The Utility Loop Concept

1
The Utility Loop Concept

• Advancing Geothermal Heating and Cooling to Our
  Members

2
Why Offer a Loop Tariff

• A renewable energy solution to member concerns
  about rising costs
• Positions cooperative as leader in renewable
  energy and conservation
• An energy proposal our elected and regulatory
  officials can support
• Geothermal helps meet CIP energy savings mandate

3
Why Offer a Loop Tariff

• Electric cooperatives are the local business best
  positioned to expand geothermal
• Access to low cost long term RUS capital
• Business structure to support service
• Existing relationship with cooperative members
• Margins produced by loop tariff stabilize rates
  for all members
• Revenue margin based on installed loop field
  capacity not heat pump run time or weather
  variability

4
Geothermal Benefits

• Loop tariff allows geothermal to slow or displace
  growth of dual fuel/electric resistance heat
• Reduce growth rate of winter peak and need to
  upgrade distribution system capacity
• Reduce exposure to carbon tax, high market energy
  prices
• Possible opportunity in renewable energy credits

5
Geothermal Market Barrier

• Geothermal systems offer highest efficiencies as
  well as lowest heating and cooling costs but are
  more expensive than conventional systems.
• Closed loop system accounts for higher first cost
  of geothermal installations
• Loop tariff is finance tool that may provide
  member with positive cash flow from first month

6
The Utility Loop Concept

• Cooperative owns the closed loop system
• RUS finance of geothermal loop systems same as
  ordinary utility plant.
• Installed cost of closed loop, interest, program
  expense, and margin covered through monthly loop
  tariff
• Member pays monthly loop tariff to use the ground
  loop but owns mechanical system - heat pump,
  pump center and ductwork.

7
The Utility Loop Concept

• Property owner grants coop easement for
  installation, removal, or maintenance of loop
• Easement recorded with County Clerk
• Member may cancel loop tariff service or purchase
  loop at any time
• Loop can be disconnected in event of non-payment
• When account is transferred to new member, they
  are offered loop tariff service or purchase
  option.
• Loop may be purchased for originally installed
  allowance plus fees.

8
The Utility Loop Concept

• The loop tariff is subject to change thru regular
  rate study and policy review procedures
• Cooperative contracts loop installation through
  qualified local HVAC dealer driller network.
• Design and installation quality standards to
  assure system performance and satisfaction
• Renewable energy credits, or similar incentives
  retained by cooperative

9
Delta-Montrose Loop Tariff
10
Market Barrier Eliminated

• 15,719 Total 4-Ton System
• -6,819 Loop Tariff Allowance
• 8,900 Gross Out of Pocket
• -1,600 GRE Rebate
• -2,670 Federal Tax Credit
• 4,630 Net Out of Pocket

11
Next Steps

• LREC board has authorized further study and
  engaged services of consultant to prepare a
  business plan
• Forward to RUS for approval