[Extensions of Remarks]
[Pages E342-E344]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

RECOGNIZING THE DELTA-MONTROSE ELECTRICAL ASSOCIATION

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HON. TOM UDALL

of new mexico

in the house of representatives

Wednesday, March 13, 2002

Mr. UDALL of New Mexico. 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.

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. Any 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 out
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

[[Page E343]]

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.

[[Page E344]]

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