I believe that fate brought me to Cloverland. The day I decided to start looking for a new career opportunity was the day Cloverland posted the position. After reading about the history of Cloverland and researching the members they serve, I was excited at the opportunity to become part of the Cloverland family.Get to know Mike Heise
National Co-op Month is a great time to remind our 34,000 members that Cloverland Electric Cooperative was created to serve our community. Back in the day, neighbors banded together and formed our co-op for the common good. In our case, it was the only way the community could bring electricity to the area where there was none. Adding Edison Sault Electric’s customers and service territory in 2010 helped our cooperative community thrive. That mission-focused heritage is the common thread in our 85-year history.
Today, we are continuing to power the Eastern Upper Peninsula community. While our focus has remained steady on providing reliable energy to our members, today’s energy landscape and consumer expectations are far different than they were decades ago. That’s why we’re adapting, to keep pace with changing technology, evolving needs and new expectations.
Since we’re a co-op, we operate a little differently than other utilities. Cloverland’s decisions are made by directors who also live right here in our community. Everyone who pays to receive electricity from the co-op is a member. When you pay your electric bill each month, your money stays here – to pay for the electricity used, or to make improvements to our local infrastructure to strengthen service reliability. As an electric cooperative, you can count on our team to maintain local jobs, at-cost electricity and exceptional service, no matter what the economy –– and supply chain issues –– throw at us.
In June, we conducted a member survey to gather your feedback on co-op programs and services so that we can plan and adjust for the future. Thank you to our 4,193 members who participated! Your responses greatly inform our strategic planning decisions and communications to best suit your needs.
Serving as your trusted energy advisor means we want to help you save energy (and money) and provide advice and information on a broad range of energy topics. For energy savings, check out Cloverland.com/eo for energy optimization incentives and a free residential energy audit. Consider scheduling a free energy audit with one of our energy experts to identify ways to increase the energy efficiency of your home, business or farm. Understanding how your home uses energy can help determine the
best ways to modify energy use and save money.
Our success lies in your satisfaction, which is why we offer these opportunities to engage and listen to what you have to say. If you want to receive important information from Cloverland such as planned outages and tree-trimming alerts, be sure we have your email address. Stay in the know with SmartHub alerts and our quarterly e-newsletter.
Please know that you – Cloverland members – are at the heart of everything we do. Co-ops adhere to seven guiding cooperative principles that reflect core values of honesty, transparency, equity, inclusiveness and service.
We exist to serve you and provide the quality, reliability and friendly service you expect and deserve. While we’ve grown over the years, we’re still driven by the same guiding principles to serve our community. We hope to see or hear from you soon. This co-op was created for you, the members. The power is in your hands.
It’s an exciting time to be in the energy industry. The Inflation Reduction Act earmarked $10.7 billion to make rural energy cleaner and more affordable. It is the biggest boost of federal funding since the New Deal law that created America’s rural electric cooperatives that bring power to 42 million people across the country. Cloverland is one of more than 900 rural electric cooperatives.
The New Empowering Rural America (New ERA) program and Powering Affordable Clean Energy (PACE) program are administered by the U.S. Department of Agriculture. It’s the same agency originally tasked by the Rural Electrification Act of 1936 to expand electricity delivery from less than 10% of rural America during the Great Depression to almost every acre of the country today.
The New ERA program has $9.7 billion available in grants or loans of up to 10% of that total per applicant, with direct grants limited to 25% of a project’s total cost. The PACE program has $1 billion available for low-interest loans, with up to 60% of the loan amounts forgivable by the federal government.
The PACE program guidance allows loans for wind power, solar power, hydropower, biomass or geothermal projects and energy storage projects. The New ERA program can fund the purchase of or investment in renewable or carbon-free energy, batteries and other forms of energy storage, carbon capture or clean hydrogen production or energy efficiency improvements to generation and transmission systems.
With the creation of American Rural Cooperative (ARC) Power, we have the opportunity to collaborate with other local entities. Through ARC Power, we are actively engaged in rounding up as much federal money as possible to improve infrastructure in our Eastern Upper Peninsula (EUP) service territory.
One recent initiative is the U.S. Department of Energy Grid Resilience and Innovation Program (GRIP). Sault Tribe and Cloverland (along with ARC Power) jointly submitted a grant application that provides government funding and tax incentives to allow ARC to lead project management on a solar and battery energy storage project. The project would also sponsor the development of software that will help optimize the use of the solar and batteries based on our market needs while expanding renewable generation sources in the Eastern Upper Peninsula and providing grid resiliency in our area.
This USDA Rural Utilities Service (RUS) opportunity for funding will show the power of collaboration as 90% of the funding requirements will be paid for through this program. We will continue to look for other opportunities to partner with our members creatively on projects that can help stabilize our rates by maximizing these funding sources.
As a member of Cloverland Electric Cooperative, you have a share in our margins, in the form of capital credits. This capital credit retirement reflects the contribution of capital to the cooperative during those years. Over time, those funds helped Cloverland stabilize rates and reduce the amount borrowed to build, maintain and expand the distribution system providing our members with safe, reliable electricity. It also helped to build and sustain the cooperative in an industry experiencing massive changes and technological advances.
This year, your Cloverland Electric board of directors budgeted for the retirement of $750,000 in capital credits to members who purchased electricity in 1996 and 1997.
How do capital credits work?
After taking all expenses into account, any would-be profits left over when we close our books each year are considered margins. While investor-owned utilities return a portion of any profits back to their shareholders, electric co-ops operate on a not-for-profit basis. So instead of returning leftover funds, known as margins, to folks who might not live in the service territory, same region or even the same state as you do, Cloverland allocates and periodically retires capital credits based on how much electricity you purchased during a year. It’s a major difference between a cooperative and other types of utilities.
The amount of margins allocated to each member as capital credits is based on how much electricity you used in that year. Eventually, the capital credits are retired and paid back to the members. Active members receive a credit on their bill, while members who no longer live in our service territory receive a refund check.
Our commitment to members
Cloverland’s board of directors is committed to retiring capital credits. While margins are allocated back to members every year, the board is responsible for determining the timing and amount of capital credits to retire based on the financial health of the cooperative. The board and staff at Cloverland worked to implement sound strategies aimed at increasing the equity threshold required to retire capital credits without impacting member rates.
Keep us informed
When you move or no longer have service with Cloverland, it is important that you provide us with an updated address to ensure future capital credit refunds can be mailed to you.
Also, remember you must be a member and have service in your name to have capital credits allocated/retired to you. If you are receiving electric service in someone else’s membership or the service is in the name of a deceased person, you will not receive capital credits. Capital credits are non-transferrable and any current or future capital credit retirements will be issued in the name of the person on the membership or the estate of a deceased member.
Support Cloverland Cares
Last year, we established the ability to donate capital credit retirements to Cloverland Cares. We are thankful to all the members who have committed current and/or future retirements. If you would like to donate your future retirement to support Cloverland Cares, visit Cloverland.com/cloverlandcares.
Cloverland Electric is involved in data mining projects to strengthen our energy consumption profile and revenue.
So what is data mining and how does it benefit the cooperative and our membership?
We use the word data mining versus crypto mining because recently there have been concerns about the crypto market. The data mining organizations looking to expand to our territory and ultimately grow our electric load are data miners paid for their services in the form of “bitcoin.” Many use the word crypto to mean digital currency. In many ways this explanation is accurate, but it may be confusing to those just starting to learn about the process.
Data miners are tasked to solve complex mathematical equations using very powerful computers and are rewarded with bitcoins once their tasks are complete. The bitcoin is much like a piece of stock. It has value to those willing to pay for it. In the past year, the bitcoin market value has dropped considerably. The difference between bitcoin and traditional stock is that people are willing to use bitcoin to buy goods and services, hence, it’s a currency. In recent months, the bankruptcy of FTX and its alleged misdeeds have put crypto in a negative light. Bitcoin, which is the payment form of the data miners with whom we have been interacting, was not the underlying mechanism in the FTX bankruptcy.
Why are is Cloverland looking at data mining?
- Data mining is attractive because when implemented correctly, it can grow electric use, or demand, in a positive way – it has the potential to generate additional revenue through load growth.
- Many rural cooperatives are experiencing a decline in electricity demand, causing negative impacts to their members and rates. Cloverland views the electricity demand increase offered through data mining as way to fight off negative impacts associated with electricity demand loss.
- We are structuring sales to these data miners in a way that will not add to our capacity charges with Wisconsin Energy Corporation (WEC), yet add to electricity consumption, or kWh. Ultimately, this structure increases our load factor, which is simply a measure of efficiency of overall electricity consumption relative to peak electricity consumption.
