Episode 33, the Talking South Carolina Podcast Interview with Rob Hochstetler of Central Electric Power Cooperative

Episode transcript:

Angela Barrett – “Hey guys, and welcome to another episode of Talking South Carolina. Now this week I have got Rob Hostetler, who is the president and CEO of the Central Electric Power Co-op, both, we’re going to talk to him about who they are, what they do, how they, affect our electricity in our bill, that we get monthly, here in South Carolina, as well as I’m going to ask him about the new bill that was passed in the House here locally.”

Angela Barrett – “Just a couple of days ago. And, see what he has to say about that. So hang on one second and let me bring you in.”

Rob Hochstetler – “Hello, Angela.”

Angela Barrett – “Hey. How are you? You look so familiar. I don’t know where we might know each other from, but.”

Rob Hochstetler – “Yeah, who knows?”

Angela Barrett – That’s right.

Rob Hochstetler – “I live on. I live in Chapin. But I know you’re on the other side of the lake, right?”

Angela Barrett – “Yeah. That’s right. Hey, Rob, thanks so much for joining me here today.”

Rob Hochstetler – “Thank you. Angela, I’m really excited to be on your podcast. I really enjoy them.”

Angela Barrett – “Oh good. Well thank you, thank you. They’re a lot of fun. I get to meet a lot of nice, people, and that I would never have been able to meet by doing this. And so it’s always exciting for me as well. Central electric power cooperative. Tell me who you are, what you do.”

Rob Hochstetler – “Sure. So, there are 19 electric, just two distribution cooperatives in the state. In the area that I know you live. Mid Carolina is electric distribution cooperative. All across the country, distribution cooperatives partnered together and created generation partners. Sometimes we call ourselves generation and transmission cooperatives. And really we’re their generation partner. We do the contracts and supply them power.”

Rob Hochstetler – “And by working together, those 19 co-ops are can gain scale and scope to compete with all the big utilities that you’ve heard of as well. And so central does those power contracts and supplies power to the 19 electric co-ops in South Carolina.”

Angela Barrett – Okay. I want you to break this down as if you would a child’s picture chart and how this actually works. Sure.

Rob Hochstetler – “And yeah, so you if you let me it really the co-ops build from the ground up and not to go into a complete history lesson, but go back into the 1930s and rule. America doesn’t have electricity but electricity starting to come to the towns. And in, the mid 1930s, Franklin Delano Roosevelt passes a law to trying to get electrification to rural areas.”

Rob Hochstetler – “And the first electric cooperative in South Carolina is formed in 1938. And in 1948, there’s 7 or 8 cooperatives in the state. Again, the members at the end of the line in rural communities have partnered together to form these cooperatives, and central is formed. And so now everyone that is on a power line, on a distribution cooperative, we call them consumer members or consumer owners.”

Rob Hochstetler – “They elect local board members. So those people that know the communities are elected to the local boards, and then those local boards will send people to sit on Central Electric’s board. And so cooperatives cooperating is what lets them gain scope and scale. So in consumer member consumer, if you will, Alexei, local board, the local board. Since people to serve on the cooperative of cooperatives, the generation planning organization that I work for, does that help?”

Angela Barrett – “It does. You know, because I’m in some sense, you know, some might think, okay, your your whole little bit of energy over here and you’re helping supply, you know, this, that and the other and that’s not what this is about. And the more that I read. So, that does help. Now you guys actually, was it 1948.”

Rob Hochstetler – 1948? You were one.

Angela Barrett – Yeah. That was. Yeah. Been around a long time.

Rob Hochstetler – “We we have been around a long time. And to me it’s very interesting again, the history. And so, you know this is about South Carolina. So it’s South Carolina’s history. But really national history. The local co-ops really start out buying from the investor own utilities. And they really didn’t have options and choices. And I don’t want to say they were taken advantage of.”

Rob Hochstetler – “But I think if you go look they will they would tell you they were taking advantage of the investor owned utilities. So they start to partner together. Well, interestingly, in South Carolina, South Carolina has a state owned power companies. Most states don’t have a state owned power company. And somewhere along the line, some very smart people said, oh, instead of buying from the investor owned utilities, why don’t you buy from Santee Cooper?”

