AMP Leadership on Change in the Industry11 min read
The electric utility industry of 20 years ago typically evolved because of policy changes. Policy change was largely deliberative and took place over time — often over many years, meaning there was time to influence the process.
Policy is still very important, but the disruptors and innovations impacting our industry today are heavily influenced by increasing customer engagement and the advent and adoption of new technologies. Those are coming at a much faster clip than previous changes
The level of customer involvement today is higher than it has ever been because of the volume of information available to customers both large and small, as well as the tools that make customer engagement more readily available. Today’s customers want to have more to say about what their power supply portfolios look like and the actions their energy providers take.
As new technologies are introduced and the cost of new and existing technologies come down, utilities are working to integrate new electric vehicles and distributed energy resources, along with considering how to leverage data analytics. Utility leaders are also making sure that their rate structures support critical utility functions.
What does this mean for public power systems and their leaders? It means challenges and opportunities that can generate both excitement and a bit of trepidation.
I’m a firm believer in the public power business model and the power of joint action. The close connection that public power systems have to their customer owners and public power’s foundational attributes of local control, affordability, reliability and stewardship all fit well with how the grid is evolving. While AMP works to deliver on our core mission to serve Members through public power joint action, innovative solutions, robust advocacy and cost-effective management of power supply and energy services, we must stay on top of new developments to help harness those that make the most sense and deliver the most value to customers.
We also must not lose sight of the impact of policy changes. The policy debates taking place in state legislatures, in Washington, D.C., and in the offices of the regional transmission organizations are intertwined with the industry disruptors.
In addition to the member-driven Focus Forward Advisory Council, AMP has several internal cross-departmental teams focused on exploring opportunities that could lead to the development of new resources and programs to serve our members.
The theme for AMP’s 50th Anniversary Celebration is “Stronger Together,” which is a fitting tagline to sum up AMP’s strength — it’s our members, Board of Trustees, employees and partners.
AMP benefits from a team of smart, dedicated and member-focused employees. To that end, we asked AMP’s executive management team to share their perspectives about change in the industry.
What changes do you see coming to AMP in the next five years?
Branndon Kelley, Senior Vice President of Technology and Chief Information Officer:
Technology is going to greatly change the industry in the coming years, which will require AMP to change in turn. Some of these disrupting technologies have already changed the way a utility handles distribution — things like battery storage, rooftop solar and other distributed energy resources. As their capacity and lifespan continue to grow and prices continue to drop, we will begin to see more changes to the traditional generation delivery model.
Perhaps more importantly, I think data is going to be key with the advancements in technology. On one hand, utilities will need to know where disrupting assets are located; what their capabilities are; what their capacities are; how they are connected; who is using them; and when they are using them. On the other hand, customers of all types will want access to data to make more informed decisions.
Terry Leach, Vice President of Risk and Chief Risk Officer:
In recent years, AMP has been focused on project development and management, and providing our members with new opportunities. In the next five years, AMP must shift focus a bit to develop and utilize more innovative methods and technology to provide our members with better service.
I strongly believe that AMP will be more involved with helping our members to solve some of the issues that are undoubtedly approaching. That could mean working with them on behind the meter resources, purchasing new transmission assets, advocating for quality changes through the Federal Energy Regulatory Commission (FERC) and the regional transmission organizations (RTOs), or assisting them with distributed energy resource development.
Lisa McAlister, Senior Vice President and General Counsel:
There are two issues AMP will likely be engaged in over the next five years. The first is making sure that the transmission planning process becomes as open, non-discriminatory and cost-effective as possible. That is going to be a tall order, but we are already making progress. The second is figuring out what resource adequacy should look like as we shift toward renewable and distributed generation, and who makes the determinations about reliability. Currently, there is a divide — between both state and local governments, and the federal government and regional transmission organizations — on that issue. We are only at the starting point for these discussions, but I can see this playing out over the next five years.
