Engaging Utility Stakeholders: A Matter of When, Not If

“The biggest mistake we made was we didn’t listen to and respect our neighbors.”
— Aquila former CEO Richard Green

I was sitting in a church, but it wasn’t Sunday.

I was listening to a preacher, but she was not an ordained minister.

I was hearing people talk about the Promised Land, but no one mentioned Heaven.

The scene was taking place in the First Presbyterian Church of Boulder, Colorado. Clean-energy activists were advocating municipalizing the electric distribution system serving Boulder so that the city could further “green” the mix of electricity provided to residents. Proselytizing about renewable energy and municipalization in a Presbyterian church made the scene all the more poignant.

Boulder, a city of about 100,000 located about 30 miles northwest of Denver, already has a certificated electric utility—Xcel Energy. But the city and Xcel have been at loggerheads for about two years over the terms and conditions of the franchise between the city and the utility. The impasse became a vehicle for clean-energy activists to press their municipalization and decarbonization agenda.

Suddenly my mind drifted and I found myself thinking about Aquila, the Kansas City, Missouri-based utility that was acquired and broken up a few years ago after a series of strategic missteps, including failing to listen to and respect the views of its stakeholders.

Leaving aside the specific details of why Boulder and Xcel Energy can’t play nice in the sandbox, a more basic truth emerged. This truth already has stalled some utilities’ investment in Smart Meters and the Smart Grid. This truth is simple: utilities need to engage their stakeholders or risk stalling strategic initiatives.

With the possible exception of utility communicators, “stakeholder engagement” may not be at the top of any utility executive’s to-do list. From my conversations with utility communicators, it is clear that some utility leaders see “stakeholder engagement” as just another buzzword that briefly grabs news headlines but changes little about the way many utilities operate.

Utilities no longer possess a monopoly on information about energy issues. For better or worse, the communications revolution has democratized the dissemination of information. This reality has tripped up more than a few utilities, with consequences that range from slightly irritating to loss of corporate life.

Earlier this year, Pacific Gas & Electric suffered a very public humiliation over the way it communicated with its customers in central California about the Smart Meters it was installing. What began as questions from customers about the accuracy of the new meters quickly turned into a media firestorm and high-profile PUC investigation.

Although the meters were eventually certified as operating within industry norms, by the time that verdict was rendered, PG&E already had been convicted in the court of public opinion for its poor customer outreach and education about Smart Meters.

“Restoring this trust is absolutely critical to us,” one PG&E official said—months after the crisis erupted. The fact that stakeholders eventually were able to compel PG&E to listen to and respond to their concerns once again validated the truism, “If you apply enough heat, everyone will see the light.”

A similar controversy surrounded Oncor’s installation of Smart Meters in its service area in and around Dallas, Texas. As with PG&E’s situation, some Oncor customers found their electric bills shooting up after the installation of Smart Meters. But Oncor seems to have responded to their customers and stakeholders more effectively than PG&E. Oncor representatives eventually conceded that they could have—and should have—done a better job communicating with customers about how Smart Meters do, and don’t, affect their monthly bills.

The laments from Oncor and PG&E officials all sounded very familiar as I sat in that church in Boulder. Then I remembered: A few years ago, Aquila spent nearly $150 million to build a power plant on a site where, they thought, they didn’t need a certificate of public convenience & necessity from their regulators. They thought they didn’t have to convince regulators that the power plant was necessary. That also thought they were not obligated to hold “open house” meetings with members of the public where they would have to explain why the generator was needed and why the location that Aquila preferred made the most sense.

Aquila’s leaders rolled the dice in a big way, perhaps believing they could bully or bamboozle their stakeholders. They lost. Their strategic miscalculation—one of several—eventually led to Aquila’s demise. Today, other utilities are providing electric and gas service to customers who used to be served by Aquila because it was taken over and carved up.

As Aquila’s power plant flap was winding down, but before the utility was acquired and broken up, the Kansas City Business Journal had a prescient insight: “Whether Aquila tears down the plant or strikes a last-minute deal, it will pay dearly. The question is whether Aquila executives learn—at last—that utilities fare better by acting as service providers instead of monopolies.”

Service providers understand that they are in the business of interacting with customers and other stakeholders. They are not a nuisance to be shut out or ignored so that some easier or more profitable endeavor can be pursued. Just ask the executives who led Aquila down its road to perdition.

© 2010 by Egan Energy Communications, a communications consulting firm specializing in utility issues. We work with utility communicators to turn stakeholders into advocates. Located in Lafayette, Colorado, our website is www.EganEnergy.com and our phone number is 720-949-4906.

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