Rob Hochstetler – “And that was that really formed a partnership back in the the late 40s, early 50s of central is the biggest customer of Santee Cooper. We buy about 70% of their power, but we also now buy power from Duke Energy Carolinas based out of Charlotte, and if I’m not mistaken, were their largest customers as well.”

Angela Barrett – “And you guys, meaning Central Electric power.”

Angela Barrett – Are the third largest in the country. Right. And inflation. Yeah. Okay.

Rob Hochstetler – “Yeah, yeah. So there’s there’s cooperatives, all local distribution cooperatives, all across the country. There’s there’s someplace between 40 and 50, depending on how you want to count generation and transmission or generation partners all across the country by sales to our members were the third largest in the country.”

Angela Barrett – Gotcha. Now how? Let’s break it down to somebody. An everyday household. What part would you guys play in the bill that we get every month from whoever it might be?

Rob Hochstetler – “That’s that’s an excellent question. So what I would tell you is for Central Electric, for the wholesale power provider, about 95% of our of our bill is the power that we get. About 80% of that is for a wholesale, just about typical wholesale is the power plants that we build and the fuel that we burn. And so not maybe getting too math oriented here, but for the consumer, then what that translates to about 50% of your bill is the power plants that are built in the fuel that is burned.”

Rob Hochstetler – “So making sure that those decisions are made correctly is very important. Then the rest of the bill is transmit lines, the power lines that you see going across the state, the distribution lines, the power that comes right into your home, and then some overhead. But the power plant decision. So we’re about for the local co-ops. We’re someplace between 50 and 60% of the in consumers bills.”

Rob Hochstetler – So what happens at central is important to the end consumer.

Angela Barrett – “Right. Absolutely. Because whoof. This can get kind of hefty this time of year when it’s cold. Now supply and demand. Let’s talk about a little bit about that. And then we’re going to talk about there’s a lot of chat right now about South Carolina need more energy and this, that and the other. But let’s just basically get down to the brass tacks.”

Angela Barrett – What I want to supply and demand. Let’s talk about that.

Rob Hochstetler – “Well, there’s in our industry and sometimes this is hard to understand even for people who’ve been here. We’re really supplying two things. We supply peak energy and then total energy. So you use some amount of electricity over a whole month, and we’ve got to make sure we can generate that over a whole month. But on the very peak day, very peak hour, very peak minute, we have to have power plants that can generate that much.”

Rob Hochstetler – “So if you turn on a light switch someplace, somewhere a generator is putting out a little bit more energy. And so we have what we call capacity. Do we have enough generation for the very peak days? It’s very cold. Been very cold here lately. Do we have enough generators built to supply that? But then we talk energy.”

Rob Hochstetler – “Solar energy is a great example, right? Solar that’s built is energy, but it may or may not be available on those very peak days. If the sun is not shining and it’s cold outside and the sun’s not up and it’s early morning. So supply and demand two areas we right now with the economy growing in South Carolina, we are short power supply that in that needing that last piece of generation on the very peak days.”

Rob Hochstetler – “And it really has the potential. And again, I know we’re going to talk about this in a minute, but starts to limit what we can do in our state if we don’t add new generation for those peak days.”

Angela Barrett – “So I’ll back up just a minute before we go even further in that direction, because I think there’s a good bit of talk there. But, the type of energy y’all are creating is, are there more than one from one source?”

Rob Hochstetler – “Yeah. So we’re we are getting very close to a third, a third, a third for us. South Carolina loves nuclear power. If you look at the number of power plants we have by our in the whole state, by the population, we are nuclear heavy. So we get about a third of our power from zero emissions nuclear power.”

Rob Hochstetler – “We get about a third of our power from coal fired power plants, those older plants that are still around and about a third from natural gas, which burns much cleaner than coal does. So we’re about a third, a third, a third. Right now.”

