"Back-to-basics" strategies challenge enterprise-risk philosophies.
Nearly a year ago, cover story announced the rise of the chief risk officer (CRO). "Utility...
The New CEO's
as a past offender on voluntary reliability rules. They claim your maintenance was at unacceptable levels. You recently told analysts you would keep O&M flat year-to-year. How will you maintain reliability?
It's clear that you can hold O&M flat and still enhance your reliability by making sure you are spending your money on those priority issues. You are very fair in bringing up the issue not only in Oklahoma, but we have similar issues here in Ohio where we had lost sight of reliability and customer minutes of interruption and those kind of activities. We have entered into an agreement in Ohio with the commission staff to focus our attention, both our capital and O&M spending, on the distribution grid to improve our worst-performing circuits. We are doing some of the same things in West Virginia because as you know, the terrain in West Virginia is a very difficult terrain to maintain lines in. And as you point out, in Oklahoma, I'm happy to tell you [that] just last week we entered into a settlement with the Oklahoma staff. Hopefully the commission will ultimately approve it, to again focus attention at improving that reliability.
The flat O&M year-over-year will have a lot to do with how we maintain the head count inside of the system and how we let attrition push down some of those human resources costs.
I think that is a very doable thing. That goes back to the whole notion of, "I'd rather have my team energized to keep O&M flat than have my team frightened by me trying to take $400 million to $500 million out of the structure."
Why did you choose to sell your assets immediately in Europe? For a while you seemed committed to being there. Why do you feel the industry had has such a rough time with asset investment in other countries?
The biggest issue there is that we all stepped into the international market arena believing that we could transfer out skills sets to those international assets. I think what we really learned, not just AEP, but really this industry, that another country, another government, another form of regulation, another customer cadre, different customer expectations. It is a very different undertaking. I think because of that most of us came home quite honestly with our tail between our legs.
Do you worry about the impact of rising interest rates?
Of course, they are going to go up. I don't think there is any question about that. Most of the debt that we have has terms associated with it that we are not too worried about. But whenever interest rates go up, share prices of stocks in the utilities space go down. I think that tie isn't needed anymore. That really is a historic tie that had so much to do with the building of a $4 billion power plant in the face of borrowing funds at Sopranos kind of interest rates. I worry about those kinds of things, for instance, in the Texas restructuring, to securitize the stranded cost there. The sooner