Additionally, with a new chair at FERC and new leadership at PJM Interconnection (PJM), we are going to see more of a focus on carbon reductions, distributed generation and transmission planning. I am hopeful that we will see a more collaborative, transparent and inclusive approach to addressing those issues under new leadership.
Adam Ward, Senior Vice President of Member Services and External Affairs:
AMP will continue to evolve over the next five years in response to a changing industry and customer expectations. Technology, distributed energy resources, including solar and storage, and electric vehicles continue to become more affordable and present opportunities for member growth. Providing members with innovative solutions, services, education and guidance designed to capitalize on these opportunities will be a priority.
In addition, engagement at the federal, state and local level will be important as we navigate the increased focus on carbon reductions, transmission planning and other legislative priorities that could directly or indirectly impact AMP or our membership. Promoting the benefits of public power, increasing awareness of our policy positions and collaborating with partners and stakeholders will best position AMP and our members for success.
What do you see as AMP’s biggest strengths?
AMP’s greatest strength lies in the roots of our creation, and that is the idea of joint action and the strength of the collective voice. Independent action can, at times, be effective, but when we come together, we have this long history of solving complex problems that we couldn’t have dealt with alone. No matter the problem — be it legislative, regulatory, financial, technological or power supply — our capacity for joint action is our greatest strength.
The second greatest strength that AMP has is its people. Our staff is small, but mighty; we have less than 200 hundred people here, but we have the depth of expertise of a much larger organization. Our individual member utilities have access to that expertise at a fraction of what it would cost to have in house.
AMP’s greatest strength has and will always be its people, and that includes AMP staff and the employees in our member communities. Our members have incredibly dedicated and hardworking employees, from lineworkers to village administrators, and AMP’s staff is just as dedicated. It is that talent that allows us to consistently punch above our weight class.
Tracy Reimbold, Chief People Officer and Vice President of Administrative Services:
Our biggest strength is the ability to bring together so many communities of different shapes and sizes. We grew from membership and maintained strong roots, not only between AMP and our members, but between member communities and the public power community across the country. From legislative lobbying to power supply planning, having so many communities working in harmony creates a stronger position for the group. When we come together, it gives member communities more options and the capability to become a part of a larger synergy, no matter the size of the community. That makes our joint action efforts stronger and more impactful.
Pam Sullivan, Chief Operating Officer:
I think that AMP’s biggest strengths are our knowledgeable and innovative staff that are committed to public power’s mission, a talented Board of Trustees that is open to providing the necessary resources to pursue new endeavors and a group of members that are dedicated, forward-thinking and engaged.
Moving forward, I think that our members will see much more competition on numerous fronts, including from other utilities, third-party companies and distributed energy resources. Collaboration and joint action are going to be key — those strengths working in harmony will be more important than ever.
What are some of AMP’s potential opportunities moving forward?
Rachel Gerrick, Senior Vice President and General Counsel:
AMP has an opportunity to enhance our value to members. That could mean placing an increased focus on cost control, whether our operating costs or the costs of transmission or capacity, or it could mean helping with technological changes, such as providing information on and access to advanced metering infrastructure. Whatever the effort may be, our priority will continue to be members’ success and helping members to be in the best position possible to face the challenges ahead.
Marcy Steckman, Senior Vice President of Finance and Chief Financial Officer:
AMP’s greatest opportunities lie in finding innovative approaches to power supply that will help members to meet their needs while also addressing issues with their rates. I think there has been a lot of pressure on members in this regard, and we should make a strong push for more creative and cost-effective approaches to help the members meet their ongoing power supply needs. Obviously, this issue varies from geographic location to geographic location, but even when things are good, AMP will continue our aim to make them better.
This industry is moving extremely fast — too quickly for any one individual community to be able to keep up on all the new technological, regulatory and policy changes that are on the horizon. That is why I think collaboration and joint action are vital to keep moving forward. As the focus on electrification, decentralization, digitalization, democratization and decarbonization continues, AMP has a great opportunity to help member communities present a stronger voice and generate economies of scale. Our role will be keeping member officials informed and up to date on all those rapid changes, while also providing them with the necessary organization and opportunities to address those changes.