Angela Barrett – “And another, government master said, I don’t know if it was last year. Something about, you know, and again, this goes back to we need more power sources that probably in the next 10 to 15 years that the coal would sort of phase be gone. Is that are you in agreement with that, or are.”

Rob Hochstetler – “Think yet the idea is that coal is not necessarily the most economic power supply resource we could have right now, but we have to have something to replace those coal fired power plants. So we really are in this conundrum of we need more power because we’re growing, and we would like to have more power so we can retire the coal fired power plants for.”

Rob Hochstetler – “I worked with the Germans, said Green and green, right? Some because of green the environment, but also because they just really are not as economically efficient as they used to be.”

Angela Barrett – “And so is. Have we come up with the solution for this other source of our or is there something in the works? Now you can say what it is, but sure, sure.”

Rob Hochstetler – “Well, it’s you’re thinking as an industry, we’re saying all of the above. It’s hard to retire coal if you haven’t built a new power plant. And so, one of the gentlemen that works at the federal level, talks about natural gas is a bridge fuel, but it’s a very long bridge. Nuclear plants, you know, Georgia brought on some nuclear plants.”

Rob Hochstetler – “They talk about small modular reactors. Those things are coming, but they’re very expensive. And so natural gas is the bridge fuel. But then we also solar is an option. Solar with batteries, those are things are state and we specifically are investing in and starting to bring online. They’re not on yet but they’re being built across our state.”

Rob Hochstetler – So but natural gas is in all likelihood all across the country. That is really the resource. It’s the bridge fuel to whatever the future holds.

Angela Barrett – “Is, is you brought that up. I will go ahead and set and ask, I know there was a bill passed just a few days ago. The House of Representatives local here about the, the ability to be able to, I guess, seek out natural gas. Is that how that bill read? I mean, I didn’t read the whole thing.”

Angela Barrett – I just kind of got the CliffsNotes for the utility companies being able to seek out that. Is that right?

Rob Hochstetler – “Sure. So our state, if you think about this, there’s interest state pipelines, the big natural gas pipelines, and then there’s intrastate the pipelines inside the state are intrastate. The pipelines in South Carolina, are full, if you think of it like a straw. The straw is for we don’t have any more intrastate pipelines. We need the ability to bring more gas into the state for power plant reasons and for economic development reasons.”

Rob Hochstetler – “And so I think what that bill was meant to do was to help get that those gas lines built inside the state without really bypassing any regulations, but starting to set the tone of we need to do this again for two reasons. One for power plants and two for economic development. The, the piece that we are very interested in.”

Rob Hochstetler – “Yeah, I think from a state perspective, we’ll work well is city Cooper would like to partner with, Dominion Energy South Carolina to build a natural gas bio powered fire fired power plant, natural gas fired power plant. Well, by statute, they have to get approval from the General Assembly to do a project with and with the investor owned utility.”

Rob Hochstetler – “And so that’s the piece that Central’s interested in. Yeah, we get 70% of our power from Santee Cooper. So we will be making, it won’t be in our name, but we’re making a big investment in that. That’s the piece we’re interested in. They’re doing other things to try to bring that power on line. And again, if our state wants to continue to grow as it’s been growing, we need that power plant.”

Rob Hochstetler – “And I could if you would like, I could tell you all the great things cooperatives are doing in economic development as well.”

Angela Barrett – “Well, yeah, let’s touch on that then. I have, I just had two more questions, but I want to switch on that while we’re there. Go for.”

Rob Hochstetler – “It. So, I’ve been here about ten years, and since I’ve been here, the cooperatives have made a big investment in economic development, trying to bring jobs in community changing jobs, but it really anything for the local community. So, since since 2014 last ten years, $18.5 billion announced for economic development in rural electric cooperatives service territory.”

Rob Hochstetler – “Volvo, Samsung names that you’ve heard $18.5 billion. That’s a lot. 43,000 jobs brought in just last year alone in co-op territory, $3.2 billion of announced projects, 1100 jobs. And those those are the kind of jobs, that really, to me, change communities. But the communities where we the to me, the best thing about electric cooperatives is they were built by the communities and they serve the communities.”

