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The 40 Best Energy Companies

Fortnightly Magazine - September 2011

years ever, in terms of cash flow, and today O&M expenses are the same as they were in 2005. “We expect O&M costs to remain flat,” he says. “By aggressively managing costs we are able to absorb inflation and new incremental costs that come along with installing environmental controls and other capital assets.” DTE’s cap-ex budget has totaled $4.8 billion since 2006, including $1.5 billion to comply with new EPA regulations through 2010; the company expects to spend another $400 million through the end of the decade on environmental controls at some coal-fired plants, while closing some others. Nevertheless, the company’s cost-control strategy has allowed DTE to achieve strong cash flow (14th strongest in the F40 survey)—and thereby minimize rate increases that elicit backlash from customers and regulators.

As an example, Meador points to improvements in the company’s field-force management processes. DTE began providing customers with a four-hour window for site visits, and set a goal of hitting that window 90 percent of the time. “This improves customer satisfaction and also drives costs down,” he says. “We refined our truck routing to minimize drive times and fuel costs, and we started calling ahead to let customers know we’re coming. If we roll a truck and then can’t get in because the customer isn’t home, it means we have to come back again. That’s a wasted trip, which means wasted gasoline and time. We don’t have that waste anymore, and now we’re working to provide two-hour windows for customers.”

Additionally Detroit Edison is installing 800,000 smart meters, with the support of a DOE grant. The new meters also will help the company contain costs, Meador says, by avoiding unnecessary truck rolls for the 20 to 30 percent of customer calls that involve electrical problems on the customer side of the meter. “Now we can check and say ‘We’re fine to the meter, you need to call an electrician.’ Or the opposite, if we have an outage to the meter, we might know even before the customer does, and we can roll a truck to where it’s needed,” Meador says. “Technology deployed right will reduce costs and improve customer service.”

Strategic Operations

Leaders in the industry obviously focus on financial management, and many companies are pursuing value with asset investments and acquisitions. As a general matter, bigger companies with stronger balance sheets have better access to the low-cost capital they need to finance their strategic plans.

However, amid the quest for greater scale, operational issues are becoming more important, as customers and regulators demand greater efficiencies—and as companies look for new ways to generate returns in a changing market. Ultimately, efforts to improve operations might distinguish winners from losers, especially in those parts of the country where economic and political forces are driving changing expectations.

“How do companies become leaders in using new energy technologies, versus being reactive to what’s happening?” asks Robert Laurens, a partner with Accenture. “The mark of a true industry leader is looking ahead to see what’s coming, and making options-based investments to gain skills.”

Beyond just gaining efficiencies on