This is the transcript for episode 314 of the Community Broadband Bits podcast. John Gavan and Brad Harding from Colorado join the show to discuss economic development, electric cooperatives, and broadband service. Listen to this episode here.
Brad Harding: It really came from a concern for the community. At that time, we had just lost a 300 - 325 member coal mine. So we sat around the table for probably the better part of the year and said what can we do to change this, and at the same time we were also dreaming big.
Lisa Gonzalez: This is episode 314 of the Community Broadband Bits podcast from the Institute for Local Self Reliance. I'm Lisa Gonzalez. Colorado communities have been busy over the past few years, and that includes the folks in Delta and Montrose counties. Back in June, while Christopher was at the Mountain Connect event, he sat down with John Gavan from Delta County Economic Development and Brad Harding of First Colorado National Bank. Both are on the board of the local electric cooperative, the Delta Montrose Electric Association or DMEA. DMEA is involved in developing its infrastructure to bring high-quality connectivity to members. They're also exploring new uses for their infrastructure that involve innovations in the electrical generation and storage field. In this interview, Christopher, John and Brad talk about the impetus behind the infrastructure project, funding and how the co-op member helped drive the project by showing up and expressing their need for broadband. Learn more about the Elevate project at DMEA.com. Now, here's Christopher with John Gavan and Brad Harding from the Delta Montrose Electric Association.
Christopher Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell with the Institute for Local Self Reliance and I'm still in Vail, Colorado, not as you're listening to this, but as I'm recording it at the Mountain Connect event, one of my favorite broadband conferences in the nation. Today I'm sitting here talking to two folks from the Delta, Montrose counties of Colorado. Let me introduce you to John Gavan, president of Delta County Economic Development. Welcome to the show.
John Gavan: Thanks very much, Chris. It's good to be here. We'll be talking, I guess today about some fairly interesting local efforts that Delta Montrose Electric has made in the broadband space and also in the, uh, renewable energy distributed generation space. Very interesting and fast moving sectors that we really have committed to play a role in.
Christopher Mitchell: Yes, and I've been wanting to interview you. You are indeed doing some very interesting things and one of those, Brad Harding here, president of First Colorado National Bank in Paonia [Colorado] is gonna give us some of the background on some of that. Welcome to the show, Brad.
Brad Harding: Well thanks for having John and I, we really appreciate it.
Christopher Mitchell: Brad, let me ask you to just start by describing as a, as a fifth generation Paonian, as I understand it, uh, what is the Delta Montrose area of Colorado like?
Brad Harding: Number one, the area is beautiful. It's remote. We're a long way away from interstates, probably 70 miles roughly. But also geographically diverse: semi-arid to almost mountainous. They're rural in nature for sure. For instance, you know Paonia is a town of around 1,500, the county, around 30,000. Montrose County is a little bit larger, but you're talking about a population in the two county area around 75,000. In general, the population is a little bit older than state averages, roughly 10 years older. We're about 12,000 per median household income lower than the state's average, and we're about 50 percent less educated when it comes to postsecondary education. Agricultural-based, government jobs, education and health care. Um, it used what dominated next category was coal mining jobs, um, which we've lost a lot. We've lost about six to 700, um, during the last number of years
Christopher Mitchell: For people who are longtime listeners, we've interviewed Virgil Turner, I want to say at least once, maybe twice about what, what was happening in Montrose City and that's a partly to say they've been very involved in this, in this project. Um, and, and maybe I can turn it back to you, John, if you want to describe briefly, and we'll go back into how we got here, but what is DMEA doing right now? And for people who aren't familiar, DMEA is Delta Montrose Electric Association. It really rolls off the tongue and so people can sometimes not realized it's even an acronym. But DMEA, uh, what are they doing now?
John Gavan: Well, first of all, DMEA is a rural electric co-op, so it's member owned, so we have traditionally had a very close relationship with our customers, who are also our members. So, we have spent a lot of time listening to what people are asking for and one of the main issues that came up in the last few years is better high-speed broadband. So being an electric utility, DMEA had a lot of capabilities in terms of people, poles, infrastructure, trucks. So we, we looked hard at the possibility of entering the fiber broadband space and solving this lagging problem that head really been dogging us for years because none of the large investor-owned telecom companies would find it profitable enough to come and build in this sparsely-populated rural area. Just to give you an idea, you know, Delta County alone is the size of Rhode Island with a population density of about 22 people per square mile.