Rob Hochstetler – “And so these are the things that the communities want to bring. And I find that very interesting. So the cops have invested about $69 million of members resources, if you will, but it has paid off extremely for the good of our state. We believe, and I don’t quote me on this. I’ve not done all the research, but I believe there’s only two organizations in our state that try to do economic development in all 46 counties, the Department of Commerce and the electric cooperatives, because we serve members in every county in the state.”

Rob Hochstetler – “And we’re very proud of that because, you know, the member, you know, the South Carolina South Carolinians are our members. And so to help them have better lives is something that we get very excited about.”

Angela Barrett – “Yeah, I didn’t see that on your the web page where that y’all were in all, 46 counties in that good analogy there with the Commerce, those those are the people that we think of, not necessarily in the trenches, but, I mean, those are the people who are in the county and owned businesses in the towns and, and, and, and know what’s going on.”

Angela Barrett – “And, the same with you guys. I mean, it, you’re, you know, everywhere. It’s a good representation, for all of the counties. There was something else for all the counties. You, I, I interrupt to go ahead.”

Rob Hochstetler – “Oh, no. No, that’s. So, the other thing. So the cooperatives have partnered together to do economic development together. All my team, which in the way we do that is even in some of those rural areas that are still perhaps struggling the way we’ve done economic development is there’s always a payback in the relatively near term. And so we do give incentives for companies to come.”

Rob Hochstetler – “But by by year two, three, 4 or 5, they’re they’re providing more value. We’re spreading more fixed cost across the entire state. And it ultimately lowers everyone’s bills by bringing these organizations in. It’s good for the tax base. Again, it’s good for creating jobs. It really to me economic development is win win win for everyone.”

Angela Barrett – “That that’s another one of the that I was going to ask you. So I know Frank Knapp is big on these, data centers eating up all of this energy. Your thoughts?”

Rob Hochstetler – “Yeah. So data centers take a lot of energy. And, we do one of our members survey, current data center. What what I would tell you and what the way we’ve approached data centers is, they have to pay their their fair share, right? They they have to if we have to build new transmission lines for them, they need to pay that.”

Rob Hochstetler – “If we’ve got to bring on new power plants online, they need to pay that cost. That data centers to me, just like all economic development, can be good for communities. But each community has to decide if it’s good for them. But they are big and they use a lot of power. But again, if the communities want them, where we sit is we want to help you get those.”

Rob Hochstetler – “And people on both sides. Are data centers helpful or not helpful? What I would tell you is once I they’ll say, well, it doesn’t create a lot of jobs. Well when they’re done, but they really never stop building. So there’s a lot of construction trade jobs that go into those that seem to be everyplace across the country. They’re they almost stay.”

Rob Hochstetler – “So it’s very high end, engineering, computer engineering jobs. But and then there’s just as important and just as professional, people that are in the construction trades. And so, if you and I want to use ChatGPT and use AI and watch YouTube and post our podcast, we’re going to need these data centers. And so they’re only building them because they’re used.”

Rob Hochstetler – And I believe the future will be you don’t want to be left out. You want some of those data centers near to you to continue economic development.

Angela Barrett – “Gotcha, gotcha. So, what is our overall answer here? To the everyday in-home. What are we looking at? And I know that you looking at it from your side, but from a business standpoint and the development of South Carolina and what it will help us as a whole, but as an individual home, are we still working at probably rate increases due to some of these things that have to be built so we can have more like the scout plant that just came, so more businesses like that that are huge and are going to pick up a lot of power, but is that what we’re looking at?”

Angela Barrett – “I mean, honestly.”

Rob Hochstetler – “Yeah. So the one the one thing this is not very technical. The words are pretty easy to say. Cost causation, if someone causes a is the cause, they ought to pay for it. And so, bills are going up. But I would tell you it’s, it’s almost inflation right now. Our industry almost moves with the price of natural gas.”