- Cloverland remains in a long term power supply contract with Wisconsin Energy to 2029. Due to market volatility over the over the past few years, our kWh charges from Wisconsin Energy are favorable relative to current market rates. Through careful management, aiming to avoid excess capacity charges while growing kWh allows for strong revenue potential.
- To protect our co-op from a default by the data miners, we require the mining organizations to pre-pay. When their deposits are gone, or in the event of payment failure, we can disconnect them prior to passing this default on to our membership.
We are actively working on the 2 MW site in Dafter. We continue to work with a miner looking at a similar facility at our new Garden substation. As plans solidify, we will keep our membership updated.
This process has highlighted our current system vulnerabilities. Many of our substations have limited opportunity to add load without increasing capacity. We will use that knowledge to improve as we move forward with future system planning to harden our infrastructure to the benefit of all members. Again, we are looking at this concept to enable economic growth in our service territory.
I hope this explanation helps clarify our intentions and the protections we are using to assure our members are not impacted negatively by the data mining facilities – instead, it is a unique way to strengthen our cooperative.
As we communicated throughout 2022, Cloverland’s board of directors passed the recommended rate increase from our cost-of-service study, effective this month. The 5% overall increase is equivalent to 1% per year since the 2017 increase. To address questions on our new rate structure, please visit Cloverland.com/rates or contact our member services team to have information mailed to you. Meantime, here are some common questions:
The new rate is structured differently – what is the facilities charge and peak demand charge?
The facilities charge ensures that expectations for continuous power and outstanding member service are m
et. It gives each member a fair and equal share of the cooperative’s operations. It provides funds that must be invested now to maintain the quality, reliability and integrity of service that our members count on and expect. The facilities charge essentially ensures that all equipment operates properly and staff is trained and ready so the lights turn on when you need them.
Peak demand is the maximum rate at which your household consumed electricity during the billing month, but only during the peak daily hours (8 AM – 9 PM). Each Cloverland member’s highest monthly point of peak demand (measured in kW) is multiplied by the peak demand rate to determine the monthly peak demand charge. The peak demand rate is set by each rate class:
- $0.93 residential
- $1.67 general service 1
- $2.02 general service 3
Who determines when a rate increase is necessary and by how much?
Cloverland’s board of directors and management continuously monitor the financial stability of the cooperative to determine when a rate increase is necessary to cover the costs to provide service to our 34,000 members across 4,000 miles of power line in five Eastern Upper Peninsula counties. It is common for cooperatives to conduct a cost of service study to assess rates regularly. It is a comprehensive review of all rates to ensure each member pays a fair share regardless of rate classification [residential, commercial/industrial]. Each member should pay its fair share of costs without having one class subsidizing another.
What members will be impacted the most?
Members with electric heat may see the greatest impact on their winter bills, so we’ve increased our incentives for heat pumps as a lower cost consideration for heating your home. Members can continue to use our online Energy Advisor assessment for guidance on additional savings [cloverland.com/energyadvisor].
How does Cloverland’s rate compare to neighboring electric utilities?
For perspective, Cloverland members have one of the lowest utility rates in the state of Michigan. Compared to national averages, our rates align with some of the lowest state averages. The increased cost of power supply and materials is causing other utilities to ask for rate increases as high as 15%.
What is Cloverland doing to keep costs down?
Cloverland strives to operate efficiently while adhering to our mission of providing reliable and affordable services. We continually evaluate our operations to keep your rates as low as possible by:
- Managing our power supply costs. For each dollar collected, $0.60 goes to the cost of purchasing electricity to meet the needs of our members;
- Implementing beneficial technology, such as our outage management system or advanced metering infrastructure, to provide operational efficiencies and increase reliability;
- Competitively bidding all contracts to ensure quality service at the best possible price; and
- Ongoing assessments of our daily operations for opportunities to streamline or improve efficiencies.
What can I do to reduce my electric costs?
Manage your energy use by operating major appliances (dishwasher, washer, dryer) during non-peak hours, after 9 PM and before 8 AM. Replace lighting with LED lights and upgrade to energy efficient appliances. Take advantage of our Energy Optimization program incentives [Cloverland.com/eo] – we’ll pay you $50 for recycling an old refrigerator [April-October] and provide a $100 rebate on a new fridge. Keep in mind that we also offer budget billing to level out payments throughout the year. For payment assistance, contact Michigan 211.
I will continue to work with our staff and board of directors to ensure our rates hold steady for as long as possible.
At Cloverland Electric Cooperative, we know our members put a lot of trust in us to be responsible with their money. We bear this trust in mind each time we purchase new equipment or invest in upgrades for our infrastructure.
The same is true when we determine rates for the electric service our members depend on. As a not-for-profit utility, we never charge more than is needed to maintain and operate our electric system responsibly. Remaining funds are returned to members in the form of capital credits – cash back over time.
As a co-op member, you can trust that when we adjust rates, we will only do so with a good reason – to cover the key components essential to keeping power flowing to our 34,000 members across five counties.
Electric co-ops are not immune to inflation, which has led to an increase in materials costs and equipment we rely on to maintain our system. As I shared in the August community presentations, Cloverland has endured major increases on materials due to inflationary pressures and lead times impacting vendors, contractors and suppliers.
While rates have remained fixed since 2017, costs have increased considerably in the last few years. The 5% increase for 2023 is equivalent to an increase of 1% each year and enables us to maintain a strong financial position while enhancing our infrastructure. Here’s how it will affect each rate class:
- Residential members (1 percent of total co-op members; 40.4 percent of energy sales) will experience a 5.4% increase of $4.73 each month based on an average usage of 658 kwh.
- General service members (10.5 percent of energy sales) with an average monthly usage of 1,298 kwh will experience an increase of $8.54.
- General service 3 members (10.4 percent of energy sales) with an average monthly usage of 10,041 kwh will experience an increase of $56.03.
- Large power/industrial members (38 percent of energy sales) with an average monthly usage of 61,812 will experience an increase of $391.06.
The current facility charge, $23.75 for residential members, will increase slightly to $24. This monthly charge covers costs required to provide electric power to members other than purchased power costs and demand costs. These costs include more than 3,112 miles of overhead power line, 72,418 poles that hold the lines, 922 miles of underground cable, 38 substations, a fleet of trucks and tracked/all-terrain vehicles, plus all the associated hardware required to operate the cooperative’s distribution system spread across five counties in the Eastern Upper Peninsula.
While rising costs seem beyond our control, our own energy usage is not. We encourage all of our members to be mindful of the ways they use electricity on a daily basis. With the peak demand charge as part of the new rate, members can save on electricity costs by running large appliances after 9 PM or before 8 AM.
A great resource for a home energy audit is our Energy Advisor tool that demonstrates ways to save energy around your home. Visit Cloverland.com/energyadvisor and check out current energy optimization incentives for additional savings. Follow us on social media for additional tips for each season. Remember that your cooperative will always keep reliability and affordability at the forefront of all we do.
When something is transparent, light shines through it. Sometimes you need to examine it from several angles to see it correctly. In the spirit of transparency, we want our members to know that electric rates will be going up – taking effect in January 2023.
Since I started in 2019, Cloverland’s financial health improved significantly thanks to the hard work of our staff and focus of our board of directors.
Despite the challenges from the pandemic, we completed studies on right-of-way maintenance/vegetation management, Cloverland’s hydro facility and SCADA system. We have streamlined our power supply to conserve capacity expenses, increased revenue from renewable energy credits, enhanced unity on our board of directors and brought on a power supply expert to ensure our cooperative remains strategically positioned for future industry challenges. In addition, we created Cloverland Cares to give back to the communities we serve and launched ARC Power to manage existing generation while positioning the cooperative to capitalize on additional infrastructure opportunities.
While we aggressively improved the co-op’s performance, rates have remained stable since 2017 – even through the pandemic when material costs increased exponentially. General economic forces along with changes to the electric industry are adding up. The cost of providing the quality of service and reliability that our members expect is rising with them.
Your board of directors will vote on the recommended overall 5% increase from our cost of service study at the September 27 meeting. We aim to keep the increase as low as reasonably possible without sacrificing safety, reliability or service to our members. As we examine our circumstances from several perspectives, we will base decisions on the healthy growth of our cooperative and best interests of our members.
Times are tough. Adding more strain to your wallet is the last thing we want to do. But in the long run, the cost of not raising rates now is certain to be higher later with greater impact on our infrastructure if continue to defer maintenance as it will erode system reliability.
