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Traverse City, Mich., Considers Fiber and Solar Buys

Traverse City Light & Power is already buying solar power from an existing array, but the company behind it wants to expand and sell the city more power. It's also considering a high-speed Internet network.

by Jordan Travis, The Record-Eagle / May 14, 2019

(TNS) — Heritage Sustainable Energy has a power purchase offer for Traverse City, Mich., Light & Power to consider, one the board president is calling a “no-brainer.”

That’s just one agenda item on a busy Tuesday meeting for the city-owned utility board. Fujitsu representatives also will present the findings from an 86-page cost-benefit analysis on building out what could be the first phase of a potential two-phase fiber network project.

Solar Deals

Heritage Sustainable Energy is back with another offer to sell power from a solar array the company has planned to expand since 2017.

Utility Executive Director Tim Arends said the Traverse City-based company would sell the output from a two-megawatt expansion of the array at M-72 and Bugai Road, for what amounts to 5.7 cents per kilowatt-hour. That would rise to 7.141 cents in 2025, then increase by 1.5 percent each year after until 2041.

Compare that to a past offer of 9.95 cents, fixed for 20 years, on which TCL&P board members passed in February. It’s also less than what Traverse City is paying the company for the array’s first phase to meet a green energy goal, at 11.25 cents per kilowatt-hour.

Marty Lagina, Heritage Sustainable Energy CEO, said the price on the latest deal includes capacity — the measure of a utility’s ability to get power to its customers. Plus, the array already is tied directly to TCL&P’s grid, he said — he’s working on zoning approval from Elmwood Township for the expansion. Utility board Chairman John Taylor said the offer is one worth considering.

Board member Amy Shamroe said she wants to learn more about the proposal. Both Traverse City and its utility aim to switch to 100 percent renewables — the city by 2020 and the utility by 2040. She anticipates the board will talk about how that array’s power would be distributed, she said.

Board members also will consider a deal with the Michigan Public Power Agency to buy 7.6 megawatts in solar power capacity from a large project in Shiawassee County, meeting documents show. It’s an even lower price — 3.695 cents per kilowatt-hour for 25 years, rising by 2 percent each year. The price includes power, capacity and renewable energy credits.

Fiber Pros and Cons

Fujitsu’s presentation will include a “most likely scenario” that a TCL&P high-speed network could bring a roughly $487,000 cash flow by the fourth and fifth years, documents show. That’s assuming 50 percent of potential business and residential customers sign up for Internet, and 30 percent of the same sign up for voice-over-Internet-protocol telephone service, according to the plan.

Taylor said he’s waiting to learn more but understands the outlook is positive. There’s more to do before the utility could start construction if the board so chooses, including setting a public hearing, as required by law, for such projects.

That likely means it would be a month at the soonest before board members could opt whether to OK construction of the first phase, Taylor said — that part would connect buildings within the downtown to Eighth Street, its Central Neighborhood and the Woodmere Avenue corridor and cost roughly $4 million to build, as previously reported.

Taylor said the fastest scenario is presuming the board is persuaded by the business plan.

“There’s absolutely a possibility that’s not the case,” he said.

Critics of the utility’s three-year-long exploration of expanding on its existing fiber-optic system are surfacing.

Utility customer Gerald DeGrazia said he has experience designing broadband networks and has worked for both the public and private sector. Fujitsu’s numbers seem much too optimistic to him, he said.

That could put the utility in the position of using ratepayer money to build the network, the revenues from which could never repay such an internal loan, DeGrazia said — he laid out several other concerns in emails to board members.

“I am very, very concerned that the board is rushing to move into a very risky venture, which in my opinion and based on my experience, doesn’t have a lot of opportunity to succeed,” he said.

Arends said there is some risk should the utility move ahead. The board is weighing the idea’s pros and cons, and how well the venture would work is an unknown.

Taylor said there’s no doubt that plenty in the city, including a few utility board members, are enthusiastic about the idea. But he doesn’t believe the board will rubber-stamp the project, nor does he believe turning a network into a self-sustaining enterprise will be easy, he said.

“I think that the numbers we see on Tuesday will matter a lot,” he said, adding he believes there’s a high likelihood of success.

Shamroe, who serves on an ad hoc committee for the project, said she’s heard DeGrazia’s concerns as well. She believes most of the questions he’s raised have been answered, and that most of the problems he’s brought up don’t seem to reflect Traverse City’s situation.

©2019 The Record-Eagle (Traverse City, Mich.). Distributed by Tribune Content Agency, LLC.

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