By promoting the ISO 50001 energy management standard to industrial customers, utilities can increase loyalty, encourage efficiency, and support industrial growth.
The CEO Forum: The Ultimate CEOs: David L. Sokol
Chairman and CEO, MidAmerican Energy Holdings Co.
of this business really is a good place for private equity capital, and particularly not leverage. For other equity holders that have a long-term view of buying and holding assets for 20 years, there is nothing wrong with that. I would still say excessive leverage is a bad thing. But equity capital that wants to come into this industry and stay for the long haul is certainly a welcome feature. But unfortunately, for most of the hedge funds, their horizon is three to five years. That is probably not an appropriate owner for these kinds of assets.
Fortnightly: How do you define leadership?
Sokol: There are two types of leadership. One is just internal to an organization: How do you accomplish things? The other is industry leadership.
I’ll give you a little bit of each. As an industry, our first responsibility is to protect the customer. Again, if you look at the revenues that come into our business, we keep a very small slice of it for ourselves. The rest of it, we’re spending the customer’s money. We have an obligation to constantly find ways to meet all of our regulatory requirements, whether it’s through a business perspective or environmental perspective, but to do so at a cost that is most beneficial to the customer’s dollar. We also have to drive the industry to have long-term planning, to really look long-term constantly and think about those issues out there, because developments in our industry are difficult to create if you don’t have a vision and people aren’t moving in that direction.
[Also] as an industry we have to provide a sense of urgency. Even though these changes may take 10 to 20 years to get there, we can’t drag our feet because it takes our industry a long time to catch up with those changes.
Unfortunately, our industry has not had a lot of industry-wide leadership. Internally, we think leadership as we run our business is really the old blocking and tackling. Plan your business. Execute against the plan and measure it, and make corrections as necessary. Create a sense of urgency amongst your people that solve problems today. I think the other piece of our internal leadership is the recognition that we are fiduciaries of the customer’s dollars and we have to be as efficient as we possibly can be because it is their money and not ours. We have an obligation to oversee it that way. That’s the only way you can be truly effective in this business.
Fortnightly: Given the legislative focus on infrastructure development, will the Federal Energy Regulatory Commission’s initial decision of 9.34 percent return on equity for the Kern River pipeline hinder such efforts?
Sokol: A couple of important points: The 9.34 percent that is recommended in the interim decision by the administrative law judge (ALJ) Charlotte J. Hardnett is certainly unacceptable. It is an interim decision and obviously is non-binding, so the commission will ultimately have to deal with this.
But you have to know the history of Kern River. We bought Kern River [from