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
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