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Four Rules You Need to Follow to Run a Utility

Posted to Esri in the Utility Management Group
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Bill Meehan's picture
Bill Meehan 15469
Director, Utility Solutions Esri

William (Bill) Meehan is the Director of Utility Solutions for Esri. He is responsible for business development and marketing Esri’s geospatial technology to global electric and gas utilities.A...

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  • Feb 23, 2022
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This item is part of the Special Issue - 2022-02 - Business Side of Running a Utility in 2022, click here for more

One of my mentors at the utility was a guy named Russ, its president. I had been with the company for nearly twenty years. For most of that time, the place was run by either engineers or those who had run operations. Russ was an accountant. Being an engineer myself, I had the notion that you had to understand the technicalities of the business to run a utility properly. I was wrong. Russ had terrific insight into running the company. Sometimes, we engineers can get caught up in the technical details of the business. If not careful, we can lose sight of the big picture.

Russ claimed, and I might be paraphrasing, that there are only four things you need to do to run a power company successfully. Here are Russ’s Rules:

1) Make money

2) Keep customers happy

3)Make sure employees are safe and motivated

4) Stay out of trouble

Russ was outlining the company’s mission stated in its simplest terms. First, it provided a clear roadmap for the employees to do their jobs. It didn’t matter whether they were senior vice presidents, CIO’s or the wonderful people answering the phones. It also provided a framework for balance. The idea is that you can’t go crazy following one rule without thinking about the impact on the others.

Russ thought that maybe the canon of staying out of trouble was the most essential rule of the four. Examples of excessive outages, violation of environmental regulations, employee accidents, blowing up buildings, overcharging customers, and electrocuting dogs would end up on the newspaper’s front page or gain a million views on YouTube. Things like that get executives fired. It triggers expensive audits and embarrassing investigations. When was the last time a utility was praised in the press? None that I can think of. Russ’s 4th rule was to keep a very low profile.

Technology Must Address Russ’s Rules First

My career was split in two: the first half for a power company and half for a GIS software company. As technology providers, we sometimes attempt to convince senior management to adopt the latest advances. So we flood executives’ attention with subjects like machine learning, virtual reality, smart sensors, AMI, and self-healing grids. All great stuff. Sometimes we forget Russ’s Rules. We must always view these technologies, in fact, all projects, through Russ’s lens. And it doesn’t always have to be for short-term gain either. Wise investments are often long-term, like investing in high-quality data.

Take machine learning and drones. As a utility executive, do I invest in this technology? Instead, should I take my money and upgrade my infrastructure? Throw a lot of money on network hardening? Shore up the poles, replace old cables, add more hardware? The answer lies in Russ’s Rules. One needs to do both. Invest in technology to optimize the needs of the infrastructure. Let’s face it. According to the American Society of Civil Engineers’ (ASCE), infrastructure scorecard for energy earns a miserable grade of C-. That means that utilities can’t simply replace all of their infrastructure because the cost would be too great. Instead, they need to be smart about it. So using GIS, ML, and drones, for example, they can inspect transmission lines in a highly productive and cost-effective way, upgrading their infrastructure where it needs it the most.

Optimizing investments save money, hardens the network the best given the limited resources, makes the network safer for utilities, and keeps utilities out of social media. All in alignment with Russ’s Rules.

Say the utility pushes for a new cyber-security system. The justification might focus on better functionality, easier upgrade paths, or adherence to the latest standards. They are all worthy reasons to spend the money on a new system. However, the justification should focus first on addressing Russ’s Rules. First, a cyber breach could cost the company a fortune in lost revenue. So the faster the new system detects a breach, the lower the financial risk. It supports Russ’s first rule (make money). Second, a breach could create outages, which make customers very unhappy. Third, creating severe safety issues puts employees in danger. Finally, the PUC and press could hammer the utility for not doing enough, creating bad press, and getting it in trouble.

Any utility investment should be mindful of Russ’s four rules. If not, then maybe the investment may not be aligned with the company’s strategy.

The Language of Business

As a technology provider, I’ve learned a whole new language. I can spout all kinds of fancy technology phrases, like canonical data models, cloud-based web services, and rest endpoints.

In a recent Where Next article, author Chris Chiappinelli speaks to GIS analysts about adopting the business language. In the article, he writes:

“At one Fortune 200 real estate company, the executive vice president—charged with introducing GIS to her organization—likened the technology to a Ferrari but said she needed someone who could get across its value to business leaders. “You need a business person to lead this, to speak business-speak,” she explained. “You need someone that’s not going to try to sell you on the mechanics of that Ferrari [but instead] take you into the experience of owning that car. You have to win what we call ‘hearts and minds.’”

In this article, he further quotes a transportation analyst.

“Everything we do is couched in the business, and we have to use the language that our business understands and that our stakeholders understand.”