Christopher Mitchell: It's quite low and it's a reminder of how big these western counties are and also quite an inaccessible as I understand it. I haven't, I haven't been out there quite yet, but one of the things that's remarkable about its beauty as I understand, is mountain ranges that are difficult to build utility poles on.
John Gavan: Yes, that's very correct. You know, luckily we had a lot of infrastructure already in place serving our members with electricity, so we've capitalized on using that infrastructure - the poles and the conduit - to advance our broadband program by stringing our fiber on that existing infrastructure.
Christopher Mitchell: And, Brad, before we get into some of the history of this, I want to just ask you one more general question, which is, as a president of a bank, we've had a few presidents of banks on before, but remind us why a bank cares about broadband and things like that.
Brad Harding: Oh, just raising the standard of life and the quality of life in a community like that. And then also we're a commercial bank. We're a business bank, and broadband through the years has become just integral, instrumental part of the daily life of really every business. Um, so it's absolutely important that our core areas of our communities, every downtown, every core has viable service. So those folks can reach out beyond the area and actually generate revenue and bring it back to the community. One of the things that rural America has really struggled with through the years is we're really good at giving to corporations, you know, the talents that we have, whether it's our, our kids that leave, um, or our resources like natural resources, maybe it's even fruit. They're extracted and they leave the area, and too often that not the profit from that doesn't come back. So having companies that actually can call that area home that are headquartered there, that employ, you know, inordinate amount of people compared to other companies is exactly what we need. And if you don't have high speed Internet, if you don't have broadband capabilities to do that, those businesses can't survive or thrive in those communities.
Christopher Mitchell: And you are both now members of the board of DMEA.
Brad Harding: Yes, correct.
Christopher Mitchell: I have a picture in my head of how something happened and I want you to fill in the reality, but I'll just paint the picture that I had, which is I'm sure over simplified. And um, I learned about this several years ago from Diane Cruise, a consultant with NEO Connect who I believe it was working with you and um, my take on it is that the community was looking for large investment in high quality Internet access, fiber based. They went to DMEA. DMEA said, we don't really think that sort of thing...we're not gonna, we're not gonna get involved in that. And then there was a big meeting and DMEA changed his mind. Is that, is that an accurate thumbnail sketch? And maybe you can fill in some details, Brad.
Brad Harding: Yeah, I think it is accurate and I'll do my best to fill in details. Really, the genesis of this effort came from from many people, and you mentioned one of them - Virgil Turner who, who's been on the show many times, it sounds like - that's a pioneer of broadband. And he really brought a lot of vision about what was possible to this area. But I'll go back to kind of Delta County Economic Development. And John and I were both parts or members of that team at the time. It really came from a concern for the community. At that time we had just lost a 300, 325 member, or employed coal mine. Oxbow shut down, and those are high paying jobs, Chris. So they're, they're good jobs. They have benefits and to lose 300 plus from that one closure was tough on the area and there was threats that Bowie Resources, another coal mine, would be doing the same thing.
Christopher Mitchell: As a banker. I'm sure you can tell me more about this, but it's not just 300 jobs, right? Because that reverberates through the local economy.
Brad Harding: Chris, you're exactly right. Those are direct jobs. We haven't even talked about the indirect jobs or a multiplier effect that would be attributed to that type of a business, but it's a major business. Um, and you're exactly right when one day you have a 60, 70, 80, $90,000 a year job plus benefits. We're talking six figures and you lose that: obviously defaults on personal residences, um, you know, consumer loans, businesses, the entire community suffers and all the way through, it trickles through the entire community. The county suffers for decrease in revenues, the local municipalities, it can really be felt. It really impacts the school district as well as you start to lose students. And, unfortunately the state, uh, how funding works at the district level is you get paid per pupil that sits in one of those chairs. So the entire county was kind of reeling and there was nervousness. So around the DCED table, we'd really focused the previous years on putting the right people at the table: elected officials, influential folks, people that really had a lot of care for the community.
Christopher Mitchell: And you just said DCED, which is?
Brad Harding: Delta County Economic Development.
Christopher Mitchell: Right, thanks.
