Demand Management at a Rural Co-op

Innovative distributed generation program is “win-win”

by Nancy Spring, managing editor

Your utility wants to start a demand management program. You think an interruptible rate program is a good idea, but you’ve got one heck of a geographically diverse distribution system. What would you get if you took a novel approach to the concept of distributed generation? For an innovative co-op in Illinois, it would be an award-winning program that benefits the customer and the utility.

Demand-related expenses account for more than 35 percent of Shelby Electric Cooperative’s power costs, a significant incentive to develop programs to manage peak demands. But, as a rural distribution cooperative with just under 5 customers per mile of energized lines, Shelby had to come up with a specially tailored solution.

Piggy tank, generator and meter, installed at a Shelby Electric member-owner rural residence. Shelby’s affiliated propane company sells, installs and maintains the propane-powered generators that the co-op controls to manage peak demand during high load periods. (Photo courtesy of Shelby Electric Cooperative.)
Click here to enlarge image

And that’s just what Shelby did. The co-op now offers electric rate reductions and enhanced reliability to members who participate in the program, while reducing power supply costs system-wide-and at the same time, extracting value from previous investments in metering infrastructure.

Controlling demand in the residential market isn’t easy, either; that’s the hardest market to penetrate. CS Week recognized the co-op’s winning idea this year by giving the program its Expanding Excellence Award, “Innovation in Customer Service, Level II.” Shelby’s demand management program has caught the attention of local, regional and national media as well, and peaked the interest of other electric cooperatives, too.

“The implementation of this program offers our member-owners not only peace of mind but also reduces energy costs at the same time, reducing Shelby Electric’s peak demand requirements from our power supplier Prairie Power Inc.,” said Shelby Electric Cooperative President and CEO James Coleman. “And as an added benefit, it increases revenue for our propane subsidiary Shelby Energy. It’s a win-win situation for all involved.”

Here’s how it works

To be successful, the program had to take into account the geographic expanse of the cooperative and the unique infrastructure requirements of a demand management program. Shelby also wanted to take advantage of the TWACS metering facilities that had been installed at all member locations by the end of 2006.

On the co-op’s website,, members can read about Shelby’s offer:

GUARDIAN automatic standby generators take the worry out of power outages. Whether you’re at home or away, your GUARDIAN standby generator is ready to assume control of your electrical needs when a power outage occurs.

Unlike a portable generator, you don’t have to go outside, run a maze of extension cords or bother with gasoline, because an automatic standby generator operates on your LP or natural gas supply.

Plus, when utility power returns, the generator automatically shuts down and waits for the next outage.

Shelby Electric Cooperative members, ask how you can save 15% off the energy portion of your bill each month.

Shelby’s affiliated propane company, Shelby Energy, sells, installs and maintains the propane-powered generators, which the co-op can control to manage peak demand during high load periods. For every 100 generators installed, the cooperative can increase peak demand control by approximately 1 MW. Each 1 MW of controlled demand, if properly managed, should result in approximately $50,000 in annual power cost savings. From these savings, the cooperative can fund rate reductions for participating members, add to overall system-wide rate stability and fund the marketing programs required to ensure project success.

Over a 10-year period, Shelby Electric expects the net benefits to the cooperative to exceed initial project implementation costs. Once installed, the benefits of reduced power supply costs accrue to the cooperative and its members for many years beyond the payout of implementation costs.

There are other benefits for Shelby, too. For one, propane sales used to fuel the generators have increased, providing an additional revenue stream to the cooperative, which helps the co-op keep rates competitive. From a reliability standpoint, installation of the generators drastically improves service levels to participating members, as the generators can be utilized when the power’s out because of storms or line disruptions. And, by using TWACS metering, Shelby knows where the generators are installed and can more efficiently dispatch resources to restore service after outages.

Plan targets and projections

In the initial planning stages of the program, 10 MW of interruptible capacity was targeted. Properly managed, this level of controllable capacity was projected to result in more than $500,000 in annual power cost savings, or nearly 5 percent of total cooperative power supply costs.

Steve Shoaff and Jason Nohren of Shelby Energy install the first generator. The member-owner said he enjoys not having to go out on cold nights to start his old PTO generator.(Photo courtesy of Shelby Electric Cooperative.)
Click here to enlarge image

To achieve this target, Shelby determined that it would need participation of approximately 1,000 members, or 9 percent of total membership. The initial aim was to implement the program over a 2-year period, with a goal of 40 generator installations per month.

The primary issue for Shelby was the training required to properly site and install the generators. Training on the use of the TWACS infrastructure was already on-going and the demand management program was simply an “incremental” use of existing systems. The other variable for this project is the installation of a disconnect ring that allows the TWACS system to communicate with the meter.

Expenses for the propane subsidiary, Shelby Energy, to start its generator sales program amounted to $1,500 for a trailer and pushcart to help with the storage and transfer of the generators. The cooperative will also absorb the cost of the necessary Disconnect Switch Interbase, $130 plus tax.

On-going success

While the concept of distributed generation is not unique, the application of this technology to the special operating parameters of a geographically diverse distribution cooperative, in a way that encourages member participation, is certainly novel.

Recognizing the long-term need for effective load management programs from a cost-savings perspective and an energy conservation perspective made the development of this program viable on many fronts.

Shelby’s demand management program combines all of the aspects of value contribution in a manageable and executable package: member savings, increased reliability, cost reductions, conservation opportunities and overall contributions to system operating and economic results. Using the resources available to the cooperative, and relying on previous investments in metering infrastructure, Shelby Electric found a unique way to leverage previous cooperative investments to improve reliability and reduce overall system costs, without creating an economic hardship to the members.

Not only does the program allow the cooperative to provide an incentive-based rate to participating members, but with system-wide savings, Shelby can maintain the competitive rate structure that its members have enjoyed for years.

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