Traverse City News and Events

Light & Power Seeks $18M In Funding For Fiber, Smart Grid Expansion

By Beth Milligan | Jan. 4, 2021

Traverse City Light & Power (TCLP) plans to seek an $18 million federal loan to build out the rest of its fiber optic network and upgrade to a city “smart grid” with better security, power outage management, and energy efficiency features – with city commissioners set to vote on approving the loan application at their 7pm virtual meeting tonight (Monday).

TCLP plans to seek an $18 million loan from the United States Department of Agriculture (USDA), which has multiple financing programs to assist communities with sustainability and growth efforts, including utilities expansion. TCLP has already successfully worked with USDA in recent months, becoming the first municipal utility in the country to receive a USDA loan to promote energy efficiency and renewable energy. The $1.8 million from that project will be used to support TCLP's on-bill financing program, which allows residential customers to finance their own energy efficiency and/or renewable energy improvements, such as installing more efficient furnaces or air conditioners.

The far more ambitious $18 million USDA loan application – if successful – will allow TCLP to build out the rest of its citywide fiber network and implement “smart grid” upgrades to its overall system. TCLP rolled out Phase One of its fiber-to-the-premises service this fall to roughly 2,200 businesses and homes in downtown Traverse City, including Central and Boardman neighborhoods, Eighth Street, Lake Street, and Woodmere Avenue. Thanks to an $800,000 interfund loan from the city’s economic development fund, the utility is now moving into Phase 1.1, reaching more than 1,000 additional customers in the coming months in the area south of Front Street, north of Fourteenth Street, east of Division Street, and west of Cass Street. The completion of the two phases means roughly one quarter of TCLP’s total customers will have access to fiber Internet as part of the initial launch.

Reaching the remaining 75 percent will require loans or grants from external sources, TCLP Executive Director Tim Arends told utility board members in December. “Any kind of expansion of the network is going to have to come from outside financing sources,” he said. Because TCLP is under the umbrella of the city, applying for loan funding requires the approval of city commissioners. The loan would be paid back over 20 years at an interest rate of the U.S. Treasury Daily Rate, plus 0.125 percent.

Arends emphasized that it will likely take six to nine months to learn whether the utility is awarded the USDA loan, noting that both TCLP and city commissioners will then need to give final approval to accept the funding. Giving approval to apply for the loan now does not commit the city to the expansion project, he said. The TCLP board and commissioners will have more data in the months ahead about the “take” – or sign-up – rate among customers for fiber, and can make a determination once they hear from the USDA about whether to move forward with building out the rest of the network.

“We wanted to go ahead and make application for the financing so that if the board then did decide to expand, we would know where the money is coming from,” Arends said. City Manager Marty Colburn also expressed his support for moving ahead with the loan application, “recognizing that there’s quite a lead time when working with federal agencies.” He added: “We’re still, I believe, going to have time to take a look at the (fiber) revenue and how we’re doing on Phase 1 and 1.1 prior to commitment to going into Phase 2.”

While citywide fiber Internet is the most high-profile public aspect of the expansion, Mayor Pro Tem Amy Shamroe – who also sits on the TCLP board – says planned smart grid upgrades may be even more crucial. Hardware, software, and advanced communication upgrades to the TCLP distribution system will allow for “operators to assess grid stability, advanced digital meters that give consumers better information and automatically report outages, relays that sense and recover from faults in the substation automatically, automated feeder switches that re-route power around problems, and batteries that store excess energy and make it available later to the grid to meet customer demand,” according to TCLP documents. Those upgrades can provide technicians with real-time grid data, allow customers to monitor their energy usage in detail and adjust consumption, and reduce demand during peak hours – a step toward reducing the city’s carbon footprint, according to TCLP.

Smart grid upgrades will also provide upgraded security that will better protect the utility against potential threats, Shamroe notes – with the electric sector identified by the government as a vulnerable target to terrorist attacks. “We know after generations of neglect, we are looking at some big bills for infrastructure, whether it’s our utilities or stormwater or sewage lines,” Shamroe says. “We’re hitting the end of life on these...and we’re not going to get ratepayers to cover all the costs. The largest chunk is securing our network and making us a twenty-first century utility, and some of that is an expense the utility will just have to take on.”

If the USDA loan is approved, TCLP can borrow as it goes along and builds out its network, rather than assuming the entire debt upfront. Shamroe says the utility has always focused on using a phased approach, so that staff and board members can evaluate progress before moving into the next round of construction. With interest rates down during the pandemic, she believes it’s a good time to try and secure funding for future expansion.

“I have full faith in our staff at both the city and Light and Power that this has been carefully weighed and the numbers looked at over time, just like funding for any other projects,” she says. “To me, this isn’t optional. This is something we have to be upgrading. We can go in phases, but the plan needs to be there.”

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