Brad Harding: So we sat around the table for probably the better part of a year and said, what can we do to change this? And in some ways felt a little bit helpless. Um, at the same time, we were also dreaming big. We had a big vision for the area. We want, we knew that Delta County, what it really benefited from, and Montrose County is much the same way, is a wonderful local food movement, healthy water, beautiful area with wonderful views of the West Elk mountains, the young compadres. In Delta County, we'd also talked about how can we become, you know, completely self reliant when it comes to local energy generation? Andthe last one was how can we bring in world-class broadband. So that's really where it started is how can we fix these things? Well, a few of them we thought were
in place: the food, the water, the views, um, but the one that we didn't know how to tackle right away was the broadband and also the local energy generation. So we took on broadband first and it didn't take us long to figure out what John already said earlier, is that the large incumbents weren't going to meet this, uh, this need. And even the local telecom company, we had conversations with them and they weren't willing to do that. There assets are really largely fixed, fixed assets in a copper-based system that they weren't going to improve upon. So then we reached out to some of the other community assets and one of them is Delta Montrose Electric Association, DMEA and uh, had initial conversations. We have, first of all, took on an approach o kind of just to visit with certain board members and staff to see if there was an interest. And uh, at that time there really wasn't, um, there was a lot of nervousness. There was a new CEO at the time that hadn't had a great experience with a broadband effort from a previous location.
Christopher Mitchell: This is maybe 2013-ish, I'm thinking?
Brad Harding: Probably the visioning may have been 2014 from DCED, but the effort to really talk to the Delta, Montrose Electric Association leadership and board, that really started in early 2015.
Christopher Mitchell: So maybe there's 12 or 15 rural electric co-ops doing it then. There really weren't that many at that time. It's picked up since then.
Brad Harding: Right. You're exactly right. So, so what happened, Chris, and I think you're mostly correct in this, we reached out to the local folks and saw that we weren't getting anywhere there, and then we really said that, uh, it's time for us to be maybe a little bit louder voice and one of the nice things about the rural electric co-op is during every board meeting, the public can reach out and attend. So we reached out and said that we were, a small group of people were going to come originally. The idea was 10 to 15 kind of influential, mostly elected people in the two counties would attend. And during that time of reaching out to those 10, 15 people, the list kept growing.
Christopher Mitchell: You built a mob.
Brad Harding: We really did it. It wasn't proactive at that time. It just really took off from there. We talked to you a city official, a county official, um, maybe someone at the sheriff's department and we found out that they were like, absolutely, we'll be there and may I bring someone else, or have you talked to this person? So fast forward over maybe just a few-week period, uh, carrying a targeted list of 10 to 15 people, grew to 72 who actually attended that November 2015 meeting.
Christopher Mitchell: And this is something I really want to just note because the number of people that I've talked to who are served by electric co-ops, who have told me, "I talked to my co op and they said that we couldn't do it." Um, and, and then felt that that was the end. You're the ones that have, have had the most inspirational story in terms of taking that as a starting point and not an ending point. And so I just want to, I just want to highlight that for people as you're talking about this, like you organize people just to come out respectfully to explain how important it was and this is something that I really hope we see repeated. But, but you can definitely tell us what's coming next.
Brad Harding: Yeah. So, uh, again, just to finish the thoughts on that, that meeting when we arrived, uh, I think, uh, the DMEA staff, leadership, and the board will probably a little surprised who was there.
Christopher Mitchell: Sorry, I'm just going to keep jumping and interrupting you, I guess. That's what I do. So my understanding is I, I'm more of a city boy, but at these meetings, they're often if you're 70 years old, you might be on the younger end, like the, the, as I understand it, among rural electric coops, it's just younger folks tend not to attend these meetings or be as interested
Brad Harding: Yeah, that, that is correct. And uh, maybe you asked that question because I'm on, I'm on the younger side and uh, at that time probably was close to 40 years, 40 years old, which is only young and Delta County, but uh, it is. But you're exactly right. But this group of citizens that showed, showed up were, were very, very involved in the community and have passion for the community and it didn't take long. I emceed that event, but really if there's a who's who in Delta and Montrose County, which is kind of funny to say that, who's who was there and uh, all the right people spoke articulately, intelligently, with passion and that meeting probably lasted an hour, an hour and a half. And afterward, you know, the, the, the DMEA officials, staff, board, um, it sent a very, very clear and strong message and it really became an agent of change from that point on.
