Member System Profiles: Sioux Center Municipal Utilities

The Sioux Center Municipal Utilities natural gas operation is centered in a small community of 6,400 people located in the northwest corner of Iowa. Founded in 1954 when natural gas came to Iowa, a decade later this little utility had the vision to be one of the first 16 charter members of the American Public Gas Association and has been with us ever since. A great deal of the credit for this goes to Utility Manager Harold Schiebout, our 16th President.

The little town of Sioux Center has recently grown rapidly–18 percent in the 1990’s– and its’ natural gas operation has grown even more in this time period. A combination electricity and natural gas utility, the Sioux Center Municipal Utilities has many characteristics of a much larger utility. The total gas sales annually top 1,200,000 MCF. Of that number, 1/3 is residential and small commercial, while 2/3 is industrial. One ethanol plant alone uses a whopping 55% of the total gas in the system.

They are the retail provider for about 2,000 natural gas customers in Sioux Center proper, and several outside city limits. Those outside include the ethanol plant and a pork packing plant that is the second largest customer. Unlike many small town utilities, SCMU has had to be competitive in order to get or keep several large customers. They went through a period when some large customers were seriously looking at retail competition for natural gas.

Harold Schiebout

For example, they had to bid a couple years ago to be the gas supplier for the ethanol plant. The competition was a rural local electric cooperative that was getting into the gas business to serve large customers, especially ethanol plants. In addition, there is a college in town that was looking at one point to buy gas from a consortium of colleges in Iowa. These customers are still with SCMU today. According to Harold Schiebout , "It was a challenge, but we were pleased to keep our customer base together and adjust our rates accordingly to relate to the higher efficiency of high volume customers."

The town motto of ‘Progress through cooperation’ aptly describes how organizations and businesses, including the utilities, have done well working together. One of the big reasons Sioux Center Municipal Utilities has been able to be competitive is it works with a consortium of municipal utilities in over 30 communities spread across several states to purchase gas. This organization, the National Public Gas Agency (NPGA), has given opportunities for smaller members to have a bit more buying power.

The NPGA is Sioux Center’s sole-source supplier. NPGA shops on the market for its members based on a diverse supply portfolio goal, getting bids from various producers or suppliers. Some gas is prepaid, some is bought short term on the spot market and a certain percentage come from varying supplies. Mr. Schiebout sums it up well, that "Small communities individually usually don’t have those opportunities."

The ‘progress through cooperation’ theme also applies to the Northern Municipal Distributors Group (NMDG), a group of munis and a couple small IOUs private companies that get their gas from the Northern Natural gas pipeline in Iowa, Minnesota, South Dakota, and Wisconsin. NMDG have a former Washington DC attorney that represents them in Northern rate cases and other FERC issues, giving the small utilities a voice in a base dominated by larger IOUs. "It is similar to the relationship of APGA and the American Gas Association (AGA)." Possibly due in part to this representation, Northern Natural gas company, which is the only game in town for physically transporting gas to Sioux Center, has been good to the utility.

For many years, Sioux Center has included a monthly newsletter with its utility bills. This has been an important conduit for information with customers about expectations and communicating why prices are higher – especially in fall going into heating season. The utility has also been very actively promoting conservation and efficiency in all its operations.

Harold Schiebout recalled about his tenure as APGA President in 1977-78 that "it was a lot different, before deregulation." In those years when he was more involved, the industry was making the often painful move from dependence on pipelines for transmission and supply. Some pipelines were really promoting that while others had reservations. This was part of the challenge of the times, since it became inevitable that deregulation would happen. Utilities had alliances and friends in the pipeline world which were directly affected, making the transition quite a challenge. "Today APGA is a lot less divisive than when I was president, and there is now more commonality among members."

APGA has also grown considerably since then, to a great extent because of Arie Verrips and Bob Cave. "It is much stronger, with more representation in more states and much more in FERC and congress. APGA has a good team of people on board. For example, Dave Schryver has done a super job, especially in his work getting members organized and focused to work on the energy bill." There are some weighty issues now being faced by the gas industry, such as getting favorable prepayment conditions. APGA has been on forefront on these issues. Return on that rather small investment has been great value. Beyond representing issues, there is a real sense of representing customers that Schiebout thinks has transcended into APGA.

The industry faces challenges in the future. "We went through an era when people were motivated to promote natural gas sales and increase volumes, but we must now realize gas is a finite resource, and use it where we get the most value." There are limitations on continuing to grow gas use at an unsustainable rate. For example, natural gas use for electricity generation needs to be supplemented by other energy sources.

Harold Schiebout’s personal plans for the future are to retire on December 31st of this year. "I entered the utility business on August 1, 1959, and will be retiring after 46 years." Looking back, he has appreciated and enjoyed his involvement with affiliated organizations like APGA, and made some wonderful friends. After spending at least four months being retired, according to the Iowa retirement rules, he plans to re-engage in a different capacity supplementing where he can with his experiences. Murray Hulstein, current Assistant Utilities Manager, has been appointed Utilities Manger beginning January 1, 2006.

Originally in July 10, 2005 Public Gas News