Rob Hochstetler – “Our rate Santee Cooper coming out of the settlement for the V.C. summer cook plant, we’ve held our rates flat really, since I’ve been here. Ten years, 11 years. And so we’re finally catching up, and we are seeing a rate increase. Now, what we try to do, I like to say we try to put downward pressure on rates.”

Rob Hochstetler – “But your question was what can the local homeowner do? And the least cost option for power in I talk about the power plants or what cost the money is to not use that kilowatt on peak and instead use it off peak. And so, some of our members and we don’t set local rates, are each of our members independent set local rates.”

Rob Hochstetler – “They’re going to three part rates. And really saying if you choose, there’s incentive to move off of peak these three hour windows in the winter during the morning when we’re on peak three hours, in the summer when we’re on peak, that’s when we’re building that last increment of power plant. And if you all do things to move, you know, don’t don’t, don’t run your hair dryer in the morning.”

Rob Hochstetler – “Get up a little early. Let us re cool your house in the summer so your air conditioning doesn’t work. Let us pre warm so you can be just as warm, but, not. And so the members are trying to sell that because it lowers their power cost the wholesale level. And they can pass it on. And so smart home smart appliances are already driving down energy usage, but trying to make it so we don’t have to build as many power plants.”

Rob Hochstetler – I think the individual homeowner can really take take part in that and be economically incentivized to take part in that.

Angela Barrett – “Yeah, yeah, yeah. And it’ll help their build.”

Rob Hochstetler – “It will, it will help their bill. Yeah.”

Angela Barrett – “That’s right, that’s right. And if they what the other question was a.”

Angela Barrett – “And now I can’t remember. But yeah, I was going to say I mean, I think people don’t realize as an everyday consumer, you know, we do think about our individual cells and our, our bills. And then if you have all the business the same. But in order for South Carolina to eat or in job growth and even pay with some of these other states that this is what’s necessary, this is the make or break right here.”

Angela Barrett – “Because if we can’t supply these companies power, they’re going to bring these high paying jobs. And these, you know, the business here, this is where the bulk starts, right? Sure. To put it in sign language.”

Rob Hochstetler – “Well, I can tell you listen to what the governor says. You know, the governor talks about people want to come to South Carolina, the number of people moving into South Carolina, Berkeley Electric, which surrounds Charleston, 700 new meters a month, 700, probably mostly residential people moving in a month. What do they want? South Carolina? Not. I am not a native South Carolina.”

Rob Hochstetler – “You might be able to tell by my twang. But I got here as fast as I could. That’s what I tell people I was, and that’s that’s. I could, South Carolina is a great state to do business in. It’s a great state to Lee to live in. The people are phenomenal. We’ve taken care of our environment.”

Rob Hochstetler – “So. But we still have to do those things necessary to stay competitive, if you will. I would say right now, we. Yes, we don’t win every project, but we win more than our fair share. It’s because of all the intangibles. I think that we bring. But sugar. Right for certain. For certain organizations, electric price is important that they have people to work.”

Rob Hochstetler – “Resources is a key a key point, that they can get their products shipped in and out, be our port, be our rail lines via the trucks and the interstates. All things very important. But we want to remain competitive. And I think it’s important for the state. And we hear our governor say that, and we hear that from both sides of the legislature as well.”

Angela Barrett – “Yeah. I think this is going to be, a funny word for, so this will a fun couple years, I guess, for all those kinks to get worked out. But it is, at least, I guess, heading in the right direction for all of us. The the state, the whole state. Finally just getting some movement there, don’t you think?”

Rob Hochstetler – “I, I absolutely agree, you know, the energy used to be stayed in steel and we didn’t. Our industry was just same thing, same thing. Now it’s a very exciting place to be because of because we are growing, because of the growth. And it’s exciting to be doing energy in South Carolina, a state that’s growing.”

Angela Barrett – “You know, and, and again, bringing this back to a household, most people take that for granted doing this just there. But it’s not it really isn’t. I mean, and that’s I think that’s where we’re facing and and luckily able to handle right now. But again looking to the future. But I mean people just especially children I’m thinking high school.”