Cloverland will continue to remain transparent. We will continue to aim to keep our rates among the lowest in Michigan. In the meantime, we encourage you to keep looking in the direction where the light shines the brightest.
President & CEO
As our bi-annual Names & Faces feature (Cloverland Connections July | August pages 6-7) shows, we’ve had lots of staffing transitions over the past six months. Along with many retirements, transfers, promotions and new hires, I am pleased to highlight the addition of Pat Frazier who joined our co-op as chief operating officer in May.
Pat will be an important pillar of our executive leadership as he applies his power supply expertise to ensure our cooperative remains strategically positioned for future industry challenges. As part of his duties, Frazier will oversee engineering, operations, generation and key accounts at the cooperative.
My history with Pat dates back to 2001 when we both were both in executive management for an organization that was responsible supporting all aspects, including power supply, of municipal electric companies in multiple states. With nearly three decades of experience working for both for profit and not-for profit electric companies plus a range of electric industry skills including engineering and executive management in wholesale and retail power, Pat brings a valuable skillset to our leadership team and will equip us for a strong financial future.
Power supply has been a primary financial focus of the cooperative for the past three years, and Pat has worked with Cloverland as a power supply consultant following the departure of our previous chief financial officer and director of power marketing and regulatory affairs (September 2020).
The new COO role fills a unique need at the cooperative, particularly following the retirement of chief financial officer, Lisa Castilho in May. I am so thankful for Lisa’s great contributions to the cooperative in her brief tenure and wish her a wonderful and well deserved retirement after a 42 year finance career.
Rather than recruit for a CFO position, we have distributed Lisa’s responsibilities among our current staff. Jillian King joins our executive team as director of finance. Her dedicated 13 years of cooperative service, combined with accounting and management experience, will ensure continued strength for the cooperative’s finances. To support additional duties from Lisa’s retirement, Kyle Stabile has been promoted to senior accountant and will manage accounts payable and several other accounting functions. Lisa also managed the member services and billing department, so this responsibility shifted to Allie Brawley as director of communications and member relations. Allie’s business development responsibilities shifted to Pat. Jake Brown was promoted to business development and key accounts manager and will work directly with Pat to enhance the cooperative’s position with broadband, electric vehicles and infrastructure projects.
Together, our entire Cloverland team will work to tackle challenges ahead while ensuring safe and reliable service to our members. Our finance and accounting team and I will work with our board of directors to analyze the recent results from our cost of service study that assesses our rates. While our rates have remained fixed since 2017, costs have increased considerably in the last few years. As a result, we plan to adjust rates this fall. At this point, we’re working out the details, but we will keep the increase as low as we reasonably can without sacrificing safety, reliability or service. As we examine the situation from several perspectives, we will base decisions on the healthy growth of our communities and the best interests of our members.
Reassuring our Members about Service Reliability Amid Capacity Concerns
By Pat Frazier
I am excited to be part of Cloverland’s team and look forward to opportunities to strengthen the cooperative’s position in the evolving electric industry. Let me address one of the most pressing issues affecting utilities across the Midwest that has raised concerns about capacity shortages.
A recent report published by the Midcontinent Independent System Operator (MISO), the organization responsible for overseeing the electric grid across 15 states and one Canadian province, detailed the summer outlook for its region. The MISO report warns of potential generation capacity issues in the Midwest that could lead to rolling brownouts or blackouts. As a result, many electric utilities across the Midwest are emphasizing the dire nature of the MISO report to prepare customers for the potential of rolling brownouts or blackouts on peak energy use days. However, Cloverland Electric Cooperative wants to reassure its 34,000 members that its Eastern Upper Peninsula service territory is highly unlikely to be affected.
Cloverland exists within the MISO Local Resource Zone 2, which includes the entire Upper Peninsula of Michigan and the eastern half of Wisconsin. Within that zone, MISO identified ample generation to meet and exceed energy needs of customers, including Cloverland members.
We do not expect rolling blackouts or brownouts related to generation issues this summer even during peak temperature days that cause energy use to surge. Members should take comfort in knowing we are in MISO’s Zone 2 region with ample generation available to meet forecasted summer electricity demands.
Our staff stays in consistent contact with MISO daily operations personnel. MISO is prepared for events that might stress the service area and calling for unusual actions to ensure the stability of electricity delivered its customers. In turn, we are preparing for similar stress events by closely monitoring our generation available to run at peak capabilities and ensuring our distribution system is ready. In addition, we are ready to respond in a timely manner should an event cause an unlikely loss of power due to lack of generation.
Pat Frazier’s Background
Pat Frazier has decades of experience working for profit and not-for-profit energy companies. His experience spans from engineering to executive management in electrical power, both wholesale and retail, encompassing generation, supply planning, trading, delivery and operations, transmission operations, regulatory affairs and ISO/RTO control center design and operations. Before Metis Energy, Frazier was vice president of Product Development, World Kinect Energy Services; president and CEO of Beach Front Energy; vice president of Electricity Services for Fellon-McCord & Associates; managing partner and co-founder of DaCott Power and Transmission Solutions; vice president of Power Generation and Energy Operations at American Municipal Power and manager of Utility Power Sales at LG&E Energy. Frazier received both his Bachelor of Science and Master of Engineering degrees in Electrical Engineering from the University of Louisville’s Speed School of Engineering.
As a member of Cloverland Electric Cooperative, you make an investment in the co-op every time you pay your bill. In addition to the amount you pay per kwh based on your individual usage, your payment covers the monthly facilities charge that helps us cover the expenses of maintaining our overall electric system. Combatting cyber security threats and maintaining poles, wires, substations and co-op equipment takes strategic planning and significant resources. The facilities charge
essentially ensures that all equipment operates properly and staff is trained and ready so the lights turn on when you need them.
Although the name of this fee may vary, facility or fixed charges are necessary for all electric utilities for rate equity among ratepayers, or members in our case. For each of the 43,000 meter points in Cloverland’s service territory, we make a significant investment and we must maintain this investment to ensure reliability and safety.
As a utility, we need a system of meter reading, billing and member services functions in place to take care of our members. This system includes trained people, office facilities and state-of-the-art technology to provide the level of service expected by cooperative members. The cost of these facilities and services must be recovered, even if you’re a seasonal member who elects not to buy any electricity during a specific period. Similar to a cell phone or cable bill, there is a monthly charge to continue the service regardless of how much you use the service.
The facility charge on your energy bill pays for the costs required to provide electric power to you other than the purchased power costs and demand costs. These costs include more than 3,112 miles of overhead power line, 72,418 poles that hold the line up, 922 miles of underground cable, 38 substations, a fleet of 219 vehicles and tracked/all-terrain vehicles, plus all the associated hardware required to operate the cooperative’s distribution system spread across five counties in the Eastern Upper Peninsula.
Regardless of how much electricity a particular family uses, the se costs of delivering power to that house is the same. As a not-for-profit electric cooperative, this concept is widely used to assure that the operational costs should be spread fairly and equitably across all of our members, regardless of the level of electricity use. That is why every member pays the facilities charge each month to cover basic operational costs. All members are charged the same amount for the cost of operation since all members benefit from the same service. In essence, this gives each co-op member an equal share in Cloverland’s operation based on the type of service.
The facility charge is an average cost to provide the first kWh of service to a member and it covers the cost the cost of owning, maintaining and supporting these facilities. These fixed costs do increase every year and this component of our rate needs to be periodically adjusted. The cooperative’s board of directors determine our rate structure and we are currently reviewing the results of our recent cost of service study to determine the appropriate facilities charge and rate per kwh to cover the increasing costs to maintain our infrastructure. We appreciate and value the investment that you make in the co-op each month, and we strive to use that investment wisely for the benefit of all members of our community.
Cloverland Electric Cooperative has proudly maintained safe, reliable and affordable electricity since 1938. At $.092 cents per kwh (residential), our rates are currently the lowest of Michigan cooperatives, and fifth lowest among all Upper Peninsula utilities (including investor owned, municipals and cooperatives). With any business, revenue needs to cover expenses. Our rates have held steady since 2017 despite increasing costs to provide power to our members.
Last fall, Cloverland retained an independent firm to conduct a comprehensive electric cost of service analysis (COSA). In our industry, these studies are standard procedure every few years to serve as a basis for rate structure. The COSA takes revenue requirements for a utility and allocates costs across the various customer classes – residential, business, commercial and industrial. Results ensure that proposed rates are fair and equitable for all members.
For perspective on our co-op, we maintain more than 43,000 meters for approximately 34,000 members with 4,000 miles of line across five counties in the Eastern Upper Peninsula. Residential members make up 82.1 percent of our total customers and 40.4 percent of energy sales. General service members comprise another 21 percent of energy and the remaining 38 percent are related to large business and governmental members.
