By Kristen Wright, senior editor
|John Di Stasio, Sacramento Municipal Utility District|
|Tom Husted, Valley Electric Association|
The editors at Electric Light & Power magazine in the fall asked readers to nominate CEOs of North American electric utilities in two categories. The large utility CEO must work at a North American utility having 400,000 or more customers; the small utility CEO must work at a North American utility having fewer than 400,000 customers.
The CEO of the Year in the large utility division is John Di Stasio, general manager and CEO of the Sacramento Municipal Utility District (SMUD). The nation’s sixth-largest electric utility owned by its customers serves 1.4 million people in 900 square miles. It employs more than 2,000 people and owns more than 10,200 miles of power lines.
The CEO of the Year in the small utility division is Thomas H. Husted, CEO of Valley Electric Association Inc. (VEA) in Pahrump, Nev. The member-owned electric cooperative provides service to more than 45,000 people within a 6,800-square-mile service area primarily along the California-Nevada border. VEA’s service area starts in Sand Valley, southwest of Las Vegas, and extends north for more than 250 miles to Fish Lake Valley.
ELP: When did you decide to become a utility leader? How did you get to where you are?
Di Stasio: Geographical preference and SMUD’s reputation were the main factors in my getting into this business. I was working in the Pacific Northwest and wanted to return to northern California to be closer to my family and our family vineyards.
I joined SMUD in 1981 as a buyer in the purchasing department. I was hired because I had spent time working at Hanford when they were in the midst of developing nuclear plants under the WPPSS project. SMUD had the Rancho Seco nuclear plant, and I had some nuclear background.
I got where I am by always working to excel at whatever job I was assigned and by staying curious and learning. I took various assignments–both voluntary and paid–to learn about SMUD and the utility industry. I moved to engineering and project management, back to purchasing as the manager, led the T&D organization, customer services and programs, became an assistant GM in 2000 and CEO in 2008. Along the way I continued to learn, and I’m still learning today.
Husted: Being in the utility industry was a natural choice for me. My father was a CEO in the industry, and I have a brother who is an executive in the industry. I basically grew up in this business.
I worked my way up from the very bottom, and I have worked in nearly every department of a utility. I wanted to move up in this industry from day one. I believe my desire to advance, coupled with my working knowledge of various departments and their functions, have allowed me to acquire a well-rounded experience that certainly makes me a better leader today.
ELP: What has been your most difficult utility decision, and what was the outcome?
Di Stasio: The most difficult decisions are always those that involve people. The technical decisions involve a calculation of risk and benefit, but decisions that impact personnel often have implications for morale. They impact the organization’s culture if not done well.
|John Di Stasio takes the wheel during a grape harvest at his Amador County vineyard.|
In 1998, as we prepared for deregulation, we had determined that our T&D business was too expensive if we were to unbundle our rates. I was asked to implement a wholesale re-engineering and cost containment effort.
There were many decisions that impacted the way we did work and the cost of the labor associated with our work processes. I made the decision to involve the employees every step of the way.
I laid out the challenges we were facing and the levels of cost we were seeking to reduce. I committed myself to countless face-to-face meetings with impacted work groups to allow them to ask questions, offer suggestions and to vent. We made a commitment to tell everyone early and often what we were considering and why.
In the end we reduced our labor costs by nearly 15 percent and completely changed our business processes. It was very challenging and impacted the entire organization, but trusting the employees with the information ensured that it went as well as could be expected. It was the most challenging job in my career and one of the most rewarding. I loved working with the field crews–seeing their dedication, skill and passion. I’m proud of the relationships that I have there today. I am also pleased that many of the changes we made then continue to serve us well as an organization today.
Husted: Throughout my career in the utility industry, I have always been committed to breaking the mold and pursuing creative solutions to complex issues.
One of my most difficult decisions came about 15 years ago, when I served as the CEO of an electric cooperative in southeastern Washington. I led this utility to develop the largest Wi-Fi and open community communications system in the U.S.
While we initially planned to rebuild a communications system only for our utility, we recognized the value of developing a secure, large-scale system that allowed for scalability and could also be used by government entities and the private sector.
