Power to the public

Having undergone dramatic shakeups over the last few years, the electric industry still faces challenging times ahead. Mark Crisson speaks to Power & Energy about his new role as CEO of the American Public Power Association (APPA) and how he intends to address some of these vital issues.

Representing over 2000 of the US’s community-owned electric utilities, the American Public Power Association (APPA) has been a crucial central point for the sector since 1940, helping to advance the public policy interest of its members – and consequently, their consumers. Ensuring the reliable delivery of clean, efficient and affordable electricity from its members is high on its manifesto

“It’s a challenging and somewhat uncertain time for the industry,” admits Mark Crisson, new head of the American Public Power Association and the man charged with leading the industry through a tumultuous period. “Restructured wholesale power market issues, rising commodity prices, workforce challenges and growing environmental requirements are making it increasingly difficult for our utilities to provide clean and reliable energy at the lowest possible price.”

The restructuring that has taken place in the electricity industry has certainly brought with it some problems. One of the most disruptive has been the fact that the regions served by regional transmission organizations (RTOs) now have restructured wholesale power markets that use an auction to set the price for all power at a “market clearing price”. Crisson is concerned about the effect this is having. “Since this price is established by the most expensive power plant needed to serve the load in a given time period, it raises the price for all power sold well above that which it actually costs to produce,” he says. “This effort was intended to promote competition and benefit consumers, but instead it has increased costs to electric consumers well above what other regions are experiencing.”

To mitigate the effect of this restructuring and in an effort to reduce prices for customers, on December 17 last year APPA joined 40 consumer advocacy, business and public power organizations and went to the Federal Energy Regulatory Commission in the hope they could take a closer look at markets run by regional transmission organizations. The ultimate aim is to ensure prices are “just and reasonable” by federally mandated standards.

Brain drain
Estimates suggest that about half of the 400,000 employees in the electric utility industry will be eligible for retirement over the next five to 10 years. Deregulation has resulted in utilities reducing their line staff by 25-30 percent whilst worker training programs have also been scrapped by many organizations in an effort to cut costs. Consequently, this has had a dramatic effect on an industry already suffering from brain drain, with a predicted shortage of highly skilled workers inevitable. Take for instance Duke Energy, which expects over 30 percent of its workforce to be eligible for retirement within the next three years and 50 percent of the workforce to leave by 2016. The valuable skills and experience brought to the industry by these people will effectively be lost forever. Retraining will be a long and laborious process – for instance, it can take five years for a lineman to reach journeyman level, and 10 years to become a fully rounded lineman. Because linemen spend a considerable amount of their career in the elements, they tend to leave work by the age of 55 or 60 and the industry has found that there are no new people coming up through the ranks. A huge skills shortage looms as the workforce, dominated by baby boomers, reaches retirement age.

Many institutions have been putting measures in place to try and buck the trend. One such scheme is a power plant worker training program at the West Virginia State University, funded by American Electric Power; meanwhile, many other utilities have joined the Energy Provider Coalition for Education, which provides online training for a number of occupations in the utility industry. Courses are designed by the industry and for the industry. Online learning is deemed attractive to young people and it is easily accessible, allowing flexibility for students. Attracting new skills workers is essential – particularly as Energy Information Administration expects that electricity consumption is expected to increase by 49 percent by the year 2025.

APPA has been concerned about this skills crisis and has been attempting to improve the situation, publishing a report entitled The Aging and Retiring Work Force: New Challenges for Public Power back in 2003. “This report revealed some startling information about looming retirements – specifically in the area of skilled trade workers such as lineworkers,” recalls Crisson. “Our primary concern is that our utilities have an adequate work force to provide continuity and reliability to one of our nation’s most essential services. This year, we’ve formed an internal taskforce with the goal of ramping up our efforts on this front. APPA is committed to arming its member-utilities with the tools they need to effectively recruit for the essential electric utility positions they need to fill.”

Energy efficiency
APPA takes a prominent role in encouraging energy efficiency amongst its members. According to Crisson, public power utilities are in a unique position to promote energy efficiency and demand-side management due to the fact that they are all working towards a common goal – improving services, rather than profitability. “As not-for-profit, community-owned electric providers, they are driven to provide the best value to their customers,” he explains. “In today’s environment, emphasizing energy efficiency is not only good stewardship; it is also very cost-effective relative to generation alternatives. APPA utilities across the country are setting and meeting aggressive load reduction goals because, as far as they are concerned, it’s good business.”

Overall, Crisson believes utilities have been making good progress in adapting their strategies and promoting more efficient, ‘greener’ practices. In fact, utilities have been particularly proactive in encouraging customers to install more efficient lighting, appliances and equipment through the introduction of rebates and incentives in reward for their adoption. “Many APPA members are offering low or no-cost energy audits to help homes and businesses assess specific actions they can take to be more energy efficient; the bonus is that it helps them save on energy bills,” says Crisson.

