BY Kathleen Davis, Senior Editor
Here at Utility Automation and Engineering T&D magazine, we’ve always concentrated on technology–all the elaborate, expensive, intricate systems that move power from the plant to your home. But, technology doesn’t come about from thin air; no matter how amazing, it’s not magic. From invention to adoption, technology takes a human hand to guide it. So far this year, we’ve tried to get the scoop from some of the people guiding technology on the T&D side of power. In January, we spoke with Kevin Kolevar, assistant secretary at the U.S. Department of Energy (DOE), about the government’s interest in our industry and the upcoming smart grid evolution. In February, we took that discussion to Glenn English, CEO of the National Rural Electric Cooperative Association, and expanded it to get his expert view of what smart grid and smart meters mean to the rural co-op community. This month, we talk with Tom King, president of National Grid in the United States, to get the perspective of a large utility on smart grids, technology and the economy.
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KD: You joined National Grid in 2007. In the year and a half you’ve been with the company, what has National Grid taught you?
TK: I joined National Grid just a few weeks before the completion of the KeySpan acquisition. There was a lot going on then, and a lot of work has been focused on that integration.
Moving to the company was an exciting challenge for me personally. Not only did I have a new company to learn about, but I was diving into the KeySpan/National Grid integration, tasked with building on our relationships with regulators across four state and federal jurisdictions, and an operational transformation program launch–all at the same time.
One of the more attractive parts of joining National Grid was the company wide commitment to leadership on climate change. It was heartening to see how the commitment permeates throughout the company–from office recycling to working with the U.S. or U.K. government on energy policy. It’s an exciting time, as we are focused on playing our role in reducing our impact on the environment–a commitment that I am also focused on personally.
KD: How has your history in the industry–with PG&E, Kinder Morgan and Enron–colored your decisions at National Grid?
TK: I have had several critical experiences with each, and all have provided me with great hands-on knowledge. I didn’t realize it at the time, but when I look back on those experiences, each was valuable in its on way.
My early experience was around building and leading rate cases, dealing directly with how utilities recover costs and provide shareholder value. I then moved to the physical side of the utility business and led the development, construction and in-service of Northern Border Pipeline.
From there, I was vice president of marketing and commercial activities of Northern Natural Gas and Transwestern during the time of deregulation. Then, on to vice president of commercial operations of Enron Liquids, now part of Kinder Morgan, during a time of mergers and acquisitions activity and merger integration. It was an exciting time being close to the commercial side of the businesses.
I then moved to Pacific Gas and Electric (PG&E) in a number of various roles, during a time of U.S. utility expansion. One of the biggest challenges I then faced was when I became CEO of PG&E. The utility was exiting its bankruptcy filing from the California energy crisis, and the next four years were about setting important energy and climate change policy, as well as transforming the utility’s operating model.
Overall, each experience exposed me to different and vital elements of the utility industry, and I was lucky enough to be right at the heart of important industry changes and challenges. I couldn’t pick out any specific role that gave me what I need in my current job at National Grid, but I think they all combined to give me the skills I need today as the energy industry faces even more changes and challenges.
KD: You specifically oversee electricity distribution and generation. That’s an unusual structure. Most utilities split generation off from a combined transmission and distribution group. What are the benefits of structuring this way, combining distribution and generation and separating out transmission?
TK: I wear three hats in my role. First, I sit on the board of directors as an executive director, the only one from the United States. Second, I lead the line of business of electricity distribution and generation, and finally, as the only U.S. executive director, I represent the United States as its senior leader.
As to the generation component, it’s fairly straight forward. The generation operations are solely based on Long Island, New York, and the output is under contract with the Long Island Power Authority (LIPA). We are also managing the LIPA transmission and distribution system on Long Island. Therefore, to optimize operating synergies and cost, it was more efficient for us to consolidate these under the same line of business.
KD: Looking ahead at plans for electricity distribution, what’s on the agenda for this year? What’s on the five-year plan for electricity distribution at National Grid?
