For Public Utilities Fortnightly's 75th Anniversary CEO issue, the magazine looked to the horizon and asked these new captains about the planned course for their companies, and for an entire industry.
Fortnightly Magazine - June 2004
How will the industry change in the future?
The utility industry of the future can be best characterized by three words: scale, synergies, and automation. Company leaders and the broader workforce will be touched by these three forces for change. We can already see glimpses of the future around us today. In response to the sweep of deregulation, many power companies no longer generate power. They have divested themselves of their generating plants, ceding that ground to independent producers to concentrate on distribution.
Investors are revolting against poor corporate governance, demanding tighter controls that will boost earnings and stock price.
A new wave of activism has risen in corporate America, driven by large institutional shareholders who claim companies have not gone far enough in their efforts to embrace good governance. These institutional shareholders maintain that good governance leads to superior financial performance and will not be satisfied unless the companies do more to implement good governance policy.
Like it or not, changes are coming for electric cooperatives. Fewer and bigger might be the inevitable result.
When power planners at Basin Electric Power Cooperative began trying to decide how and where the company's next big power plant would be built, they did what a co-op does best -they reached out and formed a coalition.
Board coordination is the key.
Many utility CEOs are happy to pass off risk-management policy to the CFO and the head of the trading desk. After all, with deregulation and re-regulation, collapsing spark spreads, hypersensitive rating agencies, and nervous investors, there is enough to worry about. So what's the problem? If the financial guys control and report the risks and profits and losses (P&L) within risk tolerances, why should the CEO be concerned about risk management?
How to bridge the age gap between older and younger workers in the utility industry.
The utility industry will face its most severe workforce problem since World War II in the next five to 10 years-a massive loss of plant- and job-specific knowledge through the retirement of a large portion of today's utility workforce. This magnitude of attrition has been masked somewhat by slow and steady, economically driven staffing cutbacks, but it will accelerate as we move into the second half of this decade.