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“We haven’t had a rate increase in eight years, and we are years away from one now.”
Boyd Lee, retired Vice President of Strategic Planning, CKenergy
CKenergy Cooperative doesn’t own a thermal energy network (TEN)—not as such. Most of the electric utility’s service territory isn’t dense enough for that kind of connected infrastructure.
Yet even without the horizontal pipes that link multiple geothermal heat pumps into what’s known as a TEN, CKenergy’s model is relevant to any TENs-curious utility.
CKenergy’s geothermal heat pump program has resulted in the installation of nearly 1,650 individual geothermal heat pumps in homes, schools, and commercial buildings. For a utility that oversees approximately 27,000 meters—18,000 of them residential—that level of saturation is six times the national average of building geothermal heat pump installations. The reason is simple: geothermal heat pumps have financially benefited both the utility and its members.
“Even though [the heat pumps] are not connected into a TEN, they improved our efficiency and our cost of power model,” says Boyd Lee, who previously led CKenergy’s geothermal program. “And that’s reflected both in our bottom line and in customers’ long-term rates.”
Co-ops: Democracy, Responsibility, and Risk
Electric co-ops are a utility model that emerged in force in the 1930s, when sparsely-populated areas couldn’t attract investment from investor-owned utility companies. Co-ops, with federal assistance, electrified rural regions. They remain an alternative to the investor-owned utility model and take pride in adhering to cooperative principles, such as democratic member control.
Co-op members elect a Board of Directors to manage the utility’s assets and expenses—including power procurement, operations and maintenance, and infrastructure—and make decisions on capital investments, long-term planning, rates, and member benefits. Each dollar of a co-op’s utility margin is typically allocated back to the membership as capital credits, a form of time-delayed profit-sharing.
Because directors are elected to represent their members’ best interests, “they have a fiduciary duty to do everything they can to keep costs as affordable as possible,” Lee explains.
In his opinion, this makes investigating highly-efficient solutions, like geothermal heat pumps, a key responsibility for co-op utilities.
Heat pumps to the People
“Utilities are looking at geothermal backwards. They’ll ask, ‘If we invest in it today, how do we finance it?’ But what you have to do is think, ‘What does it do to my utility if I don’t invest in it?’”
Boyd Lee, CKenergy
Lee has championed geothermal heat pumps since the 1980s, when, as an energy auditor, he saw that utility customers wanted to understand how to lower their bills.
It became clear that “geothermal is the overall answer, period,” he says. “The problem was then, and continues to be, the installation cost. It is limited to people who have plenty of pocket money.”
In 1993, while working at a different co-op utility, he crunched some numbers. If his co-op installed geothermal heat pumps for its entire membership, the upfront cost would be around $21 million. It was a huge investment.
But if every member had a geothermal heat pump, electricity demand and associated pole-and-wire investments would reduce so much that its rates could actually drop by 2 cents per kilowatt hour (kWh). In 10 or 15 years, rate reductions would save far more than the original $21 million investment. The heat pumps would pay for themselves, and then some.
When Lee joined CKenergy in 2005, he pitched the concept of marketing, incentivizing, and installing geothermal systems to the utility’s Board of Directors. The directors were open to ideas that could positively impact members’ bills, and agreed to explore it.
Covering Upfront Costs
Immediately, they had to find a solution to the problem Lee had originally identified: the relatively high upfront cost of installing geothermal heat pumps.
CKenergy executives knew that utility-wide savings would not materialize without geothermal systems in the ground. But they also knew that, at a cost of roughly $24,000-$30,000 per installation, their members would not be likely to purchase this equipment without financial support.
Still, the idea of financial incentives caused the board and CEO to worry about expenditures. That prompted a reframing of the problem.
“We came to understand that most utilities are looking at geothermal backwards,” Lee recalls. “They’ll ask, ‘If we invest in it today, how do we finance it?’ But you have to think, ‘What does it do to my utility if I don’t invest in it?’ That is how we came up with our existing model.”
Their model applied a temporary rider to all members’ bills. Riders or surcharges are common utility financing mechanisms. Pooling funds from ratepayers or members allows utilities to invest into dedicated program funds—anything from energy efficiency rebates, to demand response programs, to weatherization—that enable the utility service to run more smoothly and cost-effectively.
In this case, the geothermal rider was designed to recover CKenergy’s total investment in the geothermal heat pump program, Lee explains, and it would not be a permanent addition to member rates. Instead, it allowed the co-op to borrow modestly from its membership to fund initial installations, which were expected to save money on rates and even earn money for members years down the road in the form of capital credits.
For the geothermal program, CKenergy priced the rider based on its electricity sales. Its goal was to recover the geothermal program’s costs over a 12-month period. If the utility sold 750 million kWh in a year and invested $1.5 million that year in geothermal incentives, spreading that cost across total electricity sales would result in a rider of roughly 2 mills per kWh (one mill equals one-tenth of a cent).