Christopher Mitchell: Brad, as you were saying earlier though, this isn't just about Internet access, there's also an additional component in terms of local energy production. So turning over to John now, um, what happened in terms of getting that moving forward?
John Gavan: Well, interestingly, DMEA has long had an interest in developing local generation, so we've developed three small in-stream hydro facilities that provide, you know, six to eight megawatts of local power. Um, but we bounced up against a contractual limitation with our wholesale power provider where we had a contract that said we could only develop five percent of our load locally. So we essentially got to that point, and this is important because, you know, we're looking at local generation, not only in terms of, you know, it's now cheaper in many cases, but you know, every year we send $42 million dollars across to Denver, Colorado to pay for our wholesale power. If we could source more of that power locally, you know, we keep that money in the economy, we provide jobs in construction and operations.
Christopher Mitchell: I would think that also, just right now in Colorado, you cannot ignore the fact that there are dangerous fires and so you would also have more, more of a sense of reliability in the event that the worst thing could happen between you and where the energy is produced.
John Gavan: Exactly. And very importantly, Delta and Montrose counties are very unique. They have wonderful natural resources in terms of local energy. Um, we've got quite a few hydro, small hydro opportunities. We have the largest flat top mesa the world right smack in the middle of Delta County and millions of acred feet of waterfall off that mesa all year long capturing some of that potential energy and just turning it into electricity would make nothing but sense
Christopher Mitchell: 300 days of sun.
John Gavan: And that, I was just going to get to that. When you look at the irradiance factor for Delta County, it is almost equivalent to Phoenix, Arizona because we are higher, we're cooler, so solar, utility scale solar projects perform better in this environment than they do in the hot southwest. And we've got so much open public land and land available for, uh, things like, uh, you know, utility scale solar that it just makes sense. And it's also important to keep, when you develop that power locally, you have less demands on your infrastructure. You don't have large transmission networks that cost many millions of dollars to maintain and construct. It's right what the mission of your
organization is: local self reliance, taking it to the nth degree when you have both broadband and your power source more locally based.
Speaker 3`: One of the challenges that a lot of rural electrics are facing is declining demand. And I'm curious, given the, the, I know that you've had challenges in a variety of ways, but it's still such a desirable place to live. Colorado's population is booming. What kind of, what kind of demand is your co-op facing?
John Gavan: Yeah, we are not unlike many other utilities our demand has declined. With the loss of two underground coal mines, we lost 20 megawatts of load. So right now we're about 100 megawatt peak load, um, that is staying relatively stable because very importantly, since we deployed the Elevate Fiber product, we're starting to see it's stimulating the economy. We have a number, you know, I've met many location neutral employees who have left jobs on the front range of Colorado because their employer said, if you can prove that you have 25 megabit service, you can work from home anywhere. And so they've moved out to this beautiful part of the country, you know, to have their little piece of paradise.
Brad Harding: Unlike the hideous front range. Hah, sorry. Um, the, uh, I think it's just, it's important for people who are listening to this show to have a sense. I mean, declining demand is, is a real big stressor. And so if Elevate, the name of the fiber product that you're delivering Internet access over as a co-op, if that's increasing demand, and that's just huge, I have to think, for the co-op's future prospects.
John Gavan: Absolutely. We're a very progressive co-op. So we're also looking carefully at things like electric vehicle charging and we are going to be doing some trials of charging technology. Um, we're also interested in the issue of energy storage to couple with solar and hydro and we're looking at a small storage project, so we're really trying to stay on the cutting edge and watch where the energy market is going. And very importantly, the, wholesale energy market has really changed. Wholesale energy prices, you can buy, you know, 30 megawatt power on a 20 year power purchase agreement now, which is considerably lower than what we're paying our wholesale electric service provider, which is on the order of $78 a megawatt hour. So there's this big arbitrage opportunity that has happened where local generation with the falling cost of renewables, it's becoming much, much more attractive as an option to look at for part of your power portfolio.
Christopher Mitchell: Well, listeners of this show are more familiar, when we talk about federal agencies, the Federal Communications Commission, uh, but you've been working with the federal energy regulatory of federal electricity, regulatory...?
John Gavan: Energy Regulatory Commission.