I also believe that we have some great opportunities in transmission. AMP will continue with our role of advocating at the federal and regional levels for transparency, cost competitiveness and regional transmission planning as we work to mitigate the ever-rising transmission costs that our members face. AMP Transmission (AMPT) also provides an avenue to bring cost-effective transmission and related services to enhance reliability and ensure comparable service for AMP members.
As the power sector is adapting to technological advances, decarbonization efforts, changing customer expectations and regulatory uncertainty, AMP and our members have an opportunity to enhance and improve services. Providing members with guidance, education, tools and programs that can take advantage of these changes through economies of scale, industry leading expertise and the experience of our members is a priority. Robust engagement with policy and regulatory officials at the state and federal level will best position membership and AMP for the future. In the past few years, existing AMP programs have advanced and new programs have been developed in response to evolving expectations of members and their customer-owners. These changes combined with the development of new programs and services will be excellent opportunities to increase customer service and support member systems in new ways.
What changes do you see coming to the industry over the next five years?
Paul Beckhusen, Senior Vice President of Power Supply and Energy Marketing:
The biggest change will be the continued penetration of renewables in the energy market as consumer demand increases. That brings with it several challenges in managing changes to distribution and generation systems and questions involving things like capacity needs. We have already seen how, in areas where renewables are a higher percentage of the generation portfolio, weather can greatly impact the availability of renewable generation, resulting in higher prices and even reliability issues. Tackling these challenges will be AMP’s focus in the coming years.
I can’t really speak to a specific technology, but I do think that innovation is going to be a huge part of what shapes the industry in the next five years. I think the new technologies that currently exist at the outer edges of our industry will begin to truly impact the average customer. It will open up interactions between our members’ customers and outside companies, and it will impact what our members’ customers expect from their utility.
I also think we will see some long-lasting changes in the legal world because of changes made during the COVID-19 pandemic. For example, rather than require a room full of people, including a court reporter, witness, attorneys and more, to travel from across the country amid a pandemic, depositions have been taking place on various online platforms. I think it has proven to be a better experience in many instances and will continue to be utilized moving forward. That is not to say that in-person depositions will never occur again, but I think it has proven that, even in extremely complex, technical depositions, it can work. Moreover, the time, effort and expense saved have shown to be very real benefits of that technological enhancement.
Scott Kiesewetter, Senior Vice President of Generation and Transmission Operations:
A significant change in the next five years will be the continued expansion of and rising demand for renewables, which will have an impact on the market. As an early adopter of renewable power generation, AMP has an impressive diverse portfolio, which includes several renewable projects. There will be continued growth in the demand for renewables and AMP will continue seeking innovative solutions.
Ideally, we will see an end to the planned 5.7 percent reduction in subsidy payments from the federal government that started in 2013. These are currently expected to continue at least until 2030, and they apply to the Build America Bonds (BABs) and New Clean Renewable Energy Bonds (New CREBS) that AMP elected to receive as a direct credit subsidy for bonds issued to fund the construction of Prairie State Energy Campus, the Meldahl Hydroelectric Plant and the Phase I Hydro projects. The reductions directly result in an increase in the cost of power to the project participants, so if the sequestration reduction rate finally ended, it would effectively reduce the cost of the power from those projects.
Additionally, we would like to see repeal of a law that went into effect in January 2018, which forces issuers of tax-exempt bonds to accept the market conditions in a 90-day current refunding window. Prior to its passage, the tax-exempt bond holders utilized the advanced refunding as a financial management tool to save interest cost. Now, there is not an opportunity to refinance for debt service savings when interest rates are more favorable prior to that 90-day window. Repealing these items would have a strong impact on reducing costs going forward.
How has the COVID-19 pandemic affected AMP/ the industry and what permanent changes will occur as a result?
The pandemic has forced contingency planning back to the forefront of our minds. Many within this industry have had contingency plans in place, but the COVID-19 pandemic forced us to put them in motion. It has proