[Congressional Record (Bound Edition), Volume 148 (2002), Part 3]
[Extensions of Remarks]
[Pages 3186-3187]
[From the U.S. Government Publishing Office, www.gpo.gov]




         RECOGNIZING THE DELTA-MONTROSE ELECTRICAL ASSOCIATION

                                 ______
                                 

                            HON. MARK UDALL

                              of colorado

                    in the house of representatives

                       Wednesday, March 13, 2002

  Mr. UDALL of Colorado. Mr. Speaker, I wish to insert into the Record 
a March 5, 2001 BusinessWeek article that highlights the work of the 
Delta-Montrose Electrical Association (DMEA), a rural energy 
cooperative in southwestern Colorado.
  The DMEA has been around since 1938, yet it is reinventing itself to 
be able to address 21st century challenges of deregulation and 
technological change. Its investments in research and development have 
resulted in innovative services it can offer its customers in the way 
of combined heating and cooling and fuel cell power for rural areas. In 
the near future, DMEA hopes to use Internet connectivity to optimize 
customers' energy use and reduce costs.
  As the article points out, instead of trying to dominate the market, 
DMEA's co-op culture means that DMEA shares what it knows with other 
cooperatives around the country. I hope DMEA's good ideas and hard work 
get the attention they deserve.


[[Page 3187]]

                    Cutting Edge in Rural Colorado?

                           (By Hal Clifford)

       In 5 or 10 years, your relationship with your electrical 
     utility may be different from what it is now. For a fixed 
     fee, the power company might heat and cool your home with a 
     geothermal heat pump it has buried in your backyard. Or your 
     utility may offer to sell you electricity from a superclean 
     fuel cell it installs in your garage, then buy back any 
     excess juice you don't consume. The power company might even 
     link itself via the Internet to your most energy-hungry 
     appliances--maybe your air conditioner or water heater--so 
     that it can switch them to a power-saver mode when necessary.
       You might expect these sorts of high-tech innovations to 
     pop up in energy-starved Silicon Valley, the brainchild of 
     some tech-savvy venture capitalist. You'd be wrong. First out 
     of the gate is the Delta-Montrose Electrical Assn. (DMEA), a 
     64-year old rural energy cooperative in southwestern 
     Colorado. And many of the new options are quickly gaining 
     popularity with the co-op's 28,000 members.
       By focusing on energy services such as heating and cooling, 
     rather than straightforward power generation, DMEA is 
     transforming its once-quiet business. Faster than most power 
     players, DMEA is plugging into new technologies. In some 
     cases, it's also forming partnerships with companies 
     developing promising technologies--an unusual step for a 
     once-unadventurous co-op. ``I think they're one of the most 
     innovative co-ops in the country,'' says Peggy Plate, an 
     energy services manager for the Energy Dept.'s Western Area 
     Power Administration. If these strategies pay off, big 
     utilities may soon find themselves looking to DMEA for tips 
     on how to prosper in a new era of energy deregulation.


