Michaels Energy – The Early Years Through Deregulation

1984

This year is our company’s 40th anniversary. Michaels Engineering launched on Friday, March 23, 1984. What else was going on in 1984?

• Apple launched the Macintosh, the first computer on sale with a mouse and a graphical user interface; sale price: $2500, which has the purchasing power of $7,700 today. I’m surprised Steve Jobs allowed that ugly disk drive slot in the front of the machine. C’mon, Steve.
• Jobs produced the greatest television ad of all time to promote Macintosh in a one-minute Super Bowl ad. “You’ll see why 1984 won’t be like 1984.”
• Soviet bloc nations boycotted the Los Angeles Olympics, resulting in 174 medals, including 83 gold medals for the USA.
• McDonald’s scratch-off card promotion for free food for medals was based on medal counts from the 1976 Olympics in which the USA had less than half the medal count. Oops. Jeff ate free at McDonald’s for a month.
• The Detroit Tigers (owned by Domino’s Pizza founder Tom Monaghan) beat the San Diego Padres (owned by McDonald’s founder Ray Kroc) in the Fast Food World Series.
• Ghostbusters
• Terminator
• Madonna
• Van Halen 1984

Michaels Engineering – The Early Years

Jim Michaels founded Michaels Engineering when he brought two engineers from Hackner, Schroder, and Roslansky (known as HSR Associates today) along for the launch. I was with Michaels for three years before Jim retired in 1999, and Dave Waffenschmidt (one of the two engineers)  took over. I was able to spend some time with Jim on sales calls. He was an intense, gung-ho businessman.

I spent many years working directly for Dave who established the technical excellence Michaels is known for today. Dave developed amazing, incredibly detailed energy models for complex, multi-dimensional systems such as boiler plants, natatoriums, and air handling systems programmed in pre-MS-Excel spreadsheets and Basic programming languages. Before my time, Dave was writing DOE-2 simulation code (or whatever) on punch cards. Each simulation took all night to run somewhere in Chicago for $100 a pop. To me, that was like building the arch bridge across the Mississippi River in Minneapolis back in 1883 with horses, muscle, and leverage – a Herculean effort.

I spent my early career converting many of Dave’s SuperCalc spreadsheets to Microsoft Excel, adding some features, and streamlining processes for completing ASHRAE Level 3 comprehensive building assessments. I am an efficiency nutcase, and that doesn’t end with energy. It includes processes and getting things done as fast as possible with accuracy and quality. We still have the SuperCalc files if anyone is interested.

Building the Business

I could not confirm it with Jim, but I think he recognized the opportunity to focus on and capture energy savings for commercial and industrial customers and build his business around that. 1984 was just a few years after the energy crises (shortages) of the 1970s. Back then, the fear was running out of energy supplies – namely oil and natural gas, as I explained two years ago.

Electrification and renewable energy are not new. Solar heating and electrified buildings were deployed in the late 1970s as a result of these energy crises. Michaels’ first office building on Monitor Street in La Crosse, WI was all-electric and cost a fortune to operate. The trend at the time was energy independence with C-O-A-L.

Systems Focus

Michaels Engineering and Michaels Energy (our new name after the 2013 rebranding) have always been strong on engineering with a focus on whole buildings, systems and interactions, boiler plants, chiller plants, refrigeration, manufacturing processes, compressed air, HVAC, and control systems for all of the above.

Our first gravy train was the institutional conservation program (ICP), a federal block grant program to the states to deploy comprehensive energy efficiency in institutional facilities, namely K-12 and healthcare. The program paid for half the ASHRAE Level 3 assessment and half the implementation cost. Everybody wanted that and the huge savings that came with it.

Although it isn’t clear, this DOE document indicates funding for ICP was provided by settlements with oil companies (Exxon) “for violations of oil price and allocation controls in the 1970s.” That reminds me of Henry Hill in Goodfellas: “If we wanted something, we just took it.” Funds were allocated in 1984-1986.

In 1996, the DOE merged the State Energy Conservation Program and the ICP to provide “greater flexibility in funding mechanisms, increased local decision-making, and streamlined administrative procedures.” When did Jeff join Michaels Engineering? 1996. When did funds for the ICP program disappear? 1996. There was enough left in the pipeline and a few subsequent weak programs in Wisconsin and Iowa, such that I completed about 40 ASHRAE Level 3 Assessments.

Survival

My early years at Michaels were biblical days in the wilderness for energy efficiency. The 1992 Energy Policy Act established the basis for competitive wholesale electricity markets. The Federal Energy Regulatory Commission’s (FERC) Order 888 in 1996 established open and fair access to the transmission system so the utilities that owned them would not have excessive market power[1]. These were the building blocks of deregulating the electric industry and dismantling energy efficiency programs and policies. Policymakers and lawmakers mistakenly assumed deregulating the utility industry would be as successful as deregulating airlines and the telecom industry. If the market called for efficiency, it would happen. Nope. Enron happened, and deregulation stopped overnight.

The damage was done. By 1999, I was the only person at Michaels Engineering working in energy efficiency. At the time, Michaels also provided mechanical, electrical, and plumbing engineering design and environmental services to our client base. I was on the road with a tin cup in hand and panhandling for energy audits. I would drop into school administrative offices and ask to see the district administrator. That’s cold calling, bro. I was quite successful with leveraging dwindling funds from utilities like Wisconsin Gas and Xcel Energy.

The broader industry was in pain, too. I recall hearing from Dan Violette at an AESP board meeting a few years ago. He described how that period almost shut down that organization.

Like AESP, I survived the utility demand-side-management drought. I will continue with stories of resurgence and missed opportunities after the July 4 holiday week.

[1] https://michaelsenergy.com/know-grid-history-and-the-mopr/