Territory Exchange

Have you ever heard of two utilities in Michigan exchanging territory AND customers/members? I haven’t either. It is an idea that Traverse City Light and Power (TCLP) came to Cherryland with several months ago. As I write this, we are close to getting final signatures from both boards, and public input sessions have either occurred or are planned for the near future.

What is being exchanged? Traverse City Light and Power is trading rural municipal utility services along River Road in Grand Traverse County for cooperative services in the Barlow Street neighborhood near the city limits of Traverse City. The actual meter counts are slightly different, but the energy load based on history is almost identical.

There are a few very good reasons for this historic exchange. First, TCLP has a stand alone line that evolved in the days of hydropower at the Brown Bridge Dam serving the rural River Road area. With the dam long gone, it is the only rural area for which the city utility is responsible. The municipal is on one side of the road while the cooperative is on the other.

The poles and wires of both utilities in this area are old and in need of major repair and upgrades. It will simply be more efficient and practical for Cherryland to do one upgrade that involves a consolidation of the competing lines. Cooperative members and former municipal customers will see improved reliability and a utility corridor that is visually cleaner as well.

The Cherryland service territory in the Barlow area is adjacent to the city limits. It is very old and in need of major repair. Just as it makes sense for a city utility to give up rural territory, this small piece of the cooperative’s urban area was a logical candidate. The load in this area also matched the rural utility load.

While this is certainly a historical event, it is not a major transaction for either utility. The city utility will be transferring about 110 customers as Cherryland sends over just under 100 members. Thus, communication has been directed specifically to these individuals and businesses. Neither utility saw a need for a widespread public campaign.

Rate disparity is the biggest issue. Traverse City Light and Power has more than 30 meters per mile of line while Cherryland is slightly more than 11. Obviously, residential rates at the municipal entity are far lower than at the cooperative.

Cherryland is working on adding a credit to the new, incoming member bills that would slowly be lowered over a yet-to-be-determined period of years. The residential members leaving the cooperative for municipal service will see an immediate decrease. The rate impact to commercial members is specific to the individual business, and each utility will be working with them directly.

We are anticipating moving everyone to their new utility before June 1. The work will be done in phases over the April-May time period as weather and unforeseen construction issues allow.

Are we actively looking for other similar opportunities? I can’t speak for TCLP. While anything is possible, Cherryland has no present plans or ideas for any future exchanges. This was a unique opportunity that clearly made sense financially and operationally while greatly increasing reliability.

Cherryland will continue to serve on the edges of Traverse City. These dense urban areas are an important part of our overall service territory and sales growth.

We will also continue to be a good utility neighbor and applaud TCLP staff and leadership for their effort to get this exchange completed for the benefit of all co-op members and utility customers.

Tony Anderson

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  1. John March 7, 2017 at 10:07 am - Reply

    “Cherryland is working on adding a credit to the new, incoming member bills that would slowly be lowered over a yet-to-be-determined period of years. The residential members leaving the cooperative for municipal service will see an immediate decrease”.

    Why to the second sentence? Shouldn’t they see a decrease at the same rate as the increase to the other? The municipality should Pay for what you have to shell out. That would at lest be equitable.
    I get the swap, just not the cost difference.
    What is to stop the municipality from keeping the higher rate and making a little extra coin?

    • Tony Anderson March 7, 2017 at 10:15 am - Reply

      One swap but two different utilities – Each has made a decision on how to handle the rate transition. It would be nice to have someone pay for what Cherryland has to put out but that is not how this deal was set up. Nobody forced Cherryland to make the sacrifice. We simply thought it was the fair and right thing to do.

      I expect that same sense of fairness is what will prevent the muni from charging the higher rate. I am confident that they will move them to the proper rate at the time the new muni meter is installed.

  2. Scott Anne March 7, 2017 at 10:25 am - Reply

    Makes perfect sense. Thank you for the information.

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