Building on our strengths: A legacy of public power leadership shares lessons for future success

As the energy landscape has changed dramatically over the last century, public power utilities have been through many challenges and have seized many opportunities to come together to reshape how electric utilities do business. Interviews with three former chairs of the American Public Power Association’s Board of Directors show the common thread of what has made public power strong in the past and what continues to support their success today.

Interviews with:

  • Eldon Cotton, former general manager, Los Angeles Department of Water and Power, and APPA board chair in 1995-96
  • Phyllis Currie, consultant for Hometown Connections; chair, MISO board of directors; former general manger, Pasadena Water and Power in California; and APPA board chair in 2012-13
  • John Twitty, executive director of TAPS, former general manager of City Utilities of Springfield in Missouri, and APPA board chair in 2006-07

What was the biggest challenge the industry faced when you were board chair?

COTTON: The entire 1990s were a period of  uncertainty in California, both before 1996, when the electric utility industry was deregulated, and after. Even though public power entities were largely exempted from most provisions of the deregulation, they were at risk from many of the unintended consequences.  . Every utility had to consider the potential impacts of disaggregation of generation, transmission, and distribution. Most of all, the potential loss of retail load made long-term planning, with confidence, impossible. The proposal to allow retail customers to choose their energy provider raised serious concerns about stranded costs of generation, especially for Los Angeles, because of significant investment in long-term generation resources, both coal and nuclear.

TWITTY: In 2006-07, [the industry was] just beginning to figure out how we were going to make electricity going forward. Really the beginning stages of renewables that we see now, as wind and solar were pretty new. We created the CEO Climate Change Task Force to explore how we were going to make sure we made electricity in a way that is acceptable to our customers, to our communities, and is competitive. I asked Bill Gallagher, my predecessor as APPA’s board chair, to be chair of that committee. He only recently stepped down as chair. It turned out to be a really big effort. The other big deal that year was that APPA’s President & CEO, Alan Richardson, retired. We went through the search process for what was only the fourth CEO in the organization’s history, which turned out to be Mark Crisson. I think our group did a really good job, because Mark did a really good job.

CURRIE: We were looking at how the Environmental Protection Agency was going to mandate changes by regulation. This was before the Clean Power Plan, but would have required a lot of scrubbers and the like on various units. We were struggling with how to come together so that we could articulate one collective position. There was concern about how the Association was going to bridge the divide that was occurring between members that supported traditional resources and members that had communities and members of Congress pushing clean energy policies. Climate change was being discussed but it wasn’t totally accepted by a lot of people.

 

What do you see as the biggest challenge for public power now?

TWITTY: This whole paradigm shift of how we make electricity and how we harness the technology available to us today is the issue of our time. This has always been an industry where you have to move big machinery. Now, you still have to move big machinery because you have to be able to ramp up and down quickly with the growth of intermittent power supplies on the system. The footprint wind and solar have, and the battery technology being implemented we’re still just sticking our toe into the water of that particular phenomenon. In some ways, it’s a continuation of what we started with the task force back then, but it’s a bit more mature now.

CURRIE: The big challenge is technology. Hometown Connections is working hard to provide resources to allow utilities to develop advanced metering infrastructure and meter data management systems and get the benefit of that technology, because it is going to be critical as more technology develops and more customers demand information for ease of service. Utilities coming together to jointly acquire a resource, such as AMI, or to understand how it is being deployed in another utility, that helps them make the right decisions as to how they are going to deploy the right technology.

COTTON: New rules and regulations are continuing challenges for utilities of all sizes, but especially for small utilities. Evolution or creation of unfair market conditions is also a threat.

California has permitted customer choice through the formation of community choice aggregation and several other states are considering creating similar programs. The growth in the number of customers and loads served by CCAs has been significant. Utilities such as Pacific Gas & Electric and Southern California Edison could lose the majority of their load, leaving them as wires and service providers. The Clean Power Alliance CCA in Southern California has the potential to serve more customers, eventually, than LADWP.

 

What success has come from public power utilities combining their efforts?

CURRIE: Public power utilities, if they do find ways to agree on key issues, can have a much bigger impact than they would as individuals. For example, I’m on the MISO board now, and an entity like AMP, which has activity in multiple regional transmission organizations, can have an impact along with some of the investor-owned utilities, by virtue of marshaling the collective influence of its many members.

Change is coming, and some aspects [of managing a utility] will only get more challenging. It is particularly tough if you are running a small utility and are already doing everything. Drawing on the resources of other organizations and joint action agencies can give you support for what you can’t do on your own where you can get with your peers and think about what’s out there, and what you need to be doing.

