People power

Progress Energy’s Lloyd Yates talks to Marie Shields about the challenges of addressing tomorrow’s environmental issues while maintaining a high level of customer service today.

It would be understandable if Lloyd Yates were distracted. It’s the week before Hurricane Hanna is due to hit the Carolinas, and no one yet knows what the damage will be. Raleigh-based Yates, who is CEO of Progress Energy Carolinas, expects to have a lot on his hands in the coming days.

“Because of our service territory, Carolinas and Florida, we spend a lot of time preparing for hurricanes. We have a detailed process in place we’ve refined over the years, and unfortunately we’ve had a lot of practice. We’ve become quite adept at hurricane performance. We have specific timelines associated with when we call our meetings and logistics in terms of how we bring in supplemental resources. We tie in with the Southeastern Electric Exchange Mutual Assistance Program, so we’re talking to other utilities now, and we’re getting set up so that if the hurricane hits, we’ll have people in place and we’ll be ready to respond.”

In the end, the fallout from Hanna was manageable, with crews able to restore power to most areas within 24 hours. But it serves as an example of the sort of thing a high-level job in the utility industry can throw at you.

Luckily, Yates is well placed to deal with whatever comes along, having spent 25 years working in the industry, in everything from fossil generation to energy delivery and nuclear. As he explains, this varied background has helped to give him a broad perspective. “It’s enabled me to understand the business and to make balanced decisions about where we make the best capital investments, for example. I can even weigh in to helping solve technical problems from time to time, which I’m not sure they always want me to do,” he says, laughing.

The utility sector has seen a lot of changes since Yates first started back in the 1980s. It has gone from being a regulated business in the midst of building big, centralized nuclear plants and coal stations, to a deregulation focus and then into deregulation and consolidation, with several mergers and acquisitions taking place in the late 1990s and early 2000s. Now, as Yates points out, we’re dealing with the global economy. “Countries like China are building more power plants, and there’s a big demand for commodities, which are both impacting our business. There’s also been an increased focus on the impact of carbon legislation.

“This industry goes through cycles based on a lot of different things. At one point it was mergers and acquisitions impacting the global economy. Now there’s carbon legislation. Since energy is such a key item in people’s lives, we’re constantly refining the business and making it better. As a result of that, the industry has become more productive and more efficient.”

Customers first
One thing that hasn’t changed is the degree to which Progress Energy values its customers. “We believe our business won’t be effective without satisfied customers. Our employees understand that, and we understand that, and we make sure those customers are valued through how we service them on a day-to-day basis. For example, we ensure we respond to storms in an efficient manner to get our customers’ power back as soon as possible. Our customers rely on their energy 24 hours a day, 7 days a week, 365 days a year, and we believe we should be able to deliver that.

“In terms of our performance, the way we really satisfy our customers is operational excellence. In all parts of the company – our fossil and nuclear plants, our distribution, our transmission and customer service systems – people are really proud of what they do. We’re very process driven around low cost and high reliability, but we are also employee-oriented because we understand that our employees differentiate us from other companies. It’s their effort that makes us successful.”

This focus on customer service has not gone unnoticed. Progress was the first company in the utility industry to receive the J. D. Power and Associates Founder’s Award, in recognition of its dedication to continuous improvement in serving customers. And in 2006, the Edison Electric Institute presented the company with its Edison Award for outstanding achievements in operational performance, reliability and customer service, and environmental stewardship.

As Yates explains, “We’ve had CEOs and leaders in this company who have believed in customer satisfaction for a long period of time and have driven it throughout the history of this company. That’s what makes it strong; it’s a CEO priority. One of the things we don’t do is bring out a new initiative every year. We’ll set an initiative, set some targets, and then we’ll drive it forward, and that make take us five or six years.”

Happy birthday
July 13, 2008 was Progress Energy’s 100 th anniversary, and the company held a small celebration with its employees in the lobby of its headquarters, where Yates himself helped hand out the cupcakes. But the company’s main celebrations lay elsewhere: in keeping with its customer focus, Progress put together a plan to hold 100 service events throughout its territory. As Yates explains, the company decided to give something back to the community it serves. “From the original 100, we are now up to 182 community-oriented service projects. Our employees were really energized by that, and so was the community.

