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Fortnightly Magazine - July 2006

Diamonds in the Rough

Retaining mid-career personnel will be important to a utility’s success.

Michael Brown and Sasha Lazor

With upward of 50 percent of the utility industry’s workforce approaching retirement, the industry’s leadership, at all levels, must come to grips with this enormous challenge. This looming demographic challenge is not simply a human-resources problem. For most of the industry, it poses a very real threat to the bottom line and touches upon the fundamental ability of the company to pursue its mission. The path to survival will require non-traditional thinking around all the people levers—staffing, work planning, compensation, work processes, performance management, development, job and organization design, and, most important, leadership.

Gravy Train

Utilities must trim the fat from excessive stock options, stock grants and executive pay.

Richard Stavros, Executive Editor

This month’s cover story focuses on how utilities intend to find the talent they’ll need over the next few years to replace all those retiring baby boomers. And part of that puzzle naturally involves executive pay: how to attract the best and brightest without going overboard on rewards for performance.

People

(July 2006) The New York Independent System Operator named Rana Mukerji to serve as vice president, market structures. CMS Energy elected Jon E. Barfield as an interim appointee to the company's board of directors and also re-elected 10 incumbents. Pepco Holdings Inc. elected Frank O. Heintz and Lester P. Silverman to the board of directors. TXU Corp. elected the following directors: E. Gail de Planque, Leldon E. Echols, Kerney Laday, Jack E. Little, Gerardo I. Lopez, J.E. Oesterreicher, Michael W. Ranger, Leonard H. Roberts, Glenn F. Tilton, and C. John Wilder. And others...

America's Resource Mix

Wind gains, but won’t soon alter the fuel mix.

Gary L. Hunt and George Given

Some power markets may be seeing possible signs of recovery. Spark spreads appear to have bottomed out, and reserve margins have begun to fall in some markets. As Figure 1 shows, recovery is uneven, with many regions still experiencing excess supply and a few regions with peak reserves under 10 percent.

Transforming Production Tax Credits

Three reasons to make them a permanent part of U.S. energy policy.

George Sterzinger

For the past decade, the renewable energy industry and various branches of the federal government have engaged in an ungainly, enormously unproductive two-step on production tax credits (PTC) for renewable energy projects, and for wind projects in particular. The PTC can be transformed into a keystone of an effective energy environmental policy. However, to achieve this transformation, the misperceptions must be challenged.

The Institutional Investor: Still Hot on Utility Stocks?

Michael R. Yogg, who manages Putnam's Global Utilities Fund, explains what investors want from the sector.

Richard Stavros

Is the love affair with utility stocks cooling? A Standard and Poor’s equity research report in late May included a negative outlook for electric utilities: “We think the sector will underperform in 2006, weakened by the rising interest-rate environment,” the report said. But not all investors agree. We talked with veteran portfolio manager Michael R. Yogg of Putnam Investments, who revealed how the modern-day investor views the utilities sector.

Are They Betting The Company?

Eleven questions to ask senior managers about their risk-management objectives.

Brett Friedman and Tim Essaye

It is almost impossible to design an effective hedge program without first determining the exact objectives a company wants to achieve. Although this sounds obvious, it rarely is. Management usually can agree that the firm should hedge to reduce risk, but “risk” is too vague a term to justify hedging on its own.

Calling EPACT's Bluff

How Congress opened another can of worms with its call for regional joint boards to study power-plant dispatch.

Bruce W. Radford

Did Congress really invite the industry to re-examine the concept of economic dispatch, as practiced by the regional grid operators and RTOs, through market bids, day-ahead markets, a centralized auction, and a uniform market-clearing price? Perhaps not, but skeptics of RTO practice have called the bluff, if that’s what it was.

Baby Boom Blues

A series of articles, reviews, and strategies for the anticipated utility workforce shortage.

Michael T. Burr

Almost 40 percent of utility workers will become eligible for retirement in the next five years. Assuming only nominal growth, the industry by 2010 will need to hire 10,000 new skilled workers each year. Exacerbating this situation is a host of social and market factors that constrain the supply of skilled workers and make the workforce gap especially challenging for electric and gas utilities.

HR Roundtable: Bridging the Talent Gap

Recruiters and HR consultants see utilities taking an increasingly comprehensive approach to addressing tomorrow’s personnel challenges.

Michael T. Burr

New talent is scarce. And keeping the old talent takes imagination. How are utilities handling changes in personnel markets? We speak with several leading HR consultants to get their views.

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