                                NEW WAVE

       For now, Delta-Montrose is no more than a speck on anyone's 
     radar. But the co-op is intensely focused on finding creative 
     ways to deliver electric services to its customers. Like many 
     of the other 950 or so consumer-owned electric cooperatives 
     in the U.S., DMEA dates back to the Depression (table, page 
     106D). Its roots, modest size, and simple mission nurtured a 
     conservative business culture. But in 1997, the co-op's 
     managers and board took the measure of the coming wave of 
     deregulation and the pace of technological change and decided 
     to get ahead of the curve. ``We began investing hundred of 
     thousands of dollars in research and development, which for a 
     co-op is unheard of,'' says Edwin H. Marston, the board's 
     president.
       DMEA's first big innovation, in 1997, was a combined 
     heating and cooling service dubbed Co-Z GeoExchange. For a 
     fixed, year-round price, DMEA equips customers' homes and 
     businesses with a geothermal heat pump. This device is unlike 
     conventional furnaces and air conditioners, which heat air by 
     means of combustion and chill it through mechanical 
     compression. Instead, the pump circulates fluid through pipes 
     buried underground. Even when it's cold out, the earth only a 
     few feet below ground is always around 58F in Colorado. In 
     winter, the pump pulls heat out of the ground and pushes it 
     into the home. The earth's warmth is then distributed through 
     the building, typically via an air-duct system. In cooling 
     mode, this process is reversed.
       It's a simple technology that can deliver big savings. 
     Under a Co-Z agreement, a customer pays about $100 per month 
     and is guaranteed a comfortable house. DMEA estimates that a 
     2,000-square-foot home might cost $2,645 per year to heat 
     with propane. A Co-Z GeoExchange home can be heated for 
     around $1,600--a savings of 40%.
       So far, the service is a winner. Between late 1998 and the 
     end of 2000, DMEA installed 115 GeoExchange systems, about 
     half of them under Co-Z service contracts. This year, it 
     expects to install an additional 75 to 100. The venture is 
     already profitable, and DMEA expects that to continue. 
     Managers say that retained earnings (akin to profits for a 
     nonprofit co-op) on Co-Z should grow tenfold by 2005, to 
     $478,000, from $46,000 last year. Indeed, the Co-Z contracts 
     deliver profit margins in excess of 50%--good business in an 
     industry that typically sees a 4% return on investment.
       DMEA puts these retained earnings to work by paying down 
     debt and developing other technologies. Fuel cells, which 
     convert propane or hydrogen into electricity, attracted 
     DMEA's attention because many of its customers live off the 
     grid, in sparsely populated rural areas. True, fuel-cell 
     power is expensive: At 25 cents to 30 cents per kilowatt 
     hour, it's four times the average cost of power for DMEA's 
     wire-connected residential customers. But since building our 
     new power lines can cost $20,000 to $60,000 per mile, it's 
     sometimes cheaper to install a fuel cell on site than to 
     string a few miles of wire.
       Once the co-op grasped this logic, it went looking for a 
     fuel-cell maker interested in rural markets. In early 1998, 
     the search led to a partnership with H Power Corp., a Clifton 
     (N.J.) manufacturer of proton exchange membrane (PEM) fuel 
     cells. Then, DMEA took things one step further. It put H 
     Power together with Energy Co-Opportunity (ECO), an arm of 
     Cooperative Finance Corp., based in Herndon, VA, which serves 
     as a bank for electrical co-ops. The two got on so well that 
     ECO invested $15 million in H Power and inked an $81 million 
     deal to buy 12,300 4.5-kilowatt fuel cells--H Power's largest 
     order to date--to be delivered to member co-ops over the next 
     two years. Last March, H Power repaid DMEA's favor by siting 
     its first out-of-the-laboratory test unit in the co-op's 
     Montrose (Colo.) headquarters. DMEA, meanwhile, plans to 
     begin leasing the fuel cells to its customers this fall.
       In 1998, DMEA began work on another leg of its reinvention 
     strategy: Internet connectivity. ``It's our job to be on our 
     tippy toes to get our customers the best,'' says the co-op's 
     general manager, Daniel R. McClendon. Sixty years ago, that 
     meant bringing electricity to farmers and ranchers. Today, 
     the equivalent of lights in the milk shed is fiber-optic 
     connectivity. So DMEA took a 6% position in REANET, a telecom 
     startup formed by two other electric co-ops.


                               Net Savvy

       In addition to providing Web connectivity and e-mail, DMEA 
     hopes to use the Net to optimize customers' energy use and 
     reduce their costs. The co-op is serving as a test bed for 
     technology from Mainstreet Networks Inc. Modified by a small 
     attachment made by the Morgan Hill (Calif.) startup, a 
     homeowner's electrical meter becomes an Internet 
     communications point through which utility managers can power 
     down energy-hungry appliances at a distance. DMEA points out 
     that during a recent spike in power prices, it could have 
     saved $48 per home had it been able to turn down their water 
     heaters for just one hour. DMEA expects to roll this program 
     out in the next six months.
       Further out, DMEA is trying to repeat the matchmaker role 
     it played with H Power. In 1999, DMEA invested in CoEnergies 
     LLC, a Traverse City (Mich.) startup that modifies existing 
     central air conditioners. In effect, it turns them into 
     ground-based heat-pump systems by the addition of a buried 
     ground loop, similar to the GeoExchange heat pump. In many 
     regions this retrofit could replace conventional furnaces. 
     ``This machine has huge energy-savings potential around the 
     country, but nobody knows about it,'' says Paul S. Bony, 
     DMEA's marketing manager, who has a unit installed at his own 
     house. ``We're talking terawatts.'' Now he's seeking 
     investors.
       The flurry of developments at DMEA distinguishes it not 
     just from other co-ops but also from many of the better-known 
     for-profit players that are preoccupied with building power 
     plants. Size has something to do with DMEA's agility. But 
     it's the cooperative culture that is key. The co-op's staff 
     sees itself as running a nonprofit skunk works that helps 
     their owner-customers and those of other co-ops. ``We used to 
     have a circle drawn around our membership,'' says Business 
     Development Manager Steven M. Metheny. ``Now it's wide open--
     whatever we can do, in whatever markets there are.''
       Delta-Montrose's strategic punch lies in the institutional 
     structure. Rather than trying to grow and dominate a market, 
     co-op managers say their job is to share what they know with 
     the nation's other co-ops, which provide electricity to 34 
     million people in 46 states. ``They're doing a lot of work 
     that the other co-ops are going to benefit from,'' says the 
     Energy Dept.'s Plate. And just maybe, the big city power 
     companies will, too.

     

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