“We did projects with organizations like Food for the Hungry and Habitat for Humanity, as well as working in various boys’ clubs and Junior Achievement clubs – whatever the employees chose to do in a specific area, they went out and did. We also doubled the money we put into our Energy Neighbor Fund, to help people who are struggling to pay their heating and electric bills. Our 100 years was more about celebrating our communities and the people we serve as opposed to the company having big parties.” And Yates put his money where his mouth is, so to speak – he was personally involved in both the Food for the Hungry and Habitat for Humanity projects.

Going green
Environmental issues are currently top of mind for most utilities, and Progress is no exception, counting environmental responsibility as one of its core values. According to the company’s policy, it is committed to excellence in its environmental practices and performance, and endeavors to make environmental factors an integral part of its planning, design, construction and operational decisions.

“In the company we have a focus on environmental excellence, which we implement through a formal management system that identifies and addresses key risks,” says Yates. “Through our workforce, we manage those risks via compliance to specific environmental levels in our area, meaning that we look at improving our air quality, managing our waste streams, and preserving our natural resources as we put in new infrastructure.

“We’re also a leader in reducing emissions from our coal-fired plants. We put seven SCRs – selective catalytic reducers – on our coal plants. We put in five scrubbers or fluidized gas desulphurization plant facilities. Our plan is to make over $2.5 billion in environmental upgrades to our plants in the Carolinas and Florida. When we’re finished with all this, we’ll reduce our SO 2 and nitrogen oxides by 80 percent and mercury by 70 percent in the Carolinas, and we’ll reduce our SO 2 and nitrogen oxides by about 70 percent in Florida and mercury by about 50 percent in Florida.

With both presidential candidates supporting some form of cap and trade, any policies the new president puts in place could have a profound effect on the industry. According to Yates, any such policy should contain three things: “One, it should have a clear objective in reducing all major sources of greenhouse gasses and include all sectors of the economy – not just power plants, but also transportation and industry. Two, the policy should be achievable, meaning that we need to put the right investment in technology development to reduce greenhouse gasses as opposed to policy declarations without the available technology. Three, the policy needs to be affordable for people. We need to minimize economic disruptions and the impact on consumers by having effective cost containment measures in place.”

Battery powered
In terms of the technology required to meet its environmental goals, Progress is putting money in better battery storage, because, as Yates says, batteries will make alternative sources of energy like solar and wind more cost effective. “One of the problems with solar and wind is that they’re intermittent generation resources, and the generation doesn’t always coincide with the load demand. With effective batteries and storage capacity, you can store that energy and then use it when you need it.

“If we make more efficient batteries, it will help with plug-in hybrid electric vehicles, which are a key strategy to reduce our dependence on foreign oil. More efficient batteries that can be charged at night using our current system can then be used during the day to take people back and forth to work and to school, therefore offsetting global warming on two fronts.”

Efficiencies can also be made on the distribution and customer side, as Yates explains,

“We have a program called DSDR – distribution system demand response – where we want to put in about $250 million into our distribution system. This will make it much more efficient and create about 250 megawatts (in energy savings) on the system over the next five years. We’re working with local builders and developers on a home advantage program to help them make their houses EPA Energy Star quality. We provide a $400 incentive for meeting those qualifications, and then we’re proposing a rebate of $1000 for installing solar water heating systems on those homes.

“We also have a similar program with our commercial investors and governmental new construction, so if someone comes in and they want to put in a large commercial investment or governmental facility or process, we’ll work with them to make those facilities energy efficient.”

Better understanding
For residential customers, there is the Save the Watts program, with over 100 energy efficiency tips on the company’s website – simple things like washing in cold water or turning thermostats down two degrees. Yates says the hits on this website are going up significantly.

“We recognize that we need to help customers change their behaviors if we’re really going to be effective with energy efficiency. Save the Watts is a very cost effective way to do that. People are becoming more and more savvy with respect to computers, we’re seeing the usage really go up, and our customers are becoming more educated. The more they do that, the more effective we’re going to be as a utility in terms of driving energy efficiency. No matter how many programs we put out, if our customers don’t understand that they have a choice to use or not use those programs, then energy efficiency’s not going to work.”

One result of this higher level of awareness among customers has been an increase in what they expect of their utility. “They absolutely do expect more of us – we call it consumerism. We have something called CEACs – Community Energy Advisory Councils – where we bring people together in our community to give us feedback, and they tell us what they expect from us.

Thanks to all these efforts, since 1981 the company has reduced its energy usage by more than 27 billion kilowatt hours in its two service areas of the Carolinas and Florida. And through its Energy Wise Program, it will soon be able to remotely adjust air conditioning and other loads in customers’ homes and some strip heating in its Western Region, which is a winter peaking region. Customers get a $25 credit as an incentive to participate in the program, which Yates says should result in about 200 megawatts of reduction by 2017.