The study was conducted in cooperation with Cloverland staff, led by our Chief Financial Officer, Lisa Castilho. In addition to her accounting team, many other staff members provided essential data for the study. The study reviewed ways to support operations through incremental steps toward cost-of-service to better prepare for future developments and insulate members from over-and under-collection risk for unexpected changes in member loads and demands.
Typically, after reviewing the results of a COSA and before proceeding with rate design changes, the governing body of a utility will consider how big of a disparity warrants rebalancing. I’ll be working with Cloverland’s board of directors over the next few months to examine our COSA results and how we can rebalance rates closer to COSA results. Rebalancing is achieved by more accurate matching rates to the actual cost to provide electric service to each class of customer. It could be a single increase/decrease or a graduated approach, where the rate class under-paying gets slightly higher rate increases than the class under-paying in the next general rate increase.
We will be fully transparent as we move forward to determine the impact to a potential new rate structure. Rebalancing rates is a good conservative step to prepare for the future with better aligned rates and a solid financial position. It ensures that we can continue to provide all members with safe, reliable and affordable electricity for years to come.
By Lisa Castilho
Cloverland plans to use cost of service analysis (COSA) results for potential rate changes in 2022, subject to board approval. The COSA takes the revenue requirement for our utility and seeks to equitably allocate those costs to the various customer classes of service. This analysis provides a determination of the level of revenue responsibility of each class of service and the adjustments required to meet the cost of service.
Since the last rate increase in 2017, our regular operating and capital projects costs have increased normally. However, over the last six months, unprecedented inflationary pressures led by freight, logistics, labor and material have impacted our vendors, contractors and suppliers. As a result, we’re enduring increases to prices and lead times on parts and other key components essential to keeping power flowing to our members.
The most common transformers we use have increased in price by 126 – 168% from last year and the best lead times we are offered are 50-60 weeks. We have already started placing orders for transformers to be delivered in 2023 but prices are not guaranteed until shipment.
The cost of wire is up 35% and we use tens of thousands of feet to maintain our power lines. Electrical conduit is in short supply and demand is high. Prices for lineman tools and equipment are up between 5-15% and the cost for parts we stock in inventory have increased between 3- 16%. Digital meter availability has also been a big challenge due to the worldwide shortage of microchips.
Economic recovery from the pandemic and strong demand for workers is a driving factor for increases in the cost of labor. Our contractors are facing the same price increases on materials and labor, so they are passing those costs along to us. We have multi-million dollar infrastructure projects that need to be completed over the next few years and we are seeing 15-25% increases in prices compared to previous years.
Domestic freight costs continue to increase and freight rates are up 34% versus 2020. Long distance trucking increased 26% versus 2020. We are also facing fuel surcharges increasing with oil prices 80% higher versus 2020.
Little relief is expected in the near term as challenges from COVID persist while demand remains extremely strong.
In December 2021, Cloverland Electric Cooperative announced the launch of a new generation and transmission (G&T) organization called American Rural Cooperative Power (ARC Power). Initially, Cloverland will leverage existing staff and resources for this entity that will be a separate cooperative organization. We are fortunate to have a management team with the expertise and knowledge to best manage power supply needs to drive economics and sound deployment of energy resources.
The primary long-term benefits of ARC Power will be stabilizing power supply costs and managing future rate increases for Cloverland and future members of ARC Power. In the short term, the formation of ARC Power allows Cloverland to manage existing generation while positioning the cooperative to capitalize on additional infrastructure opportunities. With the passing of the federal infrastructure bill, funding is available for renewable development including solar and wind farm projects, and local infrastructure improvements such as broadband, smart grid and electric vehicle infrastructure.
Additional benefits from ARC Power include managing renewable energy projects from design to completion, transporting energy to provide flexibility and participation on a larger scale, and integrating multiple sources to create a balanced and blended approach to renewables and energy deployment. As a separate non-profit cooperative power supply entity, Cloverland and other future members of ARC Power will have flexibility with all forms of energy production and transport and broadband on a national scale.
ARC Power allows us to be creative and proactive about the management and stabilization of power supply costs. It provides for an opportunity for us to be ‘shovel-ready’ as infrastructure dollars become available.
ARC Power also captures one of the key objectives of Michigan’s U.P. Energy Task Force encouraging all Upper Peninsula electric providers to participate in a region-wide electric plan. According to the Task Force, this planning effort should encompass all aspects of the U.P.’s electric supply, including forecasting electricity demand, evaluating the U.P.’s generation needs, and assessing grid reliability while mapping utility service territories and identifying opportunities and incentives for collaboration amongst providers.
Cloverland believes the best way to manage energy needs is through collaboration. As a result, the cooperative is taking the initiative to move the Task Force’s objective forward with ARC Power.
The launch of ARC Power provides an entity allowing rapid collaboration among local school districts, tribal entities, investor-owned utilities, other cooperatives, developers, economic development corporations, government, and more.
There are currently 62 G&T cooperatives across the United States serving 833 distribution cooperatives powering 42 million consumers nationwide. Forming a G&T organization provides Cloverland power supply flexibility to manage its future energy needs. Cloverland Electric’s purchased power contract extends to 2029, but with upcoming availability of federal dollars, the opportunity for funding infrastructure projects is critical within the next two years. The creation of ARC Power allows for greater flexibility incorporating viable long term power supply contracts into Cloverland Electric’s unique energy needs.
It’s a time of reflection. I’m grateful for my own family as well as our co-op family. At Cloverland Electric Cooperative, we’re driven by a sense of mission and purpose. Our team maintains a strong connection to our communities within the Eastern Upper Peninsula and our members. It is the collective work of all employees in all departments that makes our co-op run efficiently. Reflecting upon the accomplishments of 2021, I wanted to note select highlights for each department (all data is year to date).
To fill vacated positions, we onboarded nine new employees and promoted four employees internally. By the year’s end, we’ll celebrate 36 years of service for two retired employees. Among our new employees, we have three apprentices in St. Ignace (2) and DeTour (1). Our 119 employees across five divisions includes two new positions:
- Hydro plant electrician – As co-op needs grow, we recognized the importance of an additional employee within this classification to join the electrician we’ve had on staff.
- Operational systems specialist (currently recruiting) – as our system grows and our needs become more diverse, we recognize the need for this specialized position to ensure our infrastructure runs efficiently.
System control and dispatch operators worked through the storm and outage events through the year in their renowned professional and dedicated manner. In addition to restoring thousands of power outages, Cloverland’s line operations and right-of-way accomplishments include:
- Building and connecting 235 new services;
- Upgrading 344 existing service requests;
- Replacing 135 existing poles due to age/decay;
- Re-clearing approximately 300 miles of power line; and
- Completing 296 tree maintenance service orders.
Safety continues to be a cornerstone of our culture that requires ongoing training. All employees completed annual first aid, CPR and blood borne pathogen training and field employees completed forklift training. In coordination with Fishbeck Engineering, we started a five-year spill prevention control and counter measure plan. We purchased five automatic external defibrillators for trucks in each division and 10 personal voltage detectors for apprentices and the on-call lineman in each division.
As a prime example of teamwork that serves our mission, our generation, engineering and operations divisions completed an 8 MW generator replacement in Dafter, which switched inefficient generation with resources to enhance the co-op’s energy resource objectives. All teams had a challenging year with supply limitations, materials pricing and delays affecting ongoing maintenance schedules.
The 14-person hydro plant team ensured all generating assets are in top shape, including:
- Completion of a 2 ½ year generator excitation and governor upgrade project on all 74 turbine/generator units;
- Rewinding and refurbishment of four generators;
- Ongoing maintenance of the intake log boom, canal headgates and turbines; and
- Launched a comprehensive study to assess the options and associated costs/benefits to improve the efficiency of hydro turbines.
Our engineering staff focused on areas to improve the co-op’s ability to refine existing assets and new ones on the horizon that will contribute to greater safety and reliability of our distribution and transmission company systems. Specific highlights include:
- Completed construction of the new electrical distribution substation in the Cooks area. Once commissioned into service, this project will improve electrical system reliability and performance to the Garden Peninsula, Manistique and Gulliver;
- Continued with construction progress to install new communications and real-time control systems throughout the electrical distribution system to provide greater system monitoring and control of distribution equipment;
- Assisted the American Transmission Company to remove old 138 kV electrical submarine cables and systems across the Straits of Mackinac and assisting with replacement submarine cables;
- Acquired new unmanned aerial vehicles (“drones”) and FAA certified a system engineer to initiate patrol and maintenance flights on co-op assets; and
- Installed and commissioned equipment allowing for the Heritage Sustainable Energy solar generation facility to interconnect with our distribution system, providing a great renewable energy resource to the co-op’s renewable energy profile.
