Kathleen Davis, associate editor
Disney World has never seen such power: CEOs, executives and other power industry insiders flooded Walt’s Orlando resort in early June to participate in Edison Electric Institute’s (EEI) annual convention. This year’s forum included discussions on workplace diversity, industry growth rate, shareholder activism, corporate flexibility and natural gas issues.
Progress Energy’s president and CEO, Bob McGehee (featured in last issue’s industry report), outgoing EEI chairman Allen Franklin and the honorable Bob Dole kicked off the conference on Monday, June 7 with a rollicking opening session. Franklin, speaking to a packed house of industry insiders, opened his speech by discussing the convention’s theme, “celebrating 125 years of innovation.” He pointed out that it was appropriate for several reasons-chief among these the invitation to look both back over the industry’s history as well as into the future.
Tracing the complicated and innovation-laden path of electricity’s past, Franklin stated, “We have the power in our hands to maintain this evolution.”
Franklin even touched briefly on the blackout of last year. “As regrettable as the outage was, we should all be proud of how this industry responded,” he said.
“Economic theories, market models come and go,” he added. “But, the first concern must always be: Keeping the lights on.”
Franklin concluded his speech by urging his peers to maintain that sense of curiosity that evolution requires. “As heirs of Edison, we must not lose his sense of wonder,” he said.
Attendees then split up into smaller groups to examine specific industry topics. In “Building a World Class Diversity Organization,” Duke Power’s president, Ruth Shaw, laid out the groundwork for a diversity template, stating that diversity will “naturally happen,” if the right items are in place. Self-awareness and the belief that “diversity is a necessity” is number one on her list. Other items include giving employees a good sense of what they need to advance, as well as respect for the individual in the workplace.
David McClanahan, president and CEO of CenterPoint Energy, added, “With diversity, you can build better companies.”
His list for creating that diversity template includes having executives that believe in the concept, establishing good communications and training, and, above all, being accountable.
Frank McClusky, vice president of diversity and corporate relations with Georgia Power and Southern Company, asked the audience to “work from a vision.” He, too, believes that accountability is key, and he urged CEOs to be the “champion” of their diversity programs.
Later in the conference, panelists examined the what, why and how of the new “back to basics” mantra for the industry in a session titled “Growth in the Electric Business.”
Greg Abel, president of MidAmerican Energy Holdings, began with a list of all the items most American electric utilities-though not all-have retreated from: non-energy or non-core businesses, trading and merchant generation (driven by risk and capital requirement), and foreign assets.
“Many investors feel like the industry has not been a great steward for capital,” added Gale Klappa, chairman, president and CEO of Wisconsin Energy.
Abel reminded the audience that the back-to-basics idea hinges on one thing: That the constant for the industry over the last 125 years has been the customer. Sometimes this means becoming more comfortable with a lower risk profile, Abel pointed out, even if that means growth and returns are also lower.
“As we evaluate models and concepts, you must ask, ‘Can our customers accept what we’re proposing?'” he said.”We are constantly facing the limitations of back-to-basics,” stated John Rowe, chairman and CEO of Exelon. He added that it was hard to beat the thin two to three percent traditional growth rate of utilities on a long-term basis. In fact, Rowe believes that a technological improvement or invention is pretty much the only option to break a company out of that low growth rate. However, he does seem some opportunities for growth within the back-to-basics strategy-“selectively.”
“I’m supposed to be an apostle of competition,” he told the crowd. “But, there are mornings in the shaving mirror where I’d be more than happy with a contented monopoly. But, it’s terribly hard to go backwards on that track.”
Rowe does see opportunities with acquisitions in the future, as long as your company is “exquisitely careful” about what is bought-especially in the next five to ten years.
When asked by an audience member why he felt so many industry mergers, acquisitions, and expansions have failed in the last few years, Rowe stated simply, “I have to say it’s because executive lust often exceeds executive discipline.”
In other conference news, ScottishPower won the international Edison Award for improved customer service and strong financial performance. Edison Awards are given annually by EEI to the U.S. shareholder-owned and international members that “have made significant contributions to the advancement of the industry.” Wisconsin Energy won the U.S. Edison Award for it’s “innovative coal combustion products program.”
Additionally, Wayne Brunetti, chairman and CEO of Minneapolis-based Xcel Energy, was elected chairman of EEI for the upcoming year.
“The next twelve months promise to be a critical time for the electric power industry,” Brunetti said in accepting the position. “As chairman, I look forward to working with EEI staff and its member companies to address the wide range of regulatory and legislative issues facing the industry.”