TK: System reliability and customer satisfaction are always at the top of our agenda in everything we do across the company–and making sure we do that safely. We are absolutely focused on this and realize that we have a lot work ahead of us.
Investing in our network to keep the lights on is a priority. Across National Grid as a whole, we’re investing more than $4.5 billion every year. While the current market conditions are challenging, we are confident that we can still access the financial markets to fund this investment–and it’s even more important that we do this as efficiently as possible.
It’s also important to us that we are welcomed, be it by the market and customers we serve or the energy policymakers and regulators. Part of our vision is to be a trusted energy solutions provider for the future, and we know we still have work to do here. For example, I want us to have one point of contact for our customers whatever their query. I want to standardize our back-office systems completely. These are just examples of the tough challenges we face; the challenges we are working hard to overcome.
Additionally, with our 2050 target of 80 percent emission reduction in place, tackling climate change is at the heart of our business. As we invest in our network and improve the customer experience, we are always mindful of reducing our emissions and our impact on the environment.
KD: You weathered a series of nasty New England storms in December. How did that impact your power distribution and have you fully recovered? Do you have any favorite stories from that storm?
TK: They were nasty storms and had a significant impact on a large part of our networks across New York and New England, taking out power to half a million of our customers at one point. We recovered as quickly as we could, and I think that was due to the planning we did in advance of the storm arriving.
I can’t pick out one story–the whole restoration was a team effort. Overall, I am extremely proud of National Grid’s response, which was professional, well-planned and well-executed. The scale of our mobilization was immense–we supplemented our own 268 internal crews with 740 mutual aid, line contractor and forestry crews. On top of that, the background support by every line of the company’s business was significant, with more than 500 back-office workers involved. I can’t thank our people enough for what they did, and their commitment and actions amazed me.
KD: National Grid’s overall strategy talks about becoming “more focused.” Can you give us some details of the U.S. power distribution market? What’s in the works here to follow that strategy?
TK: The focused element of our strategy was mainly centered on our move to the new lines of business on concentrating on what we’re good at–managing energy networks safely and reliably. We exited a number of businesses which were not quite aligned to this and have focused on our principal growth markets in the United States and United Kingdom.
We’re now taking it to the next stage. It’s about focusing on transforming our operating process and integrating systems, using best practices and choosing the best way forward to serve our customers. For example, we still have many back-office IT systems that basically do the same thing. So that’s where we are focused now, working to achieve the one National Grid goal, at a company that has undergone lots of change and significant growth over the past few years.
The other side of this focuses on our aim of becoming an energy-management company that leads, particularly in the climate change arena. The energy sector, both here in the United States and in the United Kingdom, is changing rapidly. We have to build sustainable energy solutions for future generations, so we’re focusing on our role in that.
KD: Your branding position (or tagline) is “the power of action.” What does that mean for the company, and what does it mean, specifically, for your consumers?
TK: Put simply, it’s how the power of action can mobilize a movement to join together and improve the way we work and operate. It’s about leading by example.
We agreed to the new brand, primarily through our customer outreach, to garner consumer attention and communicate our position as an active partner and enabler for sustainable energy generation, delivery and usage. It embodies three overriding principles: to lead by example, encourage participation and make sure it’s easy to follow. We want to show customers how to simply and efficiently put the power of action to work in their lives. They are encouraged to step up, to take charge and to make a difference–both in their energy consumption and in the effect that energy use has on our environment.
For our employees, the power of action equals the power to do great things in areas like customer satisfaction, energy solutions, climate change, safety, community commitment and inclusion and diversity. This drives important company initiatives by encouraging employees to deliver sustainable solutions to our customers. By working together, all our small actions can have a positive impact. We want to lead by example and take action.
KD: The buzz phrase these days in our industry is the smart grid, and most smart grid products come into the equation at a distribution level. How is National Grid preparing for the smart grid evolution?
TK: If we are going to start using our energy smarter, then we need take a holistic view at how an intelligent network should work. We need to look today at how tomorrow’s networks should work. The smart grid is about creating a network with the intelligience to optimize energy flows, including prioritization of clean-energy sources, self-healing networks to minimize outages, automation of demand use and utilization of the most efficient use of energy. We are looking at pilot programs within our networks to make sure we play our role in the implementation of smart grids.