Our information technology (IT) department completed primary datacenter equipment replacements and upgrades. They transitioned to alternate vendors for an annual cost reduction while expanding the ability for our workforce to stay connected with video and messaging software. In addition, the IT team upgraded 20 employees from desktop PCs to laptop solutions to further support a hybrid work environment.
Our business development and communications team achieved two FAA drone certifications, researched and coordinated electric vehicle resources for members, created a digital welcome packet for new members, expanded our social media channels to include YouTube and completed three “Tomorrow’s Talent” videos that showcase three co-op career paths. Read more about the hydroelectricity exhibit they created on page 11. They also enhanced promotion, fundraising and participation with our non-profit foundation, Cloverland Cares, which awarded $6,000 in scholarships and $2,800 in grants to food banks this year
Our member services team responded to more than 34,000 calls, processed 6,216 service orders and 288,411 payments – and that’s not including fourth quarter data!
Our accounting department completed another year with a clean audit and no adjustments. As of August 31, they processed 484 work orders valued at $2,243,362. Year to date, our accounts payable team has processed 6,675 invoices and 3,931 checks and issued 2,300 paychecks.
Our management team is blessed to work with teams who take lots of pride in the work they do each day. At the heart of these achievements is you––the members we proudly serve. I’m thankful for the positive impact we continue to make despite challenges we face with increasing costs for materials, power supply and more.
On behalf of our Cloverland team across the Eastern Upper Peninsula, we wish you a bright holiday season.
October is National Co-op Month when we celebrate the principles that make being part of a rural electric cooperative so unique. It’s an ideal time to inform our membership about all the innovation we’ve focused on over the past year. In addition to our steadfast mission to provide safe, reliable and affordable electricity, we’re always innovating. Continually working to make improvements to Cloverland’s infrastructure and seeking ways to conserve costs involves many exciting endeavors to ultimately benefit you – our 34,000 members across the Eastern Upper Peninsula (EUP). Here’s a summary of both new and ongoing initiatives:
BROADBAND ACTIVITY – As previously announced, Cloverland participated in the Rural Digital Opportunity Fund (RDOF) auction. The winner of RDOF funding in the Eastern Upper Peninsula is Atlantic Engineering Group (AEG) of Atlanta, GA. AEG is actively working with EUP entities to determine how they will roll out the program. We are working closely with AEG to support their installation needs. Cloverland is investigating the potential for ownership of our own fiberoptic system to advance our reliability and cybersecurity initiatives through direct communication with our substations. We are weighing the costs of ownership versus our current strategy of leasing from existing providers.
TARIFF REVIEW – Since acquiring Edison Sault Electric in 2010, Cloverland has maintained two rate books. To further unify our cooperative, we created a cross-functional team to review our tariffs and merge them as one rate book. This endeavor aligns well with a cost-of-service study planned for this fall. Co-ops typically conduct these studies every few years to assess how rates align with expenditures required to maintain reliable infrastructure. Cloverland’s last cost-of-service-study was completed in 2017. We aim to complete this study by the end of year, then assess results to update our rate structure in the first quarter of 2022.
ELECTRIC VEHICLE (EV) BATTERY CHARGING NETWORKS – Interest in deploying EV chargers across our service territory continues to rise. Since our current power supply contract penalizes us for demand, we do not have the ability to provide discounts and incentives at this time. However, we are connecting our members interested in EV chargers with the Michigan Department of Environment, Great Lakes and Energy (EGLE) to maximize their incentives. Our key accounts program is supporting members by connecting them with EV resources and helping them understand the technology so they can choose the right system for their needs. As part of our cost-of-service study, we will review the possibility of creating an EV rate.
INFRASTRUCTURE OPPORTUNITIES – Based on the increases in infrastructure grants for our country, Cloverland is working closely with our lobbying firm, as well as our member-partners in assessing what funding opportunities are available at the state and federal level to maximize the investment back into Cloverland’s system for repairs, efficiency and reliability.
HYDRO EFFICIENCY STUDY – Our hydro plant produces approximately one third of the power for our members. Despite periodic water flow restrictions set by the International Joint Commission and Corps of Engineers, we maximize the output of this historic facility to produce as many megawatt hours as possible. To ensure we are utilizing our hydro plant in the most efficient manner, we are conducting a study to examine its efficiency. Aside from clean energy, hydroelectricity has many benefits for our fuel mix – it saves us from having to purchase power at a much higher cost through our supply contract. The Corps of Engineers’ hydro facility produces approximately 20 percent of the energy for our system and combined with Cloverland’s hydro facility (approximately 30 percent), hydroelectricity covers nearly half of our energy supply for our EUP members.
POWER SUPPLY AND GENERATION – Midcontinent Independent System Operator (MISO) manages the power grid to ensure there is no collapse of infrastructure. Cloverland is a MISO participant meaning that the co-op pays MISO to manage the nodes where our power is delivered. In 2021, we have seen significant margin impact due to congestion at these nodes, so we are investigating a financial transmission rights concept to serve as an insurance program to alleviate variance in MISO bills through location marginal pricing (LMP) congestion pricing. Based on the supply (of generation) and demand for (load) electricity in each market, LMP is calculated in real time at thousands of market nodes. The LMP value is a calculated combination of the electricity price, congestion on the transmission grid and line losses.
MONTHLY DEMAND MITIGATION – Cloverland continues to investigate ways to lower our monthly demand as its impact is significant on our electric rates. To compound matters, during the summer months, Cloverland is required to pay a minimum threshold from a capacity standpoint as part of our long-term power supply agreement. For June, July and August, Cloverland is obligated to pay this minimum based on a formula rate. In essence, we are required to pay for capacity that we are not using due to our contract terms. We are working to reduce this annual burden as its impacts remain in effect through the end of our contract (2029).
SOLAR PROJECT – Public Utility Regulatory Policies Act (PURPA) is a federal act that allowed us to include Heritage Solar Farm (Pickford) on our system. Cloverland continues to fully implement this project as part of our energy portfolio and maximize its benefits.
As a member of a democratically controlled cooperative, you are welcome to voice your concerns and questions to your district’s directors. Our board meetings continue to be open to our members or you can voice your comments through our website: https://www.cloverland.com/about-us/board-of-directors/board-meetings/
I hope this summary informs you about the great work our 118 employees endeavor to do each day. We’re proud to serve the EUP and celebrate your membership with Cloverland during National Co-op Month and beyond!
With greater focus on energy costs in the Upper Peninsula, we want to remind our members why Cloverland Electric is different––because we’re a cooperative. Our business model sets us apart from other utilities because we adhere to seven guiding cooperative principles that reflect core values of honesty, transparency, equity, inclusiveness and service to the greater good of the community.
Electric cooperatives, including Cloverland, have a unique and storied place in our country’s history. We democratized the American dream by bringing electricity to rural areas when for profit electric companies determined the effort too costly. Back then, cities were electrified, and rural areas were not, creating the original rural-urban divide. Newly established electric lines helped power economic opportunity in rural areas. Today, that spirit of equity and inclusion is a vital part of our co-op DNA.
Equal access for all
When our electric co-op was founded, each member contributed an equal share to gain access to electricity that benefited individual families as well as the larger local community. Each member had an equal vote in co-op matters. That sense of equity and inclusion is still how we operate today. Cloverland was built by and belongs to the diverse communities and consumer-members we serve. Membership is open to everyone in our service territory, regardless of race, religion, age, disability, gender identity, language, political perspective or socioeconomic status.
By virtue of paying your electric bill each month, you’re a member of the co-op, and every member has an equal voice and vote when it comes to co-op governance. This ties back to our guiding principles of equitable economic participation and democratic control of the co-op.
We encourage all members to vote in Cloverland’s director elections every May. We invite all members to call-in and participate in monthly board meetings.
We know members of our community have different needs and perspectives, and we welcome diverse views on all issues under consideration by the co-op. The more viewpoints we hear, the better we are able to reflect the needs of all corners of our community.
While our top priority is providing safe, reliable and affordable energy, we also want to be a catalyst for good in our community. Since we are your local electric cooperative, co-op revenues stay right here in our community. In turn, we invest in our diverse community base through scholarship programs, charitable giving, educational programs and more. We strive to make long-term decisions that improve and enrich the communities we serve.
