Change Is Coming - Are We Willing to Accept the Risk? (1995)

Business as usual. Not anymore. Presque Isle Electric & Gas Co-op has moved into a new business. As the new name shows, it is the natural gas business. We at PIE&G felt that the investor-owned natural gas companies had ignored our electric service area long enough. In the fall of 1993 our board of directors and management team began investigating the possibility of providing natural gas in areas we now serve and surrounding areas. After careful consideration we began to examine the changes that have taken place in the natural gas and electric industries. We decided that we would do a survey to see how many members wanted natural gas service. We sent out a survey in the spring of 1994 and the response was overwhelming. More than 50% of the members we surveyed for gas returned the survey and told us that within three years more than 90% of those members who use propane would convert to natural gas. With such a good response we decided to go to our membership and ask for a change in our Articles of Incorporation so we could enter the natural gas business. Again our voting membership responded with nearly 90% in favor of changing the Articles and entering into another business. We also began at this time to form our business philosophy that we would serve lower-populated areas, seeking to make a fair return, just as we did on the electric side, and use this margin to help us fund the extension of our natural gas system. We soon realized that this project would require some hard work, months of planning and long hours. The first thing we looked at was how well would the natural gas business into our existing electrical business. It did not take long to realize that with little additional personnel we could run this new venture. The accounting, billing, and member service areas would require no additional personnel to handle the natural gas business. We talked with our linemen and they were more than willing to learn how to construct and maintain a natural gas distribution system. After careful review, we came to the conclusion that we would need to hire two gas technicians to help train our current linemen and provide the initial expertise we were lacking in-house. The gas technicians we hired had 50 years of gas industry experience. We also hired an engineering firm which oversaw all construction, as well as the bidding processes, to be sure we would have a quality natural gas distribution system when all was said and done. Another major aspect of our reasoning for entering another business, along with the apparent perfect fit to our existing business, was the cost savings we could provide to our membership. The broader membership base created by the combination of the two services would allow us to spread the cost and thus reach an eventual goal of lowering costs for electric members and keep costs low for natural gas members. After looking at the business and evaluating the positives and negatives, the challenge began. We knew we would have to obtain franchises from the various townships. This is when one of Michigan's largest investor-owned natural gas utilities decided they did not want the competition and they would now like to serve in the townships we were ready to serve. This same utility, just months before, had shown little interest in these regions. At the township meetings, the IOU pulled out all the stops to obtain the franchises, and we were forced to either compete on their terms or concede. We felt we would serve more area than the IOU, because they have to provide a return to their stockholders, something we do not. The IOU showed up at township meetings with a barrage of former and current employees, member representatives, vice presidents, lawyers, field reps, and so on, eventually totaling more than 30 people at a public informational hearing in a township of about 1500 people. We, on the other hand, had one big advantage: we are part of the community we serve. …