Angela Barrett – They just had no concept. It’s just there. They flip the switch. It’s just they’re.

Rob Hochstetler – “That’s right. And that’s what we want. Right? I don’t know what to do with the place. I could, but I it’ll very close in, Christmas time 2022. We the whole the whole southeast got covered really most of the East Coast with the, with the, with the cold front. Old everywhere. And we were very close. Central did not have to turn anybody off.”

Rob Hochstetler – “But in the South, many people we call them, blackouts or brownouts because because they weren’t generating resources. We talked about that need, that last generation resource. They weren’t there or the transmission wasn’t there to move power where we needed it from. And, we’ve done things now to try to overcome that. But that’s only a couple of years ago.”

Rob Hochstetler – “We were that close, right?”

Angela Barrett – “Yeah. It is. So it does need to kind of be a household subject, at least in my opinion. But, people, again, and I’m guilty of it. Take it for granted. No need shirt. I’m one of those. When I turn it on, I want to work. Yeah, okay.”

Rob Hochstetler – “I would tell you, one of the things that we try to be cognizant of again, because we are serving the more rural areas, the cooperative serves 70% of the land mass in South Carolina, about a third of the population, so about 2 million South Carolinians. But we serve some of the poorer areas in trying to find that balance of making sure things are affordable, reliable, safe and environmentally responsible.”

Rob Hochstetler – “That’s the way I like to say it, but never forgetting that there are some people that, their power bill is a significant portion of what they their income. And so we try to remain cognizant of that, follow all the rules. But that downward pressure on rates and keeping rates affordable, so people can do other things with their money besides just keep their power on.”

Rob Hochstetler – “I’m a believer that electricity changed the world, and we do take it for granted, but it really was life changing, and we want to make sure that’s available for every.”

Angela Barrett – “Yeah, I agree in it’s just like we, I have some schoolteacher friends who I’m a give this analogy and some very poor one, but I’ll give it anyway. We talk about how difficult the teachers have in classrooms these days with all the things that are going on. But if home would help because that’s where it starts, is at home, then that would be better all around in the school systems.”

Angela Barrett – “And I think this is kind of the same thing. And this is just NE in Haiti, anything I’ve heard anywhere. So I’ll only write on one brochure that Matt from this is just in my fuller brain. If we all help here and small level at home, I think it would help overall, not only just our power bill, but the energy that we have here in South Carolina.”

Rob Hochstetler – “I think that’s that’s actually a really, really good analogy. Everyone doing a little bit and can help a lot. And so we do things, our members, I say we, we help our members do it, get back to their consumers, beat the peak. Who will tell you when a peak day is coming. Just do little things. You don’t have to, but you can.”

Rob Hochstetler – “We also have people who have put in smart thermostats and let the cooperatives again for financial incentives again, will pre cool your home in summer and will not run your air conditioner during the peak three hours, but you’ll be. Hopefully you feel fine, but if you want you can override it. Same with heat. The other thing that comes close to that, it maybe gets us a little bit off topic, but started right here to cooperate in South Carolina was Operation Roundup.”

Rob Hochstetler – “It’s going all across the country round your power bill up to the local to the closest dollar. So on average it’s about $6 a year. If everyone pools those resources, that money goes right back into the communities. And so what an idea that started here in South Carolina is gone all across the country and allows those local cooperatives, if everyone helps a little, we can do big things.”

Rob Hochstetler – “And I think you’re analogy is very similar, that if everyone helps at home a little bit, it really can go a long way. In the end.”

Angela Barrett – “Yeah, I agree, I agree Rob, thank you so much for being here today. I was excited about this. I don’t often get to talk to you. Big wigs out there, but this was fun.”

Rob Hochstetler – “And instead of myself, a big wig for.”

Angela Barrett – “She, I don’t know, presidency that’s rooting. But thank you so very much, for being with me. And we’ll have to get back together in three, 4 or 5 months and do a check in and see what has developed at that point.”

Rob Hochstetler – I would enjoy that very much. Angel. Thank you.

Angela Barrett – Absolutely. Thank you.