is also not against net metering. But beyond the impact to WEC and WEC members, I am really concerned about increasing the cost of renewable electricity more than necessary, because it provides a disincentive for people to switch from fossil fuels to electricity. If we’re serious about climate change we need to provide low- and no-carbon power at the lowest cost we can to push people toward those power sources instead of fossil fuels. I hold that concern totally independently from my concern about WEC’s finances and cost shifting among members.

The Co-op has a tradition and history of dialogue with members, and that’s to our credit. It’s our intention to keep it going, particularly with the net metering issue. Steve and I have responded to many members over phone and email. We’re also a democratic organization. If people think our position on net metering is wrong, they can run for the Board and support candidates who represent their interests. The one caveat is: Board members at WEC are fiduciaries. They’re personally accountable for the financial health of the institution. Any new leaders need to recognize that shifting costs to fellow members and the financial health of the organization needs to be addressed.

For now, we’ve got a cash flow problem. If we’re fortunate to solve it sooner rather than later, I hope we will be able to return more money to members in capital credits to mitigate the rate increase. But time will tell on that.

– Stephen Knowlton
New broadband updates from CVFiber

Louis: The mission of CVFiber is similar to and connected to WEC’s mission of providing essential services to our members that would be unlikely to be provided by for-profit entities. When new federal broadband grants became available to CUDs [Communications Union Districts] and WEC, CVFiber, and the other CUDs realized the original structure of our fiber-leasing partnership didn’t make sense anymore, we committed to helping and aiding CVFiber in their mission. One way we can do that is giving them the opportunity to provide updates and information to our members in Co-op Currents. 

We know our members, many of whom are served by CVFiber, are eager for broadband updates. We’re thrilled to partner with CVFiber on this outreach.

Coventry open house

Steve: We had a good turnout at our Coventry landfill gas generation plant open house, operated jointly with Casella’s annual open house – the first one in a couple of years. There were a lot of people who were fascinated by how the plant operated and what has to be done to actually make energy out of landfill gas. It’s not like you flip a switch. The gas has to be drawn in, purified, burned in a generator to create electricity, which is sent out on transmission lines. My impression was a lot of people were glad to see this landfill gas is being used for something useful, not just going up into the air.

Louis: Construction has concluded and so has the downturn in gas production. They also sank seven additional wells, and production has recovered some. We’re also replacing the piping that brings the gas through the plant, and we are adding an additional blower to help draw the gas into the engines. We’re also changing the way we manage the gas flow to increase production and efficiency, so we’re not flaring gas when we have additional engine capacity.

Steve: And if you want some bad news, the facility will need roof repair over the next few years, but it’s an important plant and needs to be maintained.

Member cookout

Steve: We were fortunate to have a nice day between rainstorms, and we had a good time. I enjoyed talking with people about the pleasures and challenges of having an electric vehicle. Betsy Allen, Bill Powell and I all brought our EVs and enjoyed conversations about them. We enjoyed watching our three apprentice linemen show their skills and what they’re learning to do. It was just nice to see our members after not having a real gathering for over two years.
Louis: One of the funnest parts for me was having my WEC colleagues and I and current and former Board members come together to provide food instead of providing electricity to members. It was providing, in a small way, a service to members that’s outside of our normal work. That was fun and I enjoyed doing it very much.