COTTON: Utilities working together, in various forms, have been very successful and joint action continues to provide opportunity to achieve goals efficiently and cost effectively. The Southern California Public Power Authority has served large and small utilities for more than 40 years in the acquisition of new resources, both conventional and renewable. The success of SCPPA’s programs could not have been achieved by the members acting individually.

TWITTY: Most of the time, things are built from the ground up. But in this particular case, you have to have a strong organization. APPA for 80 years has been the glue that has kept a lot of this together.

I daresay that without a powerful national association and effective joint action agencies, a lot of smaller utilities would simply not be able to continue to do what their communities need them to because the system has gotten so complex. Take one example: environmental regulation. Success in Washington, D.C. or at state capitals has happened because people band together. If you didn’t have joint action agencies looking out for you, you wouldn’t be able to exist. You’d be looking to get bought out by the co-op or IOU around you, and that’s not good; that’s one step removed from the customer. Being able to hire qualified lineworkers is also a big deal. In Missouri, our smaller community-owned utilities can grow their own talent because the state agency created lineworker training programs.

Organizations like APPA are only as good as the people that are active in them. Make sure that you invest properly with your time and talent, but also with your dues dollars. If you have a rough budget year and have to cut somewhere, don’t cut there.

 

Was there a particular APPA resource/benefit you encouraged your staff to take advantage of?

COTTON: I strongly encouraged LADWP legislative and regulatory staff to participate in APPA programs and to work with APPA staff as well as our state public power association. Personally, I found sharing of information and perspectives with public power colleagues to be invaluable. Large utilities can learn from small utilities, and vice versa. Participating in APPA activities provided an opportunity to become aware of evolving challenges throughout the nation and how they were being addressed. It was very beneficial to have trustworthy allies to share information with and to learn from.

CURRIE: Two things stood out. One was the legislative and regulatory support. I usually had maybe one or two people at most that could support [those functions]. If it wasn’t for APPA or state associations, we would not have been able to engage in a lot of the policy that was going on. The other area that stood out was the education and training resources.  Staff need to be able to see what is going on beyond the boundaries that they serve. Programs such as RP3 and the conferences allow your staff to see what others are doing and get away from just a narrow view of your own activity.

TWITTY: One of the things that I encouraged was participation in the National Conference and other events. To put yourself into contact with people who are doing exactly what you are doing. There are good ideas everywhere, and they don’t all come from your utility. Whenever you go to a conference, everyone always says the most valuable time is not the presentation being made it is the hallway time or break time where you can talk out the problems.

 

What will be the hallmarks of the successful public power utility of the future?

CURRIE: Sometimes people see a movement coming, and they don’t want to be the first to address it. That’s common in the public sector. Some of that is prudent. [But] we all have to embrace the future and not get stuck in reliving the past. Nothing is ever going to go back to the good old days, no matter how you define them. You have to be able to pivot when you need to. You have to lean in to the uncertainty of the future. Managers in my generation have to be prepared to have staff members come on who have a whole different outlook. You need to be able to encourage what they can bring to the utility, and not hinder them so much that you can’t get the benefit of their thinking.

The energy portfolio is changing. Distributed energy resources solar versus storage versus wind are coming on relatively fast. Depending on the part of the country you’re in, you’ll have to deal with that sooner rather than later. You also have to look at what the community wants. [Public power utilities] have to stay engaged with the community sentiment, and a lot of communities are going for clean resources because of concern over climate change. As managers, you have to know where your community is, know where your state is going, know where your region is going, and know what the implications are in managing a transition in resources.

TWITTY: When you are in a monopoly business, you have to do business with your customers in such a way that they want to do business with you, not just because they have to. The great beauty of public power is that there is only one master the customer. You take care of customers for the right reasons – to make sure you’re doing what they need for you to do. It’s a pretty easy equation.

Reliability is only important when the lights are out. Most of the time, the system is on. If we go messing around with the reliability of the system with intermittent power supplies, that would get people’s attention really quickly. What’s always important is price. You have really significant differences in the prices that people pay for electricity. In Springfield, residential electricity is probably 9 or 10 cents. I have friends in California whose first block is about 40 cents. What makes financial sense to do in California is a whole different deal than what makes financial sense in the middle of the country. How municipally owned utilities manage and communicate that is critical, since most of the cost of the monthly electricity bill is the cost of generating electricity.

Because of changes in the industry, prices are going to change, and you have to make sure folks know. So, communicate what’s changing in the industry, and make sure that your customers (to the fullest extent possible) aren’t surprised with a rate change.

COTTON: Being able to do the right thing for customers — at the right time and in the right way — is the definition of quality performance. Public power utilities have proven to be quite nimble and, in many instances, have been able to move more quickly than IOUs. An important element of past success has been the ability to make decisions locally that best serve the local needs of customers. Preserving local decision-making, and implementing decisions in the most cost-effective manner, will ensure future success.

 

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