Affordability/ No Silver Bullet- Tony Anderson

Transcript(Recorded 03.08.10) Power doesn’t come free to any of us, but what is the role of affordability from your perspective?

Tony: Affordability is a core of what we do. I feel like people want 3 things from me. They want reliability. They want affordability. And they want it clean. And when I look at my membership of 34,000 people, I have people who will list one of those 3 as number 1. And sometimes clean is number 1. Sometimes affordability is number 1. And sometimes people just want it reliable, and they don’t care how clean or how affordable it is. So those are the keys. And so affordability is one of the 3 pillars that we’ve got to try to pay attention to. Is affordability what you hear the greatest amount of noise about?

Tony: I would say yes. You know, my membership, a lot of it’s driving by the window here on the way to work or the way home from work. And they don’t have time to pay attention to what I’m doing. They just know they don’t want their bill to go up. They want the lights on, their bill not to go up. So for me affordability is key and very important. And I believe it is for my membership as well. But that said, there are all the different factions, you know? Other people will have different priorities. But I put affordability out in front. Try to bring the other 2 as close behind as possible. As you tell us what you do here, there’s always sort of a juggling thing going on.

Tony: Yes. Could you describe from your perspective: The need for power is there and growing. You don’t have a single approach here. What are you juggling to make this all work?

Tony: We’re juggling all the forms of electricity. You know, we’re juggling wind and solar and coal and nuclear, hydro. We’re juggling it all. You know, we’re working on a solar project now, a community solar project, and I have people who love me to death now that we’re getting into solar. But I also have other members (I got a call today even) that said, “Don’t spend any of my money on solar. We have no sun in Michigan.” And those are people that I will have on both sides of that story. So you’re juggling all these balls in the air to get to what is right for a diverse membership of 34,000 people. And at the same time you’ve got the affordability ball that is of utmost importance as well. So it’s a lot. Everybody believes that one way or another something’s going to land or something’s going to emerge, some technology is going to solve this enough-electricity question.

Tony: Yes. What’s your sense of that?

Tony: My sense is everybody’s looking for the one silver bullet. And there is no one silver bullet that’s going to solve our energy needs. What’s going to happen is we’re going to do what we’re doing today. We’re going to do it better. Maybe bigger, a lot cleaner. Maybe a little more efficient. I think we just have to look at all the forms of electricity we have today, and we will be doing them better. That’s going to be our bullet, is each form of electricity will have one bullet or a couple bullets that make it better. I think there’s a sense that, especially because of the press and reports and all of that, that somehow fracking and natural gas is going to be the solution, the way out of any shortages and the lack of cleanliness of coal. What’s your sense of that?

Tony: My sense of that is better today. You know, we’ve been fracking in Michigan for over 20 years. I think we’re going to be able to continue frack. And I think there is a vast supply of gas there. Is it vast enough to get the utilities to build natural gas 24/7-baseload power plants? I think we’re going to find that out in the next year or two. I think we’ll see more of that. There are some coal plants shutting down because they aren’t clean, and it’s unaffordable to make them clean at today’s standards. So, yes, I think gas is going to become more viable. But you’re going to see utilities tentative to enter that because of the volatility of the gas price in the past. I don’t know that we have a comfort level with a vast supply we have that’s going to make us go too far down that road right away. Because we’re still going to be cautious about that price going up. That’s been the history on gas is it goes low, and then it goes way high. And we see those extreme price swings. And we’re still fearful of that even though we are sitting on much more supply than we knew we had 3 to 5 years ago. So it’ll be a cautious entry, but, yes, you’re going to see more of it. In terms of the energy usage and conservation, what role does that play? Could that be the magic bullet?

Tony: No. We’ve had an energy conservation mandate in the state of Michigan since 2008. They passed PA295 in 2008. It became in 2009. So we’ve been doing various energy conservation measures. And very effective. I think it stems the tide a little bit. It’s a little bit… It’s better than a thumb in the dike, but it… We’re still seeing growth. In a down economy with an emphasis on conservation and hitting all of our state-mandated conservation targets, we’re still seeing energy sales go up. So, again, that’s not a silver bullet either. It’s one piece of the pie. You know, certainly conservation can replace some generation. But it’s not going to stem the tide of growth. It’s still happening. And when the economy picks up even more, then the water will go over the dam. Conservation will still always be a piece. It’s been a piece for the last 50 years. But it’s not going to stem the tide of new generation. As we talk about maintaining and expanding opportunities to produce electricity, is there a role for government and for mandates within that scene?