While today’s world is radically different than it was when Cloverland was founded in 1938, our original seven cooperative values remain just as relevant today. We recognize that today’s co-op members expect more, and my pledge to you–– the members we proudly serve––is to promote a cooperative culture of inclusion, diversity and equity for all.
One of the factors we all enjoy most about the Eastern Upper Peninsula (EUP) is the natural scenery that surrounds us. We are fortunate to have so many trees that offer beauty, shade and a habitat for birds and wildlife. We know our members appreciate our EUP community for many of the same reasons. At Cloverland Electric, we strive to balance maintaining beautiful surroundings and ensuring a reliable power supply by keeping power lines clear in rights of way (ROW).
While we recognize and appreciate the beauty of trees, there are three main benefits to tree trimming in ROW areas: safety, reliability and affordability. However, before detailing these reasons, let me explain how a “right of way” may impact you. A right of way is the land we use to construct, maintain, replace or repair underground and overhead power lines. Rights of way enable the co-op to provide clearance from trees and other obstructions that could hinder the power line installation, maintenance or operation. ROW areas are typically on public lands or located near a business or home. Regardless, Cloverland must be able to maintain the power lines above and below the ROW. The overall goal of our vegetation management program is to provide reliable power to our members while maintaining the beauty of our community. Proactive vegetation management benefits coop members in three tangible ways.
First and foremost, we care about our members and put their safety and that of our lineworkers above all else. Overgrown vegetation and trees pose a risk to power lines. For example, if trees are touching power lines in our members’ yards, they can pose grave danger to families. If children can access those trees, they can potentially climb into a danger zone. Electricity can arc, or jump, from a power line to a nearby conductor like a tree. A proactive approach also diminishes the chances of fallen branches or trees during severe weather events that make it more complicated and dangerous for lineworkers to restore power.
One of the greatest benefits of a smart vegetation management program is reliability. Strategic tree trimming reduces the frequency of downed trees on lines causing power outages. Generally speaking, healthy trees don’t fall on power lines, and clear lines don’t cause problems. Proactive trimming and pruning keep lines clear to promote reliability.
Last fall, we commissioned a study to evaluate our vegetation management program which includes 3,000 miles of primary overhead ROW and 1002 circuits across our five-county service territory that has been traditionally maintained on a seven-year cycle. The study determined our system would benefit from a fiveyear cycle. As a result, we increased our tree trimming from an average of 250-275 miles annually to 415 miles of ROW starting this year.
As you know, Cloverland is a not-for-profit cooperative, which means we strive to keep our costs in check to keep our rates affordable. This factor extends to our approach to vegetation management. If trees grow too close to power lines, the potential for costly repairs also increases. Effective tree trimming and other vegetation management efforts keep costs down for everyone. Our E.U.P. community is a special place. We appreciate the beauty trees afford, yet we also know our community depends on us to provide reliable energy. Through vegetation management, we are better able to keep power lines clear, prepare for future weather events and secure the reliability of our grid.
If you’re like most Americans, you’re interested in saving money on energy costs and doing your part to help the environment. Wouldn’t it be great if you could do both? Well, you can!
It’s through a concept called “beneficial electrification.” This utility industry term means the innovations in energy technologies are creating new ways to use electricity instead of on-site fossil fuels, such as propane, natural gas and fuel oil, in a way that reduces overall emissions and energy costs. Beneficial electrification makes especially good sense with Cloverland Electric Cooperative’s low rates (the third lowest in the Upper Peninsula and the lowest among all electric cooperatives in Michigan.)
In essence, by virtue of being plugged into the grid, the environmental performance of electric devices improves over time. As Cloverland and other utilities shift to more options that include renewable energy sources to make existing generation technologies cleaner, electricity will require less fossil fuel per kilowatt-hour of energy produced. Electrons that flow through our wires come from two renewable sources – Cloverland’s hydro plant and the Corps of Engineers’ hydro plant located at the Soo Locks.
So, here’s how this concept impacts you. It means that electric appliances such as your water heater, clothes dryer, oven and even your lawn care equipment have the potential to become greener. When Cloverland takes advantage of advances in technology and the market at the generation point (how the electricity is produced), it means those efficiencies are inherently passed along to you, the consumer-member.
Electricity is getting cleaner.
Since large appliances have a typical lifespan of about 10 years, it means that you can benefit from the flexibility of the grid in addition to the increased efficiency of the particular appliance. In other words, the high-efficiency electric oven you have today could be powered by renewable sources in the near future. It would not be the case with gas appliances where you are essentially locked into the technology of that gas appliance for a 10-year lifespan.
As Cloverland can tap into more renewable options in the future, your electric appliance has the potential to become greener and more energy-efficient. The only way you would be able to benefit from this trend is through an electric appliance.
Small steps to help the environment.
For consumers and homeowners looking for more environmentally-friendly options, choosing electric appliances, tools and cars over those powered by fossil fuels is an easy solution. Whether through electric lawnmowers, blowers and weed whackers (plugin or rechargeable) or through electric water heaters and other appliances, beneficial electrification is a means to reducing greenhouse gases and helping our environment. It can also translate into a better quality of life. For example, when you can trade the loud rumble of a gas-powered mower or blower for the quiet efficiency of electric versions, you eliminate exhaust emissions and unpleasant noise.
How we’re doing our part to help the environment
As the overall energy sector continues to evolve, Cloverland is striving to take advantage of the advances in technology and the opportunities of the market as our current power supply contract allows. This means Cloverland can leverage the flexibility of the grid to offer a wider range of renewable power selections as we continue to bring safe, reliable and affordable power to our community.
We also promote energy efficiency through programs like Michigan-energy.org, which includes rebates for appliances to save you money. In addition, through our free SmartHub app, we offer our members a convenient way to manage and monitor their daily energy use.
We care about our community because we live here too. I hope you’ll reach out to Cloverland Electric, your trusted energy partner, to learn about ways to reduce your energy use. When you participate in the energy efficiency programs and incentives we offer, you’re doing your part to save energy and better our environment. While each member’s reduction might seem minimal, together, small changes add up to significant savings of money and emissions. That means a brighter future
This New Year is likely a welcome and refreshing start after a highly challenging year for all of us. Certainly, 2020 evolved with continual change through the pandemic, yet Cloverland Electric remained steadfast in our mission to keep members powered with safe and reliable service. Most of us spent more time at home last year, and as a result, likely consumed more energy. Our cooperative is fortunate to maintain low rates that have held steady since 2017.
Take a look at how Cloverland’s rates compare to other utilities in the Upper Peninsula.
In society today, many people don’t think much about the electricity they use. They expect lights to turn on when they flip the switch and all their electronics to function daily. Since electricity is so abundant, it’s common not to think much about it. The only time we really think about electricity is when the power goes out or perhaps when the monthly bill arrives.
Given how electricity powers our modern lifestyle every day, it’s a great value, especially when compared to other common services and expenses. For example, think back to the cost of a gallon of gasoline 20 years ago. Consider the cost of groceries or a cup of your favorite specialty coffee from a few years back. In comparison, the cost of electricity has remained largely flat, unlike most other consumer goods.
Like many of you, I have a cell phone to stay connected, and I subscribe to cable channels so I can enjoy more viewing options. Many of us consider these necessities for modern day life. We can see what we’re getting for our money and we pay the price for those services. In contrast, when we use electricity, we don’t necessarily “see” all that we’re getting for our money.
Considering what electricity does for us, it’s a tremendous value for our quality of life as well as our budgets. For comparison, consider that the average rent increase was nearly 4 percent (from 2014-2019) according to the Bureau of Labor Statistics Consumer Price Index (CPI). The cost of medical care was increased 3 percent during this time and education was not too far behind at 2.6 percent. So, where did electricity rank? According to the CPI, electricity increased by less than half a percentage point, 0.4 percent.
Considering electricity is something that we all use around the clock, I’m very proud of our team of 115 employees who work hard daily to maintain a strong track record to assure that our members have access to the electricity they need, while maintaining the lowest cost possible. At the same time, we are striving to increase our service reliability by reducing outages to the best of our ability. Since trees are the primary cause of outages in our service territory, we are stepping up our vegetation management program by increasing our tree trimming schedule to better manage key problem areas. We are continually working to improve our operations to ensure a smarter grid, adding generation where possible, all while maintaining some of the lowest rates in the state.
Cloverland provides the reliable service you expect and deserve as valued members of the co-op. As your trusted energy provider, we want to help you save energy and money. We recognize the past year was challenging for many of our business, farm and residential members and we’re here to help. If you have questions about your account or are looking for ways to save energy, please contact our Energy Optimization team at 877-296-4319. Cloverland Electric is your electric co-op and our sole purpose is to serve you and the needs of our community. That’s everyday value.
