Black Swan events are very rare and unpredictable. The COVID-19 pandemic is just such a Black Swan event.
This is a true test of leadership in American business, especially for the nation’s electric and gas utilities. These regulated utilities have an “obligation to serve” their customers, and many will not shut off service during a nationwide pandemic crisis—which will impact cash flow. Some major utilities are currently seeking rate increases to cover needed capital improvements, but regulators will have no patience for it. Additionally, the Edison Electric Institute, a group that represents investor-owned utilities, projects that as much as 40% of the utility workforce may be absent at any given time due to COVID-19 exposure or related symptoms. Some of that staff are mission critical.
Indeed, these are significant challenges. What should utility leaders consider? Here are some suggestions:
1) Take care of your No.1 asset, your people. Keep them informed, provide access to health care and staff up human resources to support them. Reinforce safety!
2) Increase IT support and cyber security for those working from home using video conferencing, file transfer protocols and specialty software packages. Ensure security for required government/regulatory reports with confidential data.
3) Reinforce customer service and call centers by reassigning employees that were working in new customer service activities.
4) Double down on artificial intelligence to replace standard, repetitive jobs requiring little creativity or personal customer interaction.Try using AI for call center introductions, standard new service connections, fleet maintenance services, the purchase of basic staples and supplies, travel and equipment maintenance.
5) Cross-train personnel in mission critical tasks so they can cover multiple jobs as needed. Engineers are often a quick study and can add value across many disciplines, so this is a great opportunity for engineers to cross-train, mentor and lead in system operations, critical maintenance, protection and control, telecommunications and emergency restoration operations.
6) Renegotiate all tier one contracts under Force Majeure clauses to include line contracting, fuel for fleets and power production, vegetation management and leased office space. Buy American and local if possible. Regulators and shareholders will not tolerate offshoring. Contract with at least three different companies from geographically different locations. Move outsourced engineering to local area businesses.
7) Regulators will likely halt requests for rate increases due to citizen demand for rate relief. Cancel public meetings for controversial or costly new projects and maintain a low public profile as rate cases are delayed.
8) Cut costs now. New load growth will grind to a halt. Revenue will drop, but the obligation to serve remains.
9) Close the worst performing power plants and buy power on the open market at record low prices.
10) Keep the shareholders, public or coop members fully informed with facts based on solid, empirical data.
Black Swans are very rare in nature and in business. They are a true test of leadership. History will record how states and our nation respond and markets will reward or punish businesses like our electric and gas utilities for success or failure.
Mike Beehler is a registered professional engineer in Ariz., Fla., Hawaii, Texas, Colo., Kan., Ga. and Ala., a fellow in the American Society of Civil Engineers and a member of IEEE and CIGRE. He is the author of “The Science of the Sale” and the COO of Mike Beehler & Associates LLC.