Moving forward with this project required a tremendous amount of planning and deliberation. It represented a significant investment, and many organizations were apprehensive about embracing new ideas related to communications systems.
Although it was initially difficult to help businesses and government entities understand the benefits associated with a shared communications system, I remained dedicated to moving this innovative project forward.
Despite some initial reservations from potential partners, the project was ultimately successful in creating a state-of-the art system that has provided significant benefits to communities in the area. More than a decade after its inception, this communications system continues to expand, and it now serves as a valuable example for organizations across the nation.
ELP: What problems are unique to your utility, and how have you overcome them?
Di Stasio: California is clearly an environmental leader, but the sheer number of energy-related policies and regulations can create conflict, uncertainty and regulatory risk.
While those challenges are not unique to SMUD, we are uniquely positioned in the state capital. We are often involved with legislators and regulators on a very frequent basis.
While we support the environmental outcomes’ being sought, we’re a locally governed utility, and we do not want the means to those ends prescribed rigidly. We enjoy a positive relationship with the state’s policymakers and pride ourselves in being honest brokers.
It takes being engaged, educating policymakers and their staffs on our core values and providing them a path forward that meets our interests.
We have a good story to tell since we’ve been able to meet most of the environmental objectives in a balanced way without sacrificing reliability or affordability.
As a result, we enjoy a level of credibility. Maintaining the relationships is key.
Husted: Unlike most other small utilities, Valley Electric Association owns and operates all of its high-voltage transmission assets. Without a proper strategy, this can place a financial burden on a small utility’s consumers. We have overcome this issue by implementing creative strategies. We recently joined the California Independent System Operator Corporation (CAISO) balancing authority, which has allowed VEA to maximize the utilization of these assets and reduce costs to our members. VEA is currently the fourth-largest transmission owner in the CAISO. In recent years, VEA has also pursued new sources of revenue by securing large government contracts.
ELP: What is a typical day for you?
Di Stasio: There is not really a typical day. I am very involved in the industry at both the state and federal level, so there is a significant amount of travel and meetings. I like to stay personally involved with our key initiatives like resource planning, work force and retail strategies. I set aside time outside of staff meetings for full day off-sites with my leadership team frequently to keep us connected and aligned. The time we spend developing strategies and plans is invaluable. We have an excellent executive team, and our time together has built a strong bond that helps us deal with the day-to-day challenges. I meet with employees frequently and stay involved in the community.
|Tom Husted, third from left, meets with the VEA Ambassador Executive Committee. They are, from left, Linda Renshaw, Ted Oom and George Self.|
Husted: I have always been an early riser. I am up by 4 a.m. and spend the next few hours reading industry news and answering emails. At the office, I spend a great deal of time with VEA’s leadership team, but I always make time to walk throughout the office and converse with our staff. This serves as a valuable opportunity to visit one-on-one with employees and see things that I would miss if I stayed in my office all day. Some people run their companies from 30,000 feet, but I am more of a detail-oriented leader. I have always believed that paying attention to details in the little things sets the stage for taking care of the details in the bigger-picture aspects of business. Lately, our cooperative has been pursuing a number of major deals, so I frequently attend meetings for hours on end. These are exciting times for VEA, and the discussions in these meetings are often lively. The days are long, and I typically don’t get home until late at night, but I enjoy every minute of the work we do at VEA.
ELP: How have you kept your company afloat in a bad economy?
Di Stasio: We have an excellent CFO in Jim Tracy. He forecasted some of the economic disruption very early on. As a result, we took some steps to contain costs and secure a small rate increase to improve cash flow. We have operated as if flat is the new growth and learned to become leaner. We have gotten three rating agency upgrades since 2009 and worked hard to identify and mitigate financial risks though hedging and good planning. We are now in a position that allows us to pay ongoing capital with equity versus debt, and we’ve adjusted our cost structure, giving us very good stability. It has certainly been a challenging time for our region, but things are slowly improving.
