This month's question: What are some of the biggest challenges in creating your co-op's 10-year business plan?
Answer: I believe that managing the pace of change in an industry that has long structured itself around the concept of stability is the biggest challenge we face right now in developing our long-term strategies. Electric utilities are in the midst of a technological revolution that is bringing exponential change to the way we do business and will significantly impact where we go and what we become. As fast as things are moving, it can be a struggle to identify where the ball will be just five years from now, never mind 10. We must now take a series of calculated risks that, if done right, will position our co-ops to make proper investments in systems that can adapt to the desires of our members while complying with changing regulations and continuing to ensure we maintain the highest value in the services we provide now and in the future. That is our challenge. But as electric cooperatives, I believe we’re in the best position possible to turn this challenge into opportunity, to create a business plan that is nimble and responsive to the needs of the member and the country. It’s not easy, but at Butler EC, we take very seriously our responsibility to be the leaders of change.
Answer: For what seemed like years, our industry was stable. Growth was slow. I could estimate my co-op’s financial future with ease. However, the past few years have brought numerous issues that challenge my ability to estimate the next six months, let alone the next 10 years. A few of the factors that create challenges are: overall inflation; wages that must keep up with inflation and competition; supply chain and equipment shortages/lead times; emerging technologies that change the way we operate; potential increases in wholesale energy prices due to regulatory changes in carbon emissions policies; regulatory/legal changes that impact the distribution level; true cost of cybersecurity; buildout and expansion of a fiber network; unknown cost increases to maintain grid and rights-of-way for reliability; explosive growth due to the medical marijuana industry, which has increased capacity needs as well as upgrades to our system without knowing the industry’s sustainability. All of these challenges factor into one key question: How much financial pressure can the end user truly handle? These issues impact our tiered system but ultimately rest upon the shoulders of the distribution cooperative member. Our goal is to provide safe, affordable, reliable and environmentally responsible power for each of our members. We must consider these challenges as variables when planning for long-term success.
Answer: My challenge as the general manager of a utility is to keep up with the fast pace of change driven by new technologies and demographic trends in the utility business. Advances in renewable technologies are disrupting the centralized model of delivering electric power. Our members are demanding more options when it comes to the incorporation of renewables into the grid, both behind the meter and on a generation level. Moreover, the current cost structure and revenue-recovery model does not consider the widespread proliferation of behind-the-meter generation technology that I predict our members will adopt over the next decade. The demographic trend of our cooperative is also driving change. Younger, tech-savvy members’ expectations include personalized electronic communications and social media engagement. Older members typically expect personalized transactions and face-to-face interactions. This requires a multifaceted communication strategy designed to reach different demographics. These trends have implications for our workforce based on different needs and expectations. The pandemic has accelerated this movement and demonstrated that some utility employees can work remotely. Navigating these expectations is tricky. These factors combined with the difficulty of predicting the long-term inflationary impact of increased cost of goods makes HEA’s 10-year plan challenging. I embrace these industry challenges as an opportunity to reimagine the delivery of electricity to HEA members. It’s an exciting time to be in the electric business.
Answer: I think the biggest challenges in creating a 10-year business plan are politics and technology. Cooperative members have two primary concerns: cost and reliability. Divisive politics and changes in technology are prevalent today, creating unknown future conditions and making planning difficult. The current environment of divisive politics creates unpredictable legislative and regulatory changes that occur every time the political party in power changes. In our industry, we plan to have reliable assets for 30 to 40 years. Constantly changing legislation and regulations can result in assets being retired long before their useful life, which creates a negative economic impact. These politics can also pressure utilities to use less reliable forms of energy production. This environment makes planning for cost-effective, reliable service very challenging. Technology changes, while generally positive, can have negative effects on long-term planning. While we invest in the most current technology and hope that it will be relevant for many years, we often find newer technologies displacing our investments sooner than expected. Technologies such as smart meters, software and mobile devices have developed at a record pace. Members’ expectations change with technology, which can upend any long-range plan that we try to implement. Similar to retiring assets due to legislative/regulatory changes, changing technology makes planning for the useful life of assets and training employees difficult, which can result in service and rate issues.