2020 will no doubt mark a memorable year in the history books for all of us. Despite the setback, the pandemic imposed on our original plans to start this decade, the change in how we worked allowed us to shift efforts to planning and focusing more strategically on our priorities once we could fully resume normal operations.
Here is a summary of the positive progress our cooperative made this year:
- Financial gains – Cloverland continues to make strides towards a stronger financial foundation. We managed the cooperative utilizing operating revenue to avoid taking on additional debt. We have also paid off all short-term debt that was utilized due to the Thanksgiving 2019 and New Year’s 2020 storms.
- Improved equity ratio – As equity ratio is essentially our credit rating in the cooperative world, improving it is vital to our success. In 2019, we improved our ratio from roughly 20% to 22.5% and in 2020, we increased our ratio to nearly 25.5% year to date (October).
- Capital credits distribution – We paid out $500,000 in capital credits in 2020 to members on record with Cloverland in 1993. The last time Cloverland paid out capital credits was 2016, and we continue to work toward a sustainable program to pay out capital credits annually.
- Strategic studies – In 2020, Cloverland commissioned three important studies to help direct our activities and inform our decisions for long-term planning. These studies included a review of our SCADA system, right-of-way & vegetation maintenance program and an analysis of the capital needs for our hydroelectric facility.
- Power supply enhancements – We made strides in examining opportunities to bring financial value to the membership through effective management of our power supply.
- Broadband review – We analyzed the opportunity for a broadband program and applied for federal funding through the Rural Digital Opportunity Fund. Cloverland continues to investigate the possibility of a cooperative broadband system.
- Executive transition – Aaron Wallin’s departure in September allowed us to restructure the Chief Financial Officer (CFO) and power marketing role. I am pleased to name Lisa Castilho as Cloverland’s next CFO. With change comes opportunity and I look forward to working with Lisa to continue strengthening our financial structure.
- Charitable giving – Our non-profit entity, Cloverland Cares, officially launched with the mission to support E.U.P. food banks and scholarships to benefit our members seeking advanced education at E.U.P. schools. We received a $10,000 grant through CoBank and will continue to generate funds through members who opt-in to round up their bills each month. If you wish to contribute, I invite you join our efforts to give back to the communities we serve by opting-in to Cloverland Cares.
- Co-op family – Finally, I am proud of the way our staff of 115 employees in five divisions across the Eastern Upper Peninsula continually adapted throughout the pandemic. Although our work circumstances shifted with necessary precautions to keep everyone healthy, we remained steadfast in our goal to provide our members with safe, reliable and affordable electricity.
2020 has been a remarkable year in many respects. Regardless of the great uncertainty imposed by the pandemic, as an essential workforce, we remain committed to keeping you powered through a historical year.
Wishing all Cloverland members a safe and healthy holiday season!
October is National Co-op Month and I applaud both our employees and members for all the ways you have adapted to change. Seven months ago, we never used the word COVID and now this five-letter word has dramatically changed our lives. However, our 115 employees continue to work hard to make sure your lights are on during this trying time. While COVID restricted some of our construction activity, we shifted attention to planning efforts to allow our cooperative to continue making positive progress.
One of our key goals is providing reliable service to our members. One factor that truly makes the U.P. beautiful also hinders reliability: trees. In July, we commissioned a study to review our vegetation management program, which currently covers 88 circuits over a seven-year period to trim trees along our 4,000 miles of power lines. The study will provide Cloverland with best practices for a successful program and determine program costs that allow for greater budget control. We expect this study to be completed by October.
Another item we are reviewing is the use of technology to better respond to outages. Cloverland purchased a SCADA (Supervisory Control and Data Acquisition) system a few years ago that is not fully optimized yet. We retained a consultant with the expertise to fully implement the system for an in-depth analysis of our electric grid in real-time.
One of Cloverland’s greatest assets is our hydroelectric plant. This iconic facility has been operational for nearly 120 years and continues to bring Cloverland members value through one of the lowest per kWh rates in Michigan. Cloverland periodically performs an assessment of the hydro plant to determine necessary improvements. Our previous facility audit is outdated so the board of directors authorized staff to perform an assessment in 2020. We commissioned the study in July, and it is scheduled to be complete by year-end. This study will help staff better budget capital improvements to provide a long- term impact.
Together, these three studies will help us better understand the financial needs necessary to continually improve our infrastructure. It also informs our decisions with up-to-date data so we can plan and budget accordingly. It’s all part of fulfilling our mission to provide you, our members, with safe, reliable, and affordable energy.
Like most cooperatives with a spring Annual Meeting of the Members, Cloverland Electric transitioned to a virtual meeting this year due to the COVID-19 pandemic. I wanted to provide the highlights that CFO and Director of Power Marketing and Regulatory Affairs, Aaron Wallin, and I shared with our members in our June 4 Virtual Annual Meeting of the Members:
- Despite seven storms that classified as major events in 2019, our cooperative’s financial performance grew stronger. Our equity ratio improved to nearly 23% (closer to the target equity ratio of 27.5% set in our 2018 strategic planning) which gives us greater capacity to borrow money for capital expenditures with less interest. Financial health is critical to our cooperative for debt/creditworthiness and credit support towards power supply. In 2019, we also reduced outstanding debt by $7.2 million and accumulated no new debt. We have managed our finances to generate one of the best years in Cloverland’s history – without raising rates.
- In 2019, Cloverland employees achieved zero lost-time injuries nor any OSHA recordable injuries, even through a series of storms that wreaked havoc across our E.U.P. service territory.
- In accordance with our 2019 strategic vision, we looked inward to improve our cooperative with a review of our power supply, assessed generation opportunities, implemented purchasing policies for better control, and created a sustainable way to pay out capital credits. Looking outward, we added a new key accounts specialist role for greater focus on our key accounts and economic development opportunities for our area. To this end, we are currently researching the potential to bring broadband access to our service territory.
- Cloverland has been participating in statewide electric utility activities to ensure safe, reliable service throughout the pandemic. To ensure reliable service and further assist our members, we reviewed our mutual aid contracts, looked for funding opportunities, launched Cloverland Cares as a charitable non-profit, and extended the disconnect date for non-payment.
- To improve operational efficiency and reliability, we initiated 2020 studies for our vegetation management program, hydro facility, and a SCADA system review.
- Our 2020 strategic vision continues to focus on assessing our power supply options and exploring generation opportunities that provide significant financial and reliability benefits.
Although the pandemic temporarily shifted our priorities, it has not disrupted our momentum to seek new opportunities while growing our U.P. partnerships and initiatives. I look forward to keeping our members updated on all of these exciting initiatives for our cooperative.
Michael (Mike) Heise
While there is no scientific support for the belief that bad things “come in threes,” in my first year at Cloverland, it seems to hold true. Last November’s storm knocked out power to thousands of our members over Thanksgiving. The New Year’s ice and windstorm caused interruptions to more than half our members. Now we are in the midst of a pandemic which has not been seen in a century.
Storm events come and go and the outcome can be dealt with swiftly with minor impact to our members. The COVID-19 pandemic holds many unknowns, making it difficult to determine how to manage it with any certainty. Unlike a storm, this pandemic does not allow us to send our tremendous crews into a ferocious storm to clear trees and restore power. The restoration of our communities and livelihoods for our members is certainly on the forefront of our minds.
To ensure your co-op could meet the challenges presented from the pandemic’s onset, we established an internal COVID-19 task force whose efforts continue daily. Focusing on the safety of our members and staff, we quickly implemented teleworking and social distancing protocols while providing safe and reliable service. We continue to monitor and adapt operations according to state and federal recommendations.
It has been Cloverland’s practice to follow state guidelines for disconnecting services for non-payment (traditionally April 15). As that date rapidly approached, Cloverland extended the disconnect of services for non-payment until at least April 30 to align with the President’s social distancing directive. Shortly after that extension, Cloverland modified the date through the end of May as the pandemic showed no signs of letting up, and the Governor’s Executive Orders for social distancing were expanded.
As a not-for-profit electric co-op, our rates are designed to keep costs low for our members, yet still allow us to meet minimum borrowing requirements after subtracting operating costs. It means our margins (or “profit” for investor-owned utilities) are typically minimal. Despite the challenge, staff is working closely with MECA, NRECA, MPSC, USDA/RUS, and state and federal representatives to identify every available resource to help members impacted by this pandemic. We are working closely with our board of directors to monitor developments and seek opportunities to balance our financial requirements with those of our members.
