Duke Power 101: a class in utility management from Dr. Ruth Shaw

Kathleen Davis, associate editor

In this issue’s profile, we discuss Southern culture, leadership skills and Duke Power’s 100th anniversary with the utility’s president, Ruth Shaw.

KD: What significant changes have you seen in Duke Power in the 12 years you’ve been with the company? Are there any that you are particularly proud of?

RS: First, every year, operation performance and productivity has improved. There’s just been a steady stream of that sort of improvement in the company–and, indeed, in much of the industry overall.

The biggest change, however, would undoubtedly be the merger with PanEnergy that created Duke Energy. For Duke Power to come through that period of change as a vibrant electric utility with such strong performance is, for me, a real positive.

The third one I’d choose is our role in the North Carolina Clean Smokestacks Initiative, which is going to lead to a very significant emissions reduction–NOx and SO2–from our coal-fired plants. I think it’s a rather innovative partnership.

KD: Has that been implemented?

RS: It is being implemented. Essentially, it’s an agreement between the legislature, the regulators and the IOUs in North Carolina to commit to some significant reductions–well below the industry averages and limits. In return for that, we�ll have a rate freeze until the end of 2007.

We’ll end up spending just over $2 billion for new emissions reduction equipment for our largest fossil stations. That project has begun at our Marshall plant, where we’re working with the FGD technology.

KD: That’s unusual–that the legislature didn’t feel the need to pass a law that–for lack of a better term–uses a “stick” on you.

RS: I think that’s where our corporate concept of “win-win” relationships comes in–relationships that advance the agenda in a way that all parties can see it is doable and achieve some desirable results. It’s a part of our operating philosophy.

KD: You’ve been president since March 2003. How are you working to put your individual stamp on the company?

RS: Let’s just say that I’m humble enough to think that putting my own stamp on the company isn’t really the important thing. What I’m really trying to do is live up to some great leaders that went before me, and I’m reminded of that with our 100th anniversary this year.

Personally, though, I started out doing a lot of listening: to employees, customers, leaders–working with them to try and chart the course for the company. I guess that’s translating as an “individual stamp,” although I have to say I don’t see it quite that way. It’s really grown organically out of where the company is and where it is going.

Our team is staying focused on engaging our employees. I think you’ll find that to be–as long as I’m president of Duke Power–an important initiative for us. In a period where our reputation had taken a few hits, we were working very hard on community relations and stakeholder relations as well. When you are a state-regulated and vertically–integrated electric utility, you’re licensed to operate. And, the terms of that license really do depend on the view of your community and how they see you, their regard for you as both a provider of services and a trustworthy business partner. We put a big focus on that and will continue to do so.

Additionally, like other electric utilities, we have a long history of economic development, and we have made that a priority in the company. And, I think we have raised our profile quite significantly on economic development. We even held the Carolinas Competitiveness Forum as the signature event for our 100th anniversary. And, we’re really at the table with area industries in new and exciting ways.

KD: Duke Power has an interesting hands-on approach to community relations–beyond just the standard corporate concept of positive branding. Why is it so important for Duke Power to take a leadership role in the Carolinas?

RS: Our means to growth is tied into the people that we serve around us. So, we have a unique interest in the quality of life in the Carolinas. I venture to say that there aren’t too many entities that wouldn’t just pick up and move if the economy or other factors become a burden to them. We’re not going anywhere. We can’t go anywhere. Duke Power is here to stay. So, I think that does give us–and other electric utilities as well–a unique role.

KD: What are some of your favorite initiatives in this area?

RS: Probably the program we would call our “signature”–and it started long before I came to Duke Power–is not one that is particularly unique to us. Many other electric utilities have similar programs. This would be our Share the Warmth program, our heating assistance program in which we match funds that our customers contribute with funds from our shareholders and our foundation. Every year since 1995, we’ve raised more than $1 million for heating assistance to low-income individuals and families.