What did that mean in real terms for co-op members? For a typical household using 2,000 or 2,500 kWh per month on average, Lee explains, that translates to about $4-5 additional on their bills per month, or $48-60 over the course of the year.
In this way, the co-op collected enough money to cover its geothermal installations each year. After 12 years, the geothermal incentive program became self-sustaining through savings from reduced wholesale power purchases. The rider was no longer necessary.
Incentivizing Installation
“There was no question that they were going to save money. That was an absolute given.”
With the upfront installation costs covered, CKenergy began marketing their geothermal heat pump incentive programs. The utility offered incentives of approximately $3,625 per ton toward geothermal heat pump installations. A typical system was approximately four tons. If they wanted, members could also borrow from the utility to help cover the costs of installation. CKenergy still loans up to $15,000 at 6% interest rates for anywhere from four to seven years.
Persuading members to install geothermal heat pumps did not take much work, Lee remembers. Whether the homeowner was converting from electric alternatives or natural gas heating, “There was no question that they were going to save money,” he says. “That was an absolute given. Members could see the logic of the geothermal installation, and I used a calculator to estimate for them what their cost would be.”
The utility was careful to never promise financial miracles, says Lee. Still, members were pleased with the savings. Members who converted from electric alternatives, like resistance heating and air conditioning, could see 30-35% energy bill savings during the summer and up to 50% of savings on heating in the winter.
Meanwhile, members who converted from natural gas to geothermal saw similar savings in the summer, due to the superior efficiency of a geothermal heat pump compared to a conventional air conditioner, and savings in the range of 25-30% for heating during the winter.
“If customers wanted to stay with gas, we never pushed them,” Lee says. Converting from natural gas to a geothermal heat pump would result in predictability and long-term savings, but depending on each member’s home, it would take longer for their energy bill savings to pay back their initial investment compared to a member who converted from electric resistance heating.
Still, over the years, fluctuating natural gas prices made geothermal heat pump installations look even more attractive. And the financial benefits were not the only motivator for co-op members to switch.
“The really big thing was the convenience,” Lee says. “The members no longer pay a gas bill; they just get one bill. And there are differences between [heating with] gas and electric, and that includes cleanliness inside the home. Any way you look at it, there are air quality benefits of geothermal compared to gas.”
The Math Speaks for Itself
Like many co-ops, each dollar of utility margin is allocated back to the membership as capital credits. The geothermal installations have steadily increased CKenergy’s margins, meaning the co-op has been able to allocate more money back to members without raising rates. That benefit affects every member, regardless of whether or not they have installed a geothermal heat pump.
“Every installation we make positively impacts the people who don’t have geothermal, because it results in a lower wholesale cost of power,” Lee explains.
The program improved CKenergy’s power supply economics. By increasing electricity sales while holding peak demand relatively flat, geothermal installations improved the utility’s load factor: its relationship between energy sold and peak demand. A stronger load factor reduces the effective cost of electricity across the system.
But could the utility handle it if the entire membership switched to geothermal heat pumps?
“We’d make money hand over fist!” says Lee.
Sixty percent of the membership base still heats with gas. If every member switched to geothermal, CKenergy would pick up kWh sales in the winter, bringing in larger amounts of revenue. By decreasing summer peak demand by switching air conditioners to efficient heat pumps while increasing the winter peak, the utility’s demand throughout the year would balance out. This load leveling helps drive down wholesale power costs, Lee says—so rates to members could actually decrease. By his estimate, the program has yielded $32 million worth of savings on power, which translates to lower rates for members.
How It Started and How It’s Going
As of 2025, approximately 1,650 CKenergy members had installed geothermal heat pumps. The program has been so successful that, in fact, “We haven't had a rate increase in eight years,” Lee says, “and we are years away from one now.”
To hear Lee describe it, electric utilities are poised for widespread geothermal system adoption. He predicts that co-ops, in particular, will become deeply involved in geothermal heat pumps and thermal energy networks.
“I believe that the directors of a co-op are elected by their members to represent their best interests,” he says. “And that requires outside-the-box thinking. I think we’ll see a lot of them open their eyes to it in the next few years.”
To facilitate that face-to-face work, in 2025, he founded Outside the Box Geo, aiming to help utilities understand the financial case for geothermal heat pumps.
Meanwhile, geothermal heat pump adoption continues in CKenergy’s territory in western Oklahoma. The co-op stopped heavily marketing the geothermal heat pump incentives long ago. Now, installation spreads by word of mouth.
It’s not only because of the favorable math.
It’s also because “When people get geothermal heating and cooling,” Lee explains, “then they start experiencing a whole new level of comfort in their homes.”
Thank you to Boyd Lee for your contribution to this case study. If you are interested in learning more, visit Boyd’s website at Outside the Box Geo.