It’s a concept that has long been at the heart of the APPA philosophy. Since 1980, the organization’s Demonstration of Energy Efficient Developments (DEED) program has been encouraging activities that promote energy innovation, improve efficiencies and lower costs of energy to public power customers. DEED is the only R&D program to be funded and used by public power companies and, over the years, the program has provided nearly $6 million in grants and scholarships to help utilities improve their efficiency by introducing innovative technology and best practices. One notable DEED project was the rollout of broadband over power line (BPL) technology, which was introduced as a pilot scheme in the City of Manassas in 2001 and was so successful that it became the first large-scale commercial BPL deployment in North America. The technology enables customers to access the internet from any electrical outlet.

Another project supported by DEED was that carried out by Waverly Light and Power and the University of Northern Iowa to develop BioTrans Soy Oil. The organizations carried out extensive testing on soy-based formula oil and developed a non-toxic, biodegradable, environmentally benign transformer oil. Now sold by Cargill, Inc. as Envirotemp FR3TM fluid, the oil has been a particular success and is available worldwide.

In addition, every DEED member utility recently received a complimentary copy of Reliability Software 5.1. Developed through a DEED grant, this technology enables utilities to track their electric distribution system’s reliability. The software became an instant hit due to its simplicity.

Changing the rules
Crisson considers a greater push towards improving energy efficiency as crucial and, as a result, feels that it is in the interest of the industry to closely follow any developments that take place in terms of legislation. “The issue of greenhouse gas emissions is an economy-wide problem,” he explains. “Curbing these emissions will affect the costs of goods and services across the economy. From our perspective, it’s important to take a close look at the economic – as well as environmental –ramifications of climate change legislation. It is also important to maintain a diverse fuel supply in the power industry for both economic and reliability reasons.”

In fact, APPA would rather see a carbon fee or tax as opposed to a cap-and-trade system coming into force. Crisson favours the introduction of a straight fee that could be simply administered and imposed equitably across the economy. “The revenue generated could be used to develop technology aimed at assisting the industry in meeting the emissions targets on schedule as well as provide a means to assist consumers in coping with the costs of climate change legislation,” suggests Crisson.

Supporting the continued promotion of energy efficiency practices is a key criteria for APPA. The organization recently bolstered this effort by introducing a guidebook titled Easy Steps to Energy Efficiency: What Works for Public Power. Its purpose is to provide advice for public utilities on introducing energy efficiency programs or improving existing ones, and to highlight successful programs in APPA member communities. “We plan to continue to provide our members with the tools they need to customize local energy efficiency programs,” says Crisson.

Ensuring that members comply with the new mandatory reliability standards contained in the 2005 Energy Act is also a priority for APPA, and it is working with industry associations and regulators to achieve this. “We have the opportunity this year to assist the North American Electric Reliability Corporation (NERC) in crafting these new standards, and we are working to ensure our members are a key part of this process,” explains Crisson. “We are also challenging our members to strive for our Reliable Public Power Provider (RP3) designation. Through the RP3 program, public power systems demonstrate proficiency in four disciplines: reliability, safety, training and system improvement. In 2007, 49 utilities earned recognition from APPA for providing consumers with the highest degree of reliable and safe electric service.”

Challenging times are likely to continue in the electricity industry over the next 12-18 months. “The rising cost of commodities is placing significant pressure on construction costs for all infrastructure, which will put further upward pressure on electric rates, particularly in high growth regions,” predicts Crisson. “Climate change legislation will continue to be front-and-center in Congress, and our industry will be challenged to expand the scope of the debate to include impacts on the consumer and the economy. There will also be continued regulatory and political pressure to expand the development and use of renewables and energy efficiency, and this may be a requirement in many cases before regulators agree to permit any base load generating plants. And as pressure on power prices continues to grow due to inflation and regulation, there will be increasing consumer pressure to address the problems described above in the restructured wholesale power markets.”

What is DEED?
DEED is APPA’s own research and demonstration program dedicated to increasing efficiency, reducing costs, investigating new technologies and services, and improving processes and practices to better serve utility customers. Begun in 1980, DEED pools its members’ resources to invest in the future technologies and best practices of the electric industry. A 12-member board of directors governs the program.

Quick facts
470 projects funded to data
$6,232,890 awarded in project funding to DEED members
607 DEED members
27 active grants and 10 active scholarships
85 percent of DEED dues directly funds research projects

Member benefits
DEED is a potential funding source for utility projects through DEED grants, a tool for student assistance at member utilities through student research grants and internships, a knowledge resource for all utility departments, and an avenue towards customer and peer recognition.