Christopher Mitchell: Energy Regulatory Commission. My colleague John is probably laughing right now because he, he knows all this stuff down cold, but FERC, which really is important for interstate moving of power. Um, what's happening with you and FERC.
John Gavan: Well, two, almost three years ago, we capitalized on this old regulation called PURPA, the Public Utilities Regulatory Policy Act of 1978.
Brad Harding: Yes. Yes. And I just, I just wanted to throw out there, I mean, for people who aren't familiar, this is where we get net metering from. This has been, this has led the charge in many ways for alternative energies over the years.
John Gavan: Right. It, it initially was a rather arcane piece of legislation that many people had forgotten about, but we dusted it off and, uh, filed a petition with FERC asking the question, does the PURPA regulation, which specifies that you can develop local renewable generation projects of up to 80 megawatts, um, as what are called qualifying facilities. And we asked the question, would a qualifying facility, um, take precedence over our wholesale electric service contract? And FERC came back and said yes. So this decision opened up an opportunity to develop local renewable generation outside of wholesale power contracts and it was kind of an earthshaking ruling that was noted nationally. Our wholesale power provider then immediately filed a protest, um, it was initially turned down and they filed another request to apply a cost recovery charge on any qualifying facilities that we would develop. That too was turned down and a request for re-hearing was then filed, which has been sitting at FERC for two years now and we're waiting for the final ruling on that request for re-hearing.
Christopher Mitchell: But this is a big deal, just to simplify it, because basically previously you would have had to create a lot more demand to justify the creation of more local resources. Now you're able to build those local resources and then you'll, you'll end up getting a little less power from your wholesale provider.
John Gavan: Correct. We also, almost are looking to strategy where we'd use the wholesale electric provider as the battery. So we would develop local generation projects, um, and ramp them up. But again, you know, you have seasonality, day-night, issues like that. So having the ability to source power in the wholesale market is also very important to build a very reliable and redundant portfolio.
Christopher Mitchell: That's great. So, um, I feel like while we're on this role of, of all the ways in which you're really making these great decisions that are benefiting the community and being forward-looking, one of the things that comes up around the country, um, with the issue of coal mining jobs disappearing from everywhere or other manufacturing jobs that are disappearing, is this issue of retraining. At Dmea, as I understand it, you've made it a priority to hire people that had been in the, in the mines working.
John Gavan: Yes. We, when we elected to build our fiber network, we subcontracted to some construction companies, local construction companies to install the fiber. And one of these companies was very successful in hiring miners, coal miners who had been laid off and retraining them in fiber splicing and fiber installation. And over time they put over 60 coal miners who had been laid off back to work. And those people were able to stay in town, keep their families in place, and not have to move to Utah or Wyoming or elsewhere for the next coal mining job. So it's been a tremendous, um, tremendously successful initiative and has had tremendous community benefit as well.
Christopher Mitchell: Well, one of the, one of the things that we've seen communities wrestle with in the past is that's been perceived as being more expensive to try to train people locally and um, and to get them, it's cheaper just sort of import workers from Arkansas seems to be a common state where people will, will move to some other part of the country for a few months, build a network and then moved back to Arkansas, get another job, move around. But was there, was there an additional cost to this that you're aware of? Is this just something that a local contractor did on their own volition?
John Gavan: First of all, as a member road co op, there are co op principles, one of which is concern for community. So we made best effort to source the manpower locally wherever we could for this fiber build project. So working with this subcontractor, we definitely encouraged them to use local resources and it just happened that one of the underground coal mines had recently a shut down as Brad indicated, so there were people available and ready for retraining.
Christopher Mitchell: That's a lot about the past and the and the good things that have happened and uh, some of the things that are rolling forward with the renewable local distributed energy. Um, but we haven't really covered exactly what Elevate's plan is. Is it every last person in the, in the territory, more or less, I mean, is that the goal with, with a full fiber network?
Brad Harding: Yeah, that's the ultimate goal. I mean, it seems kind of brash and bold, but, fiber to the home connection for every DMEA member. So we'rw well on that path. Um, launched construction roughly, gosh, is it 18 months ago and to have 3,500 users currently and continuing to build out around 250 installs every month, um, with a race to, uh, to get everyone in the service area needs met.