Husted: Amid trying economic times, Valley Electric Association has taken significant steps to reduce costs and increase operational efficiencies. We have implemented a forward-thinking strategy to develop new sources of revenue and keep rates low for more than 45,000 people in southwestern Nevada. Through new federal contracts and significant capital improvement projects, our total assets have more than doubled since the onset of the Great Recession. Annual revenue has also grown significantly despite lingering economic instability. In addition to joining the CAISO, we recently secured government contracts to serve the Nevada National Security Site (formerly known as the Nevada Test Site) and provide energy delivery services for Creech Air Force Base. Through these valuable opportunities and other worthwhile endeavors, we have managed to avert double-digit rate increases. In addition, VEA has expanded its work force by 30 percent since 2011 largely to accommodate these new contracts. Our board president likes to say that we are always “turning over rocks” to find ways to benefit our members, and it’s true. VEA is a very progressive cooperative, and our board is open to new ideas and encourages us to think outside the box. We have successfully built a culture that promotes and rewards creative thinking throughout all aspects of our business.
ELP: SMUD does consistently well in the J.D. Power & Associates Electric Utility Residential Customer Satisfaction Study, and is it any wonder? SMUD rates have been 20 to 30 percent lower than PG&E’s during your tenure, John. What are you doing right?
Di Stasio: Obviously low rates help, and we’re proud that our rates are amongst the lowest in the state. But it takes much more than low rates to gain the loyalty of customers. Sometimes it’s even harder as a monopoly business. For us, it’s a constant focus on reliability, affordability and environmental stewardship. Our reliability speaks to our quality and responsiveness as an organization. As a community-owned utility, we view affordability as our dividend and take our role as environmental stewards seriously. Environmental stewardship reflects our contribution to improving the regional quality of life. We then design and measure the actions that deliver on those aspirations.
ELP: Tom, VEA recently signed an important grid agreement that will allow renewable energy producers to transmit and sell power to other markets, opening the door to valuable solar, wind and geothermal projects in Southern Nevada. How did that come about?
Husted: Valley Electric Association’s unique service area offers a wealth of potential for solar, wind and geothermal energy projects. A significant portion of this area is designated a Solar Energy Zone (SEZ) by the Department of Energy. We also have a large amount of underdeveloped geothermal resources in the northern part of our service territory. While Nevada has a renewable portfolio standard (RPS) in statute, California has an even higher RPS and a much more robust energy market. Renewable energy developers who wanted to take advantage of our prime climate faced challenges as a large investor-owned utility in Nevada had satisfied its RPS and was not entering into purchased power agreements for new renewable resources. We also recognized growing demand among renewable energy producers in our area, with many companies’ applying for interconnection to our system. At one point, we had more than 3 gigawatts of proposed renewable generation within our service area. It became apparent to us that joining the CAISO would serve several purposes. While there is a cost associated with being a member of the CAISO, we benefit financially by providing excess transmission capacity on our system to the organization. Renewable energy developers will also benefit by building in our service area because our direct connection into the California grid gives their renewable energy “Bucket One,” or preferred status, to satisfy the California RPS. Joining the CAISO also supports VEA’s mission to promote the regionalization of the western transmission grid. We recognized that joining an ISO would serve to improve efficiencies and maximize the potential of our utility.
ELP: John, you’re retiring this year after 30 years in the industry. If you could go back in time, what would you do differently?
Di Stasio: I’m not sure that I’d do much differently. I am truly fortunate to have the career that I’ve had. It has been both challenging and fulfilling. I might have done some things differently knowing what I know now, but I learned as much, or more, from the things that didn’t go well as I did from the successes. One thing that has been clear for me from the beginning is the value of our industry’s mission and the dedication of the people. Our industry has done as much, or more, than any other industry to support the nation’s economic growth and prosperity, as well as provide basic human comfort and convenience. I have always felt very proud to be a part of such an important and honorable mission. Our employees are highly committed to their communities and take great pride in keeping the lights on. It has really been a great source of pride for me to be in this business.
|VEA CEO Tom Husted, center, attends the National Clean Energy Summit 5.0 in 2012.|
ELP: Tom, VEA offers an alternative to its members in southwestern Nevada with more reliable rates: a solar water heating program. The program, anticipated to control future energy costs and reduce energy loads, offers an average annual energy savings of $253 to $546 for VEA members. The program is forecasted to save members approximately $34 million over 20 years. How does the program work?
