CEP Conversations: Michael Volker of Midwest Energy, and their award-winning How$mart energy efficiency program
October 21, 2008
Midwest Energy is a rural electric cooperative based in Hays, Kansas. It serves 48,000 electric and 42,000 natural gas customers in central and western Kansas.
Midwest is a particularly progressive rural electric co-op. It serves a part of Kansas that is suffering high rates of rural depopulation – but in a situation where many businesses suffer, Midwest has figured out how to adapt and thrive.
Midwest has invested in renewables. Currently, it serves 49 megawatts (MW) of its load through wind energy purchased from the Smoky Hills Wind Farm, an amount that represents 16% of the co-op’s peak demand.
Economically, Midwest is also an “independent borrower” – meaning, it freed itself from the USDA’s Rural Utilities Service (RUS) borrowing system, and now finances its operations through private equity.
Midwest has also developed an award-winning energy efficiency program – How$martSM, a pay-as-you-save® (PAYS®) financing model that helps customers make cost-effective energy efficiency improvements to their home. The program has received compliments from the Kansas Corporation Commission, as well as earning the Governor’s Award for Energy Efficiency.
Michael Volker, Midwest’s Director of Regulatory and Energy Services, working with Midwest Vice President Pat Parke, developed How$mart(SM). Recently, Volker sat down with CEP’s Maril Hazlett to explain a bit more about the program.
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Maril Hazlett, CEP (MH): Tell me a little bit about how How$mart got started – where did the idea first come from?
Michael Volker, Midwest Energy (MV): Well — in the beginning…
MH: So energy efficiency is part of Genesis, huh?
MV: How$mart got started… well, three things. I happened to be on the Kansas Energy Council, when they were doing an inventory of energy efficiency programs. Also around that time, natural gas prices were spiking.
There is nothing a utility can do to change fuel prices – all we can do is to teach customers to conserve. So, what kind of energy efficiency programs improve or teach energy conservation? We looked at different programs and it stimulated our brain cells.
Now, no utility in Kansas had done a PAYS® program before, or at least not voluntarily. And no one has ever done it like we’re doing it now.
The last thing was that the Hays City Council was receiving a windfall from franchise fees – they charge Midwest a percent of revenue. They wanted to give that money back to the community, to subsidize low-income individuals, and so they asked us for help.
The City Council’s one requirement, before they would give that money to any individual, was an energy audit from Midwest Energy. They’ve long known about our energy auditing. In fact, they require that new homes have an audit from Midwest Energy before they’ll offer a certificate of occupancy.
Safety is a side benefit of the Midwest energy audits. There are probably more dangerous ways to vent the CO from a hot water heater, but it’s a little hard to imagine. Photo credit: Midwest Energy.
MH: Midwest has been doing energy audits for a while?
MV: Since the 1980s. I think we have the longest continuously running energy audit program in the state, compared to other utilities.
MH: Sounds like a great idea.
MV: It was a great idea… but – the first winter, we would do the audit for the customer, and the customer would get the payment. But then we’d come back a year later for the same customer asking for the same thing.
No changes, no improvements. We’d do an audit, and we’d see holes in windows, holes in floors, unsealed, no insulation, equipment that was downright dangerous.
Unless you can fix the building envelope, the shell, energy efficiency is all but impossible to achieve. The most efficient HVAC system in the world isn’t going to matter if your house is uninsulated and leaking like crazy.
Not a lot of people can afford to plug the leaks, let alone put in a new HVAC system. It was frustrating. How do you help these people? How do we get past this barrier? They were living paycheck to paycheck – and/ or, they were renting. They couldn’t make the improvements themselves because it wasn’t their property, it was the landlord’s.
We were doing energy audits and yet, nothing was happening, nothing was changing. Our customers weren’t benefitting. We wanted to make something happen. So we considered the PAYS® idea.