Christopher Mitchell: So where's the funding for that coming from? How does something like that get financed? Um, I'm sure you know, local banks have some wealth, but you can't just write a check for the amount that must be involved.
John Gavan: Yes. We secured special arrangements with two of the prime lenders in the Co-op space to help finance this project. Um, we also, you know, DMEA, most rural electric cooperatives have a very solid equity position. So we also did a lot of self-funding. Next, there is tremendous grant opportunities, especially in the state of Colorado. We have a high cost telecom fund which is being repurposed now to support broadband construction in unserved and underserved areas. So we were successful in securing a $2.65 million dollar grant this year to offset the construction costs in some of our more remote areas.
Christopher Mitchell: Now, when you say equity, I think it's worth reminding people that a, a cooperative organization such yourself, and I'd love to throw this to you, Brad, it's a money-related question, equity's going to be in it. At the end of the year, the benefits the profits are redistributed to the members. Does that mean that, effectively, members will get smaller checks at the end of the year because more of that money is going into investment for the future.
Brad Harding: You're exactly right, Chris, that cooperatives are member-owned and one of the unique benefits of a cooperative is that when the revenues exceed the expenses, there are margins, and those margins, uh, can be retained to support the cooperative long term or they can be distributed to the members over a period of time. And DMEA likes to do kind of a combination of that. But John was alluding to the fact that because of that strong equity position, um, we haven't had to subsidize the fiber build out from the equity position of DMEA. It's a wonderful part of this story. But what DMEA has done is downstream some of that equity in the form of loans to Elevate, um, to, you know, launch the project and Elevate over time will repay those.
Christopher Mitchell: Great. I don't know how much of, if any of the counties are considered to be economically distressed by federal measures, but, um, I believe banks have opportunities to get Community Revitalization Act credits if you're helping to be part of a project that's a improving the prospects for those areas. Is that something that your bank has looked at?
Brad Harding: No, it's a good, good question. I wish in some ways that we were of the size and scale to participate on those CRA type of programs. Most of those are big-bank related programs, they get a lot of benefit for the award. We're Colorado's, I think fifth smallest, locally-owned community bank and for the most part, that's not a part of our strategy to reach out with, you know, millions of dollars of funding for a project of this size and scale. But there are players in the state of Colorado that would benefit from doing those things just as you suggested.
Christopher Mitchell: That's a lot of great information. As we're winding down the show, what's the last bit of news that we want to share?
John Gavan: Well, as I mentioned, uh, you know, we had our success with the PURPA regulation, but now we're also looking at the possibility of buying out of our wholesale electric service contract. Um, and so that is an effort that's accelerating and, uh, we think offers another opportunity to allow us to source more of our power in the wholesale market and also locally.
Christopher Mitchell: Are other electric co ops following your other, watching you and thinking that they might want to do something. I've just, I've had a sense that a lot of the rural electrics are pretty nervous about doing these sorts of things.
John Gavan: Well, there is a new Mexico, a rural electric co op that has already bought out of its contract and is now implementing megawatts of solar.
Christopher Mitchell: Is that Kit Carson, by any chance?
John Gavan: Kit Carson, exactly.
Christopher Mitchell: We interviewed Luis a few weeks ago.
John Gavan: Great. Yeah. So we are kind of following along somewhat a slightly different path than Luis did, but I think you're going to see the, the wholesale energy markets have become so dynamic. I think this trend will content continue.
Christopher Mitchell: Great, well thank you for being a leader in this space and I, and we're hoping that many, many rural electric cooperatives a follow your lead.
Lisa Gonzalez: That was Christopher speaking with John Gavan and Brad Harding from the Delta Montrose Electric Association. We have transcripts for this and other podcasts available at muninetworks.org/broadbandbits. Email us at podcast@Muninetworks.org with your ideas for the show. Follow Chris on Twitter. His handle is @communitynets. You can also follow muninetworks.org stories on Twitter. The handle is @muninetworks. Subscribe to this podcast and the other ILSR podcasts, Building Local Power and the Local Energy Rules podcast. You can access them on apple podcast, stitcher, or wherever else you get your podcasts. Never miss out on our original research. Subscribe to our monthly newsletter at ILSR.org. Thanks to Arne Huseby for the song "Warm Duck Shuffle," licensed through Creative Commons, and thanks for listening to episode 314 of the Community Broadband Bits podcast.