Husted: We are extremely proud of our solar water heating program. The initial idea for the program came as a result of valuable feedback from a group of our members who serve as ambassadors for VEA. Following an intensive, year-long case study, we put together a program that provides our members with improved access to this energy-saving technology. We tried a couple of manufacturers before we selected Rheem, which has proven to be a great partner. VEA purchased water heaters, solar panels and other necessary components for the conversions in bulk and passed those savings along to our members. We have revised the program only slightly over the past few years, including eliminating the deposit associated with installation. It is now a no-money-down, zero-interest loan with on-bill financing. VEA works directly with a general contractor who manages the installation of the units. This allows us to maintain quality control. As part of the contract with members in the program, VEA retains the renewable energy credits (REC) attributed to each solar panel. These RECs are registered and certified by the Public Utilities Commission of Nevada. We are able to sell these RECs to companies that need them to satisfy an RPS or to mitigate clean air requirements, such as mining companies or manufacturers. Each single-panel unit avoids 3,082 pounds of carbon dioxide per year. Since the program’s inception, we have installed nearly 800 systems. The Nevada State Energy Office has also provided us with modest grants two years in a row that have enabled us to help cover the additional cost of converting propane water heaters to solar.
ELP: How will the electric industry change in the next 20 years?
Di Stasio: I think that it will change dramatically, primarily as a result of technology. Distributed generation and storage, electrification of transportation, interval meter data with advanced energy management systems will all serve to create a much more distributed and complex network. How utilities prepare themselves for these changes will determine how we fit in that landscape in the future. We will need to consider investments differently, recover costs differently for different services. We need to ensure reliability in different ways and manage large amounts of data, protecting customer privacy while providing valuable energy information. We won’t likely have one-size-fits-all customer programs. At the same time, we will still have a key role in maintaining the bulk electric system elements’ protecting the system from physical and cyber threats. The demands in many areas will be increased. It will be a very interesting time.
|John Di Stasio shakes hands following a community event.|
Husted: Technology, environmental factors and a new generation of employees and consumers are going to continue to drive vast changes and improvements within our industry. Technology will bring changes to the operations and management of the grid, from the consumer all the way to generation, whether it is distributed or large-scale. Environmental factors will also continue to play a critical role in all aspects of our lives. Energy utilization will transform the economics of traditional practices in all areas of the electric and energy industry. I believe the next generation of employees and consumers will undoubtedly influence a new direction for energy policy across the world.
ELP: The next two generations of utility CEOs likely read Electric Light & Power magazine if they are currently in the industry. What should they do to get your job when you retire or after your successor retires?
Di Stasio: We are fortunate that our industry has so many bright and capable people coming up. I always advise people to strive to excel at whatever they’re assigned to do. Always seek to learn about other aspects of your company, the industry and policy and regulatory elements of the business. Be involved. Volunteer in the organization and community.
Don’t be afraid to move laterally. The path to the top isn’t always linear. Being open to change frees us up to capture opportunities that we might not have focused on. Striving for excellence and a passion for lifelong learning are the things that have served me very well. Finally, if you get an opportunity, you’ll be prepared to make the most of it. The demographics suggest that there will be many opportunities in our industry in the next several years, so it’s a very good time to be early or mid-career.
Husted: I encourage younger workers to immerse themselves in all aspects of our industry. It is also essential to know and respect the needs of consumers. Most importantly, people should never accept the status quo. As the utility industry continues to evolve, creative ideas and innovative thinking will serve as increasingly valuable assets for future executives.
ELP: How do you spend your spare time?
Di Stasio: I enjoy my personal time very much. I have a commercial vineyard that gives me a chance to get my hands dirty and do something very different from my day-to-day job. I love international travel with my family. I play golf and fish when I can, and currently I am immersed in developing my culinary skills. I travel frequently and have many late evenings, so my spare time is always centered around my family.
Husted: While I don’t have much spare time, I enjoy a wide variety of activities outside of work. My interests are diverse and constantly changing. In recent years, I have spent time fishing, showing horses, boating and working on custom motorcycles and cars, in addition to many other hobbies.