Catawba Hydroelectric Dam and Power Plant (1904): The Catawba Hydroelectric Dam and Power Plant began construction in 1900. When completed, it had a generation capacity of 6.6 MW. This photo was taken in 1904. Old Catawba operated from 1904 to 1925 when the New Catawba Hydro Station (re-named Wylie Hydro Station in 1960) was built on top of the existing plant.
Click here to enlarge image

The most exciting new one–the one I’m personally most excited about–is one where Duke Power sells excess power on a short-term, interruptible basis through a unit we call bulk power marketing. We proposed, and the North Carolina Utilities Commission agreed, that our bulk power profits would not be included in our ROE calculation. We now share these profits on a 50/50 basis between our customers in North Carolina and our shareholders. We further proposed “giving away” the first $5 million.

The first 2 million goes to heating and cooling assistance programs to increase the dollars already there. And, because we have quite a concern about the educational attainment level in our area and we also are concerned about displaced workers coming out of textile, tobacco and furniture plants, the next 3 million will go to job training and re-training programs, principally through the state community college system.

That’s $5 million, and, on an annual basis, you¿re likely to see closer to $25 million in their share of the profits. The remainder of the dollars will be used to reduce the cost to our large industrial customers, because that is where the area has lost jobs. And, those customers are often big drivers of prosperity. So, in this first year, we estimate that will amount to about a two-percent rate reduction for our large industrial customers. So, it’s a way to provide an incentive for economic development, as well.

KD: Do you plan on extending that to residential customers as well?

RS: Our idea was to address the residential customers through the programs for heating assistance and job training. If we had done this just as a rate decrement, probably every customer would have gotten enough to buy a Happy Meal, and you really wouldn’t have managed to focus enough to make any real difference. We feel very positive about the approach we are taking, and it has been very well received so far.

KD: Is this a “Southern thing,” a bit of Southern culture extended into the modern era?

RS: That’s a great question. I admit that I¿m a woman who has always lived in the South and the Southwest; so it’s rather hard to say. But, I think it’s very much an “American thing.” Giving back to the community is distinctly American. Maybe it’s a Carolinas thing, too. If you look at any major corporation located here, it’s a very high bar for corporate citizenship. You can’t make employees volunteer; you can’t make them give back to the community. It’s in the DNA of these people, this place, this company.

KD: You have an unusually high number of hydroelectric stations (compared to the average power utility). How does that figure into your equation overall, and how do you feel being that connected to the environment?

RS: While we have a large number of hydroelectric plants, they are typically a small fraction of actual generation. However, in an era when reliability is so important, their “blackstart” capabilities–the immediacy of their availability–are increasingly important.

And, I have to say that we have a lot of hydro stations that are 80 years old. It is just amazing how little the fundamental mechanical equipment has changed in 80 years. It’s a technology that’s really had staying power. So, we are very proud of our hydro fleet.

We’re in the middle of one of the largest FERC hydro re-licensing processes ever, and it reminds me daily of how many parties touch the rivers and lakes for which we�ve got accountability. Right now, as we go about that re-licensing, we have around 180 stakeholder groups who are participating in the process, who have suggestions on studies to be made or how to plan for the next 50 years. It does give you a very special responsibility, owning these plants. Additionally, our guys were heroes in the recent drought situation in terms of how they managed water flows. So, there is a lot of upside with hydro as well.

KD: Do you ever think it’s way too much work for the small amount of power they produce compared to the rest of your fleet?

RS: I just don¿t think you can look at it that way, because they really are enabling the operation of our nuclear fleet and our fossil fleet. I wouldn’t want to put those plants at risk by having somebody else owning and managing the dams. I’ve got a lot of confidence in the way our system has been operated over a long period of years–with a great deal of sensitivity towards all of those competing needs. It takes a view that’s wide and deep to do that well, and I think we’ve got that. In all honesty, I wouldn’t trade the opportunity to manage it ourselves just to eliminate the challenges that it brings.

