I remember once thinking, naively perhaps, that most utility CEOs must have come up through the ranks, like generals in the military, with hands-on operational engineering experience garnering them the respect of their peers and subordinates along the way.
When I shared that concept last year with a 40-year industry veteran who'd done his time in generation and T&D, he schooled me saying that while that used to be the case, it's not the norm today. He said more often you'll find someone with a finance background, often imported from sectors outside power.
Well, I got another round of schooling on this subject this week from former state commissioner and current consumer advocate Nancy Brockway, who has made her presence known on this blog before, in: "The State of the States and Smart Grid Security." Well she's back, and whether you agree with her or not, and allowing for exceptions, I think you definitely should hear what she has to say about the origins of senior utility leadership in 2014:
Transaction-oriented finance and legal sector professionals have displaced engineers in the executive suites of most utilities. The big shift to deal-making occurred in the wake of the existential shocks of the late 20th century over cost over-runs, the end of cheap oil, and the growing recognition of the environmental costs of utilities.
Look back a century or more to the pioneers of the utility industry and you'll see a public interest value system that could and often did accompany the build out of utility territories and even accompanied mergers and acquisitions. Read 2004's Insull: The Rise and Fall of a Billionaire Utility Tycoon by Forrest MacDonald, for more background.
But economies of scale were pretty-well exhausted by the 1960s. Bigger was no longer better for customers. And an anti-regulation "winner takes the hindmost" political climate did not reward a utility executive's greater effort to serve the public. Rather, it rewarded ever more sophisticated schemes to funnel profits up to the executive suite.
Regulators have to push for what they see as the public interest. To do their jobs with any responsibility in these circumstances, they can no longer sit back and merely act as a brake on occasional excesses. Too often they have to define the public good and demand it from utility management.
I am not sure that a workable redefinition of the roles and responsibilities of management and regulators can happen without a wholesale cultural shift away from "Greed is Good." My opposition to pre-approval of cyber security spending comes from the sense that if the utility drags its heels or does only what it needs to satisfy regulators, that just demonstrates that utility execs do not see security as fundamentally necessary for their personal financial success.
Sort of begs the question of how Gordon Gekko would weigh security investments vs. security risk, and you know what, I don't know the answer. But we know GG types thrive on risk and reward.
That's not exactly what I had in my mind previously, imagining conservative, retired military, former boy or girl scouts, with steady hands on the tiller of some of the absolute most important critical infrastructure organizations in the country.
Hopefully, experience and acumen with fine tuning financial risk/reward equations will most often translate to similarly savvy understanding of and action on operational risks ... including one that's increasingly material and the raison d'etre of this blog.
Hopefully, experience and acumen with fine tuning financial risk/reward equations will most often translate to similarly savvy understanding of and action on operational risks ... including one that's increasingly material and the raison d'etre of this blog.
Photo credit: ABC news