KD: One area of smart grid that is being touted as a solution for the current moment without heavy equipment investment is energy efficiency. What programs on energy efficiency does National Grid sponsor?
TK: In the United States, we have been running energy efficiency programs for over 20 years, and in that time, we’ve saved our customers more than $2 billion. These have included, among other things, energy audits, weatherization programs and HVAC installations. We support this as a way to reduce emissions as well as energy bills for our customers and we’re working with our regulators across our footprint to increase our efficiency programs.
What we need to do is have all these elements working together. There is no silver bullet that can tackle climate change, reduce energy costs and incorporate changing energy sources. The bottom line is that we need it all: smart grids, energy efficiency, new technologies, renewable energy, etc. Energy efficiency programs, such as the ones we run in our footprint, can offer a solution today for reducing emissions, energy usage and costs. You only have to look at how California’s population has increased 30 percent with a flatline energy usage. Even though energy efficiency isn’t the only answer, it should definitely be a central part of the mix.
KD: Do you see the smart grid making headway in the industry in the next few years, or will concerns about cash flow and bottom lines set it back? It’s a lot of infrastructure in which to invest.
TK: Personally, yes I do. These will be investments for the short, medium and long term–but it’s not going to happen overnight. Enhancing the intelligence of the energy networks from end-to-end is a big part of the answer to the future. We have to take a wiser approach to using power, and smart grids can help us do that.
The recently signed stimulus plan will certainly help investment in this area. We are in extremely challenging times, but we still need to invest seriously in new technologies such as smart grids and renewable energy to prepare our networks for the future energy landscape. Not only can these help us manage energy costs and reduce emissions, but they can also start creating new green collar jobs to help stimulate the economy.
KD: Speaking of cash flow, do you see the current financial crisis impacting the industry? How will it impact National Grid specifically?
TK: It’s clear we’re in tough economic times. For the energy industry, we need to be even more careful in what we invest–working closely with our regulators to invest wisely, as well as our customers to help them manage their energy costs.
At National Grid, we’re confident that we can still access the credit markets to fund our investment program, but we’re not being complacent. We have an excellent finance team that is doing a great job.
KD: What advice would you give other utility executives about weathering the next few–potentially unstable–years?
TK: Without doubt, we will all be running our businesses with a greater emphasis and focus on cash management like never before. We are now in a period where cash is one of the most critical financial elements and metrics on which to focus. If utilities work to succeed in this area, they should still be able to deliver on stakeholder commitments and on adding shareholder value.
To meet the challenges, I think it is important to be clear about your business priorities and focus–have clarity in the direction and goals for the business. Company leadership must also be positioned and skilled to lead us through these challenges and opportunities. And finally, it’s vital to review and possibly strengthen governance and the decision making processes–to ensure they are clear, understood and followed by the organization.
It’s a tough journey at the moment, but with clarity and focus, utilities such as National Grid can continue to offer the best service possible to customers and communities.
About Tom King:
Tom King joined National Grid in August, 2007, as executive director of electricity distribution and generation.
King was president of PG&E Corp. and chairman and CEO of Pacific Gas and Electric Co. from 2003 to 2007. Before that, he served as senior vice president of PG&E Corp., and as president of PG&E National Energy Group.
Prior to PG&E, he served as president and COO of Kinder Morgan Energy Partners. He spent eight years, from 1989 to 1997, with Enron in a series of senior operating positions with its affiliates, Enron Liquid Services, Northern Natural Gas Co., Transwestern Pipeline Co. and Northern Border Pipeline Co. He also held positions at Cabot Corp.’s natural gas unit, Cabot Transmission Corp. and the Panhandle Eastern Corp.
King has a bachelor’s degree in business administration from Louisiana State University and graduated from the University of Michigan’s executive management program. He completed the Nuclear Reactor Technology Program at the Massachusetts Institute of Technology.