KD: Duke Power turns 100 this year. Looking back, what do you see as the company’s greatest accomplishment?

RS: It would be that this company succeeded in their “grand design.” The founders created an integrated electric system. They connected the plants; they ran lines over longer distances. They transformed an economy, and Mr. Duke created, through both the endowment and the philosophy of this company, one of the most community-sustaining philanthropic approaches in the nation.

And, I hope, by the time they are celebrating 200 years, they will look at this time and say that the revitalization and the role Duke Power is playing in economic development will come up on a future president’s list of high points.

KD: Looking forward, what new strategies is Duke Power planning to implement in the next five to 10 years?

Lineman-City Tower (1910): This postcard from 1910 features a Duke Power line technician known as “Big Joe”.
Click here to enlarge image

RS: Obviously, we’re going to continue to be engaged in top line revenue growth. And we understand what it takes to do that. We’re going to be strengthening partnerships with business leaders who have similar interests to ours. We’re going to continue to partner with economic development and governmental agencies. We’re going to continue to use the various levers and resources that we can to make the Carolinas an extraordinarily attractive place for businesses.

KD: You have an extensive background in academia. How does that experience assist you with your current work?

RS: A lot of those skills have translated extremely well. I was already in leadership roles. So, that directly helped. My academic discipline was English. So, the writing and speaking skills have been useful. And, sometimes it doesn’t hurt to have been a teacher, especially when you�re speaking to the public on a complex issue and you need to be able to make those understandable. I think there has been a pretty good translation, overall.

KD: Establishing “win-win” relationships is listed as one of Duke Power’s core business values. How do you accomplish such a difficult task?

RS: Well, nobody gets everything they want. However, in our relationships, everybody gets something they want. And, that’s how we try to approach it. The North Carolina Clean Smokestacks Initiative is a good example of that. We wanted some flexibility around the rate at which we were able to recover upgrade costs. The customers were happy to get some rate stability, and, obviously, regulators wanted to reduce emissions. So, everybody got something they wanted.

You simply start with visualizing what the “wins” look like and where the areas of compromise lie. Then you open lines of communication. It’s that simple: We do it the old-fashioned way.

KD: You’ve become a bit of a diversity “poster girl” for the industry–speaking engagements on the topic and the like. Why do you think you�ve become so sought after in this area, and, personally, how important is diversity at Duke Power–compared to its other core values?

RS: Well, I think the reason I am sought out on this topic is fairly obvious. There is a small population of women who are leading major electric power companies. There just aren’t many of us. So, if I show up, I am immediately the poster girl. And, it’s a topic that I have a longstanding interest in. Our company has a deep and abiding commitment to diversity. It’s the right thing to do, yes, but there is also a competitive element to it as well. As we look at the turnover that our industry expects in our employees over the next decade–and we look at the employees who are going to be available to come to work for us–if we’re not able to create a work environment that is inclusive and can appreciate talent and contributions regardless of gender, ethnicity, whether you’re from the South or from the North–a whole array of issues–then we’re going to have a real difficult time competing for future talent. So, it’s right up there in our core values, as it should be in everyone’s.

KD: Among your “charters and values,” Duke Power lists that the company will be successful when “every employee starts each day with a sense of purpose and ends each day with a sense of accomplishment.” Now, of course, it would be impossible for you to speak for everyone in the company, but, do you personally accomplish this every day?

RS: You know, it’s funny. I left academia after 20 years, and people in this community were stunned when I came to Duke Power. It made front-page news, believe it or not. Everybody said, “How could you do that? Don’t you miss it?”

But, the fact is, I have never looked back. The work that we do in this company is so fundamentally important to the quality of our lives, even the fundamental way we live. And, the way this company does business is something I have taken pride in since the first day I joined it. So, it is very easy to come to work with that sense of purpose and very frequent that I leave with a strong sense of accomplishment.

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