To get through this challenging time, it will require efforts by all. If it is difficult to pay your electric bill, I urge you to contact our member services team (Monday through Friday, 8 a.m. to 4:30 p.m. at (800) 562-4953 to discuss flexible payment options and resources for assistance. Recently, President Trump signed a $2 trillion-dollar package providing financial support to those impacted by COVID-19. Cloverland published guidance for those in need through our website, social media channels, and member services team. We will continue to refine guidance as additional programs become available. It is important that members who have an immediate need utilize available government programs first. If possible, consider making partial payments on your balance to avoid a large multi-month balance when the pandemic subsides.
This COVID-19 pandemic came with no playbook, yet working together in true co-op spirit, we will get through this unprecedented time in our history. I am proud to serve all 33,500 members of our co-op and thank you for your continued understanding and support.
Michael (Mike) Heise
I recently heard a great motivational speech by professional athlete Tim Tebow that focused on how outcomes can vary when we make decisions that are based on our emotions versus our convictions. The message he was conveying is that most people tend to live their lives basing decisions on their emotions which can be negatively biased if we are tired or had a bad day. However, if we all lived our lives driven by our convictions, imagine what we could accomplish together.
At the September 2019 strategic retreat with the board of directors, Cloverland staff recommended modifying the cooperative’s vision and mission statement to better align with the priorities being established for the cooperative. Vision and mission statements are both necessary for establishing goals and priorities for an organization. A vision statement is what an organization aspires to and the mission statement describes how the organization will ultimately get there. Together, these statements serve as the guiding principles for an organization when considering all business decisions.
At the January 2020 regular meeting of the board, the directors approved the following amended vision and mission statements:
Vision: Cloverland Electric Cooperative, through local control, will improve the quality of life for its members by proactively managing their unique energy needs.
Mission: Cloverland Electric Cooperative is a not-for-profit, member-owned utility focused on delivering exceptional services through the generation and safe delivery of reliable and affordable energy solutions that encourages growth, foster innovation, and strengthen the communities we serve.
Working closely with the board of directors, the cooperative is making great strides in improving transparency, highlighting the value of local generation, improving our financial position, and considering the expansion of member programs. As we usher in a new decade, and new era, the changes to our vision and mission provide a renewed focus on the strengths of our member-owned organization as well as our conviction for serving the unique energy needs of our members to help strengthen the communities we serve.
With our corrected “20-20 vision” and Cloverland’s renewed conviction to upholding our cooperative guiding principles, we can do great things together! This New Year’s storm was a great example of the value of a cooperative. On behalf of the organization, I would like to take this opportunity to thank our members for the outpouring of support as we dealt with a storm of historic proportions.
Michael (Mike) Heise
Cloverland’s message in its 2018 Annual Report was entitled “Strength in Numbers.” The message delivered the board’s renewed focus on the cooperative’s long-term financial health. Toward that purpose, the board and management team developed financial and operational goals measured by standard industry metrics to guide decision making and establish a strong financial foundation. At the heart of the established goals were the overriding cooperative goals of providing safe, reliable, and affordable electricity.
Budget Highlights – It Starts With a Map
As Suze Orman is credited with saying “It’s impossible to map out a route to your destination if you don’t know where you’re starting from.” The board recognized that the cooperative’s debt position was costing hundreds of thousands per year in unnecessary interest expense and hindering its ability to spend the funds necessary to maintain its system. With a focus on debt reduction, as measured by an increase in the cooperative’s equity ratio toward a goal of 30%, the board approved a 2019 budget that focused spending on improving long term reliability, without increasing the rates paid by our members. In the 2019 Annual Report (to be released April 2020), we are anticipating announcing financial results that surpassed expectations.
For 2020, we look to continue along the same path of financial improvement with a focus on long-term reliability. With 45 percent of all outages caused by trees on lines, we have increased our vegetation management budget with a goal of managing nearly 4,000 miles of distribution lines on a seven-year cycle. Also, we will conduct a right-of-way study to determine where we can identify greater efficiencies while controlling the cost of our vegetation management plan. The cooperative will also complete studies to assess the efficiency and condition of the hydroelectric plant focusing on maximizing efficiency cost-effectively.
With these specific goals in mind, Cloverland’s Board of Directors unanimously approved the 2020 budget at the October 2019 meeting. This budget will allow Cloverland to continue to build on the financial progress of 2019 while continuing our efforts to improve the reliability of our system. While we are proud of the progress made so far, we recognize there is more road yet to travel.
Capital Credits – Returning Your Investment
In consultation with senior management, the board elected not to retire capital credits in 2019. The board and management understand that retirement of capital credits, which represents a return of funds members have paid to support the cooperative’s growth, is an important facet of cooperative membership and a measure of success. However, funding capital credits by increasing an already heavy debt burden is not a sensible strategy. This factor is why Cloverland staff, working closely with the board, has a goal to fund capital credit retirements without negatively impacting the long-term goal of an optimal equity ratio. With expected strong financial performance in 2019 and a budget that continues to strengthen the financial foundation, we have budgeted $500,000 for capital credit retirement for 2020. While this amount is less than what is needed to revolve equity capital on a 30-year cycle, it is a strong first step toward a consistent and sustainable capital credit retirement program.
Michael (Mike) Heise
It’s hard to believe how fast the past nine months have gone by. Since starting In February, I’ve been working to gain a better understanding of the unique energy needs of our members and the ways In which we can better meet them In the future. It’s amazing what we learn by simply listening and observing. Both are crucial to our operation as a co-op, so we can deliver the best services to you.
Listening improves understanding, builds trust, strengthens relationships, and fosters cooperation. It also helps us to strategically plan for the future in a way that best serves the needs of a changing membership demographic.
In September, the board of directors, members of our senior leadership team, and myself participated in a very productive strategic planning session to develop goals and objectives that will reshape our co-op. In the coming months, senior leadership will continue to work with the board of directors to evaluate the needs of the members and ensure they are taken into account as we move forward.
Ultimately, our goal is to provide exceptional service through the generation and safe delivery of reliable and affordable energy solutions. That’s why we’re reviewing a variety of strategic opportunities that will strengthen the co-op’s financial position and enable it to better serve you.
Using a ‘nothing is off the table’ approach, we can consider all opportunities and determine how they best align with our long-range goals and objectives.
As we move forward, it’s important that we hear from you and you share your thoughts and ideas with us. I welcome your calls and emails and so do your district directors.
We also encourage you to attend our monthly board meetings to express concerns, ask questions, or simply listen and learn more about your co-op. When we understand the needs of our membership, we’re in a better position to deliver results that do not disappoint.
As the end of the year rapidly draws near, I am excited for the new year and moving forward with a strategic plan with you in mind. Meantime, from our family of employees, and the board of directors, we wish you a safe and enjoyable holiday season.
Michael (Mike) Heise
Every October, cooperatives from all sectors across the country celebrate National Cooperative Month. The purpose of this annual celebration is to recognize the cooperative difference and allow Cloverland Electric Cooperative to highlight our purpose.
Celebrating National Cooperative Month showcases our unique business model, which is based on the Seven Cooperative Principles: Voluntary and Open Membership; Democratic Member Control; Members’ Economic Participation; Autonomy and Independence; Education, Training, and Information; Cooperation Among Cooperatives; and Concern for Community.
For co-op employees and members that are familiar with the principles, the month of October is a great opportunity to renew our connection to each other and the purpose of our co-op.
To celebrate National Cooperative Month, look for a variety of programs we offer – from energy optimization savings to time-saving services like Auto Pay plus promotional contests to celebrate – you – our members.
In the U.S., there are more than 29,000 co-ops serving in every single industry. Many co-ops from different sectors join together during the month of October to promote the benefits that cooperatives provided to their members and the communities they serve.
There are more co-ops in our local community than most people realize. Soo Co-op Credit Union, Parker’s Ace Hardware, Les Cheneaux Area Artisan Cooperative, Soo Co-op Nursery, plus agricultural co-ops, food co-ops, and more. Last month, we featured a Marquette Brewery Club that used the co-op business model to open a brewery. Co-ops are even represented on the shelves at our local grocery stores, such as Land O’Lakes, Welch’s, Organic Valley, Cabot Cheese, Sunkist, Ocean Spray, and many more.
According to the latest data, more than 130 million people belong to a co-op in the U.S. alone, and co-ops employ more than 2 million Americans.
This factor speaks to the heart of why we must take every opportunity to celebrate and to promote the value of the cooperative business model. Participate in these celebrations by purchasing co-op products and look to do business with co-ops right here in our local community. We celebrate you as an active member of Cloverland Electric Cooperative!
Michael (Mike) Heise