HOLIDAY READING: WRIGHT-HENNEPIN – A CASE STUDY IN UTILITY TRANSFORMATION

Wright-Hennepin – A case study in utility transformation; The small Minnesota co-op is thriving due to seven subsidiaries and a culture of service

Herman K. Trabish, May 18, 2015 (Utility Dive)

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Many small electric cooperatives find it hard to stay competitive with the vertically-integrated, investor-owned utilities that have so many more customers for every mile of transmission line.

But Wright-Hennepin Cooperative Electric Association has, even during the recession, cut power prices and kept pace with the IOUs around its territory, including Xcel Energy.

“Wright-Hennepin is in excellent shape because 20 years ago we saw the potential for the possibility of legislated deregulation, and we started offering new services,” explained CEO Mark Vogt. “We own seven different businessesnow. They keep Wright-Hennepin financially strong and offer valuable new services to our customer base.” Wright-Hennepin (W-H) is a member-owned, non-profit electric utility in Rockford, Minnesota. Founded in 1937, it now serves over 46,000 homes, businesses and farms.

And despite flat electricity sales since 2008, co-op leaders say its strategy of diversification that produced seven associated business enterprises has kept it competitive.

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A strategy of diversification

Foreseeing a loss of kWh sales 20 years ago, Vogt and others at W-H were looking for a new direction for the cooperative.

They were thinking in terms of home energy services and home automation but there were practically no such technologies at the time. They “literally stumbled” on home security system technology and decided it could be a profitable platform.

“As we got into these businesses, we surveyed the membership carefully. We found there was a lot of interest in home security and even greater interest if the cooperative offered it because we are their trusted partner,” Vogt explained.

"We thought it would have a strategic significance for the future of our business and that hunch turned out to be right,” he said.

The result was a new business, WH Security, which later spun off WH International Response Center, a 24-hour national home security center monitoring business.

WH Services followed. It provides a host of consumer-related services from electric contractors to a number of innovative electric heating products to tree trimming and clearing services. Then came WH Generation, which builds onsite generators for commercial customers’ load management.

The W-H strategy of diversification may not work for other utilities because it requires “a genuine sales culture” that most utilities don’t have, Vogt cautioned.

“We had to build a sales culture from the ground up and it took years to change the type of employees we hired," he said. "But that strategy has paid itself back in a thousand ways.”

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'Solar made simple'

A more recent addition to the W-H subsidiaries is WH Solar, a solar sales and installation company. It grew out of the response to a 2013 member poll on solar that showed exceptionally high favorables.

In 2013, solar was something few utilities wanted to touch, Vogt said. “We immediately saw there was a business opportunity. We said, ‘We better be in the solar business or someone else will be providing it to our members.’”

Why, Vogt asked his Board, would Wright-Hennepin to generating electricity from fossil fuels and wind, and not offer solar as well?

The member response on community shared solar was the strongest, Vogt said, so they decided to start there. They built the first community solar array in Minnesota and it, the co-op says, is the first U.S. community solar array with battery storage.

“We built the first two community solar arrays almost without marketing. That’s how strong the member response was,” Vogt said.

WH Solar’s tagline is "Solar made simple," he added. “We intend to take the hassle factor out.”

The idea of owning solar without having it on their roofs and or having to maintain it appealed to the cooperative’s members, Vogt said.

“They liked that they could buy just one panel or try just a few to test the technology before making a large economic investment. Even renters and people with zoning issues and houses oriented wrongly [for solar generation] could participate, so it was a good place to start.”

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The solar intangibles

Solar is different than other products, Vogt has realized. The W-H members aren’t in it for the money but because they want to do the right thing. Over the life of the contract, they will save, perhaps several thousand dollars, depending on how many panels they have and how big their home is.

“There is an intangible about solar that our industry better not miss,” Vogt said. “Part of it is that for the first time consumers get to make part or all of their own power. Part of it is that for the first time they have choice.”

Something about solar draws consumers, Vogt continued.

“I can’t quite put my finger on it but there is something about buying a solar kilowatt-hour that seems more appealing than buying a central station kilowatt-hour,” he said. WH Solar has built two community solar arrays, has started construction on a third, and is planning a fourth. In phase two of its three-part solar business development plan, it is moving to commercial rooftops. The City of Rockford’s City Council just approved 100-plus kilowatts of solar installations, installed by WH Solar, for its city owned buildings.

Once its commercial rooftop business is established, WH Solar will move toresidential rooftops. Vogt just hired a vice president exclusively for the solar business.

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Wind, EVs and other growth options

Despite Minnesota’s world-class wind resource, W-H is not in the wind business. Some years back, when customers began asking about the viability ofsmaller wind turbines, the cooperative built a residential-sized 20 kilowatt turbine on its headquarters campus.

“We learned from monitoring the output, displayed on our website, that in this section of Minnesota, wind is not a good resource,” Vogt said. “That is what pushed us toward solar.”

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As a distribution cooperative, W-H buys power from two generation and transmission (G&T) cooperatives, Minnesota’s Great River Energy and North Dakota’s Basin Electric. “Both of my G&Ts have several hundred megawatts of wind and both haveplans for more wind,” Vogt said. “They are producing something like 14% of Wright-Hennepin’s total power needs.”

W-H owns one plug-in electric vehicle and, after consultation with the Board and member-owners, it has decided to move into the EV charger business. By 2017, Vogt expects EVs to have a 200 mile range and be ready to ramp up in his marketplace. It is a given, he said, that electric vehicle use will boost electricity sales.

Battery storage is also an emerging option for W-H, despite some utilities’ concerns about grid defection by customers with solar-plus-storage systems that are cost-competitive with grid electricity.

“Our members like the idea of solar and battery storage is what is ultimately going to bring solar into the mainstream,” Vogt said. “It doesn’t take a rocket scientist to see that if Wright-Hennepin doesn’t provide this, somebody else will. We are an energy provider and we provide solar energy.”

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