Tony: Yes, there’s an absolute role for government. Without government and regulation, you have the Wild, Wild West, and you’re producing all kinds of energy, and you’re not worried about the environment. With government, you can be worried about the environment, but you have to balance it. You know, government can go to the other extreme. Instead of the Wild, Wild West, you have everybody locked up in captive, in prison, and we can’t build anything to produce any amount of electricity. Somewhere between the prison of regulations and the Wild, Wild West, there has to be a meeting of the minds, a middle ground, where this is clean enough. Everybody wants it clean to zero. Maybe today we can’t get it clean to zero. But maybe we can get it cleaner than it was 10 years ago. And people have to agree that maybe that’s good enough for now until technology improves and we reach that level. And then we can bump it up again in another ten years. There are too many people and too many regulators that want to get us to where we can’t technologically get today. We need some middle ground, some common ground, some compromise. We talked for a moment about what you have to juggle. As an example of that, what is this project that you have going in Marquette about the need to be flexible and cooperative and interactive with the whole industry.

Tony: It’s the Presque Isle Power Plant in Marquette, Michigan. Our power supplier, where Cherryland buys its power from is Wolverine Power Supply Cooperative. They’ve been in the market trying to fill our baseload needs for years to come. And because they were, they’ve run across this opportunity with Wisconsin Electric at Marquette, a power plant that was in need of being cleaned up or shut down. They were going to shut it down. Wolverine comes to the table with some cash and has the ability to clean it up and make it affordable for both utilities to own. So I guess that project just shows you have to be looking. You have to be looking under every rock and be ready for what you find. And we found an opportunity simply because we were asking; we were looking. We were actually talking to them about another opportunity, and they said, “What about this?” So just having the conversation creates other opportunities. And that’s kind of what the Marquette thing was. “Let’s sit down and have a conversation and see what we can work out and see what pops up.” Something great for the UP and Michigan and my members came about in a conversation. It would seem like at some point you could say, “Ok, we’ve got the perfect balance going here.” It’s not something you can really set it and forget it.

Tony: No. You’re always tweaking the balance. You know? Because you just are. It just depends on the price and the opportunity and what pops up this year, next year. It’s just you have to be ready for whatever comes. And you have to always be looking. You know? It’d be easy to lock in and say, “We’re all set. We’re all done. Whatever. We won’t look anymore.” But then you might miss an opportunity like Marquette if you did that. It’s easily done. We did it for decades, you know? In the past, we’d just have a purchase-power agreement and pay the price and be done with it. But those days are gone. You know, the market, there’s less supply on the market. So we’ve moved to more of an ownership mode, and that requires us to be always looking and always flexible. What’s your point of view on renewables now? Is it the wave of the future and always will be? You being a provider and a customer, a consumer, of power, what is your view of the renewables market?

Tony: They will always play a part. They will always be something we look at. But they’re going to have to be competitive. I think wind has gotten more competitive in recent years in Michigan. I would like to see the state allow us to buy renewable energy from out-of-the-state boundaries to meet our mandate. I think that would make renewables more affordable. And I think, as a utility group, we’re going to propose that in 2013. We’re going to ask the state to change our mandate from 10% of renewables to 12%. In exchange for that higher amount of renewables, we want the ability to go outside our state boundaries to get that supply, so we can balance that affordability then. So long answer, but renewables are here. They’re going to stay. And we’re going to use more of them, but we still can’t look beyond the fact they have to be affordable. People should not have to subsidize them to a large degree. And I think we can do that if we can move outside the confines of Michigan. So what is the role of nuclear in this?

Tony: Nuclear definitely has a role. The deal with nuclear is the fact that today we’re building it at 1200 megawatts, 2000 megawatts. You don’t have to understand what a megawatt is, but when I serve all my customers or Wolverine serves all its customers, we only need 500 megawatts. So we can’t afford to build 1200, 2000 megawatts of nuclear. If we can scale it down, do small‑scale nuclear in some fashion of 100 or 200-megawatt blocks, it then becomes affordable. And I can put that in my mix. I can still have my wind and my solar and my gas, and I’ll probably have less coal if I can bump up my nuclear at an affordable level. So I’m cleaner all the way around. So on a small scale, if you can build it affordably on a small scale, nuclear is going to be very important to our future and the Co-op’s are working to that end.