By Bruce W. Radford, publisher and editor-in-chief of Public Utilities Fortnightly
[Reprinted with permission from Public Utilities Fortnightly.]
‘We’re aligned with our customers. That’s what has kept me going.”
—Sue Kelly, CEO, American Public Power Association
There’s no one in the energy industry – and I mean absolutely no one – who is more on-message than Sue Kelly, now winding up her first year as CEO of the American Public Power Association.
“Are you working for the good guys?” I asked her, when I interviewed her last month, at her invitation, at her new 11th Floor office digs in suburban Virginia, overlooking the main runway at Washington’s Reagan National Airport.
“In a word, yes,” she answered. “At least the better guys.”
“Our incentives are aligned with those of our customers. That’s what has kept me going all these years.”
And even during her prior lives, when she worked for the co-op sector at NRECA, the National Rural Electric Co-operative Association, in the late 1990s, and before that, when she served stints as a regulatory lawyer with both Crowell & Moring and Miller, Ballis & O’Neil, Sue has viewed her energy industry work strictly as a call to public service.
“Our guys live in the same towns as their customers. They go to church with them. They go to Rotary with them. When we say it’s community power, we mean it.”
And during the past year, CEO Kelly has embarked on what she calls her “World Tour,” going everywhere from Wisconsin, to South Carolina, to Georgia, Texas, Utah, and you-name-it. Even the briefest look at her “CEO Blog” on the APPA web site will give you a sense of her itinerary over the past twelve months. A charity chili cook-off at the firehouse in Westerville, Ohio. Lunch with 20 female TVA employees (including a boilermaker, an engineer, and a human resources vp) at the Watts Bar Unit 2 nuclear construction site in Tennessee. You get the picture.
“Since I became CEO, she explains, “I decided to accept basically every speaking obligation I was asked to do by a member, if I could physically do it.”
YET SOME HAVE BRANDED APPA AS “WHINERS WITH NO SOLUTIONS.” These critics see Kelly’s association as opposing virtually anything that hints at electric restructuring or deregulation – and in particular, the U.S. Federal Energy Regulatory Commission (FERC) and its vision of an industry dedicated more to competition than rate base, including competitive regional power markets for energy and capacity.
So I questioned Kelly about the recent decision by WAPA (the Western Area Power Administration), to join the Southwest Power Pool (SPP), a FERC-regulated regional transmission organization that now operates an eastern-style, “Day Two” competitive regional power market.
“Do you see them,” I asked, “as a traitor to your cause?”
“No,” she answered. “Our members support that decision. Actually, WAPA went through a very public process on this – both whether to join an RTO and, if so, which one?
And why didn’t WAPA go with MISO, the Midcontinent Independent System Operator?
“I don’t want to speak for WAPA,” Kelly noted, “but I believe they chose to go with SPP in part because already there was another federal PMA as an SPP member (the Southwestern Area Power Administration, or SWAPA). I think they just felt the culture there was more closely aligned, that co-ops and public power seemed to have a larger voice in SPP’s policies and governance.
“It RTO dating,” she added. “It was a better fit. Our customers support that. And if they’re supporting it, we’re supporting it.
“And I think we have been unfairly painted as RTO haters. We are not RTO haters. We recognize the benefits that come out of RTOs: Wide-area dispatch, situational awareness, a single transmission tariff.”
“But I do think we are pretty much capacity market haters at this point, through harsh experience.”
A half-dozen years ago, when Sue Kelly served as APPA’s General Counsel and VP for Policy Analysis, she joined with Elise Caplan, the coordinator for APPA’s Electric Market Reform Initiative, to publish an article in the Energy Bar Association’s Energy Law Journal with the somewhat tongue-in-cheek title, “Time for a Day 1.5 Market: A Proposal to Reform RTO-Run Centralized Wholesale Electricity Markets.” Among other ideas, that article called for the phasing out of centralized, bid-based locational capacity markets.
Kelly feels no different today. Her main gripe, as I see it, is that RTO capacity markets are one-sided. There’s a sell side (the generators) but there’s no true buy side – no true counterparties – because load-serving entities in the restructured states of the eastern RTO’s can no longer bank on a firm service commitment from their customers, as public power utilities still can.
“When they did retail access,” she explains, “they kind of broke the toys of the LSE’s in PJM and New England. They can’t make commitments anymore.”
Kelly recalled a watershed moment from FERC’s technical conference on capacity markets, held back in September 2013, when commissioner Cheryl LaFleur had asked Robert Ethier (from ISO New England) what he would do over again if given the chance, and he had answered that the problem stemmed from a load side that can’t make commitments.
“And so I [Kelly] came up to him at the break and said: ‘You realize we’re the exception to the rule. We’re the only counterparties left,’ and he [Ethier] answered, ‘Yes, I know.’”
BUT CAN KELLY STEER APPA INTO TOMORROW? On that score I reminded Kelly that the American public doesn’t much understand the difference between public power and the IOUs. Let Jay Leno stop a man or woman on the street, and he probably gets an earful something like this: “Utilities? They aren’t corporations, right? They aren’t businesses. They’re utilities.”
So I asked Kelly, “How do you give your members a way to define their brand in the eyes of consumers – to differentiate themselves from the Exelon’s and the Entergy’s of the world?”
“That’s important, yes, to re-introduce ourselves to the next generation. But it’s all wrapped up in a big hairball – in all the technological change that is going on: rooftop PV, plug-in hybrid vehicles, etc. This gives us an opportunity, if we can seize it.”
“And that’s one of the reasons that Toby [Tobias Sellier, APPA’s Director of Media Relations & Communications, who helped set up the interview] has pushed me to get into social media. I blog. I have a Twitter account. And of course I don’t have a boatload of followers – I’m not up to Taylor Swift country yet – but it’s growing. Our members are reading it.”
Yet those members already are singing in the choir. How do you bring the American consumer on board?
“First of all, we are actually in the community. You own us, through the medium of local government. Number two, we are not for profit. We don’t take 20 percent off the top and deliver it to shareholders. Number 3, we do electricity. We’ve done it for 100 years.
“But all of this requires us to seize the moment. That is one of my big messages, when I am flying around thither and yon. This is our moment of opportunity. We need to work on it.”