Technology people need to understand Russ’s Rules. They can’t use terms that don’t resonate with their business leaders. The language has to be compelling and straightforward. Business people gather information, make decisions, and uncover threats fast. They need technology to do that, and the outcomes must be linked to its mission.

Sustainability, Supply Chain, and Equity

Do Russ’s Rules address the issues of sustainability, supply chain, and equity? Of course, these are concerns that every utility executive grapples with regularly. But, looking deeper into these issues, Russ’s Rules indeed apply.

Utilities need to create an environment of sustainability. And not just from the energy supply side of the business, but from the logistics, material, and facilities management. A typical electric distribution company has hundreds of vehicles, many large, like bucket trucks. Shortening travel distance lowers travel time to correct problems for customers. It makes customers happy by pinpointing and making customer appointments on time. Lowering miles of travel reduces exposure to traffic accidents, creating a safer work environment for employees. And faster power or gas restoration and making appointments on time result in fewer complaints to the PUC, which keep utilities out of trouble.

Utilities can provide a similar analysis to their facilities and materials management as well, using every technology in the book to reduce costs, improve customers experience, enhance a safe work environment and be a good steward to the community. Plus lowering emissions supports the company’s stated carbon emissions goals bolstering the company’s image. All supporting Russ’s Rules.

Utilities have the same supply chain problems other companies face. They need equipment to meet new demands. So imagine what happens when utilities will need to upgrade their network substantially to meet the demand for electric vehicles. In a recent piece by CNBC, auto executives expect half of all new vehicles will be electric by 2030. That means utilities will need to adopt better tracking techniques using location technology. They will need to follow Russ’s Rules to make that happen. They can’t afford to pour money into new infrastructure without looking at the business implications. Just saying that the technology is modern and cool isn’t enough. It needs to support the mission first.

Finally, utilities must worry about equity. If not, they face serious issues with costly audits, customer dissatisfaction, labor unrest and bad press, violating Russ’s Rules. Using technology such as GIS provides a way to analyze how the utility invests, maintains, and serves people of color, of low income, the elderly, persons with disabilities, and renters. By visualizing the impact of their operations, they can better adjust.

The Language of Technology Must Meet the Language of Business.

Successful sports teams rely on talent, of course. But the most successful teams communicate well. I’ve been blessed to be surrounded by extraordinary talent in the utility and the GIS community. The best communicates in business terms. More and more, technology providers frame their wares in the language of the business. Utility leaders are listening.

Learn how the technology of GIS applies to the business of utilities here.

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Jim Stack's picture
Jim Stack on Feb 23, 2022

Bill, I think the Utilities could be praised if they understood all the changes going on . Like Solar and Electric Vehicle.  QUOTE=When was the last time a utility was praised in the press?

I gave a talk at a State wide Electric Vehicle meeting a while back. I explained how efficient and reliable Electric Vehicles are. I then when on the show the price of electricity compared to gas or diesel to move an electric vehicle 100 miles. I explained how the utility would have to charge 4 times more for each kWh of electricity to be the same cost of gas. I also showed how more and more electricity if coming from Solar and wind and Hydro electric renewable sources. That is something a gas car can never do. 

   Also that with all the EVSE so called charging companies and Networks we have. The Utilty is actually the one producing and providing the power. Not Tesla or Electrify American or Blink. It is the Utilty providing all the power at all hours.  

Bill Meehan's picture
Bill Meehan on Feb 28, 2022

Hi Jim,  I agree.  Thank for your response

Rudy Shankar's picture
Rudy Shankar on Feb 24, 2022

Very nice article Bill!

Mark Wilkinson's picture
Mark Wilkinson on Feb 24, 2022

Great article, Bill.  I didn't know Russ' Rules, but they certainly make sense and simplify decision making for executives.  It strikes me that Rule #2, Keep Customers Happy, may be one of the most difficult for utilities especially with the pace of rising customer expectations for personalization, new and different forms of communication and uncertainty surrounding disruptive topics like EVs and residential solar.  Utilities still have a blind spot for understanding customer interests and expectations, which adds to the challenges of Rule #2.  

You gave some great examples of how utilities can view challenges through the Russ's Rules lense.  Do you have an opinion about which rule is the most challenging for utilities to consider?

Bill Meehan's picture
Bill Meehan on Feb 28, 2022

Since all the rules are interrelated, the notion of a balanced scorecard is the best path forward. However, depending on the utility and the state of its infrastructure, I suspect the hardest rule is staying out of trouble. Given mother nature's assault on the Overhead Electric Infrastructure and resulting power failures, this one will get tougher over time.

 

Thanks for your comments

Russ Hissom's picture
Russ Hissom on Mar 3, 2022

Nice post, Bill! I'm a different Russ but I think these rules are spot-on for the industry and will work well with the current and coming changes (especially in the sustainability reporting area as you mention). Thanks!

 

Russ

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