How do people react to the idea of allowing their electricity provider to have an influence on when they turn on their air conditioning or heating? Yates says it depends on the customer. “We’re having to do a lot of education with customers around allowing the company to control their loads, but over time, as electricity rates go up and customers become more educated about their own carbon footprint and how their use of air conditioning and heating systems impacts that, we expect this to become a lot easier.”

Emission-free
This increased interest in efficiency and environment has once again pushed nuclear power to the fore. There have been many questions raised about the safety and cost-effectiveness of nuclear power in the past, but according to Yates, if we’re going to address the world’s serious environmental concerns, nuclear has to be part of the answer.

“When we talk about our balanced solution, energy efficiency, renewable and alternative energy and state-of-the-art plants, any new facility is going to be nuclear, because nuclear is the only large scale, reliable technology that emits zero greenhouse gasses. Solar and wind are renewables, and they are key parts of our strategy, but if you think about how much electricity usage is projected to grow, you realize they’re not enough. In the Carolinas we add between 20,000 and 25,000 customers a year, and our customers are using more and more energy. Their lifestyles are very energy intensive. They now have cell phones and LCD televisions and computers and microwave ovens and air conditioning and heating, and they plug in their TiVo’s.

“People buy these things, and they don’t recognize how their energy consumption is going up. How do you meet that demand with just solar and wind, which are intermittent generating resources? Batteries will help, but if you want to avoid having a negative impact on global warming, unless you’re going to fundamentally change your customers’ ways of life, you’re going to have to have nuclear as a part of the solution.”

Nuclear power, of course, has the legacy of a poor reputation with the public, but Yates believes this is changing. “If you look at the performance of the nuclear industry in this country, it’s improved significantly over the last 25 years. I came into this business in the nuclear industry, and I’ve seen business performance improve significantly, whether it’s day-to-day operations, or outage management, or better cost control. People are gaining more confidence in nuclear, and are starting to understand that it allows us to maintain some fuel diversity and it’s emission-free.”

Talking about nuclear’s challenges, Yates says the main issue the first time around was cost. “We started out with relatively low costs, then after Three Mile Island, plants were being modified as they were built, and that drove costs up significantly. This time, the whole licensing process will be a lot smoother. There’s more modular construction, there are more standard designs, and there are more passive designs in the system. We’ve learned from our mistakes and this time around it will be better.”

Coming challenges
When asked about the coming challenges and opportunities in the utilities sector, Yates says, “I’ll start with the opportunities, because they’ll lead you right to the challenges. Our opportunity is that both our service areas are growing. We’re adding customers, and those customers are using more and more energy. As a corporation, you can’t ask for anything better than that. To be in two service territories that people are moving into, and they’re using more energy, building bigger houses and buying more electronics. That’s the opportunity.

The challenge associated with that is, how do you serve that load in this environment with volatile fuel prices, carbon legislation, and the fact that people want a constant supply of power, but no one wants the infrastructure associated with it? No one wants you to put a transmission line in their subdivision or neighborhood, nor do they want a power plant anywhere near their homes. How do we resolve those challenges? We go about it through energy efficiency, renewable and alternative energies and state-of-the-art plants with a focus on retrofitting our current fleet and building new nuclear.”

If Progress Energy can meet these challenges in the same efficient way it deals with the effects of hurricanes, the future of the company should be very bright indeed.

Lloyd Yates is President and Chief Executive Officer for Progress Energy Carolinas, responsible for management and strategic direction of the electric utility. He has more than 26 years of experience in the energy business, including fossil generation, energy delivery and nuclear generation. Yates was promoted to his current position in July 2007, after serving for more than two years as Senior Vice President in Energy Delivery.

J. D. Power and Associates Founder’s Award
The Founder's Award is a discretionary award presented at various times by the founder of J.D. Power and Associates, created to recognize individuals or companies that demonstrate dedication, commitment and sustained improvement in serving customers. In the 40-year history of J.D. Power and Associates, only 20 companies or individuals have previously received the award. Progress Energy, the 15th recipient, was the first company in the utility industry to receive the award.

Progress Energy summer of service

• 182 projects completed across the company’s states
• projects scheduled and completed in every region of its service territory
• 2500 employees devoted 10,000 hours to the completion of these projects
• strong focus on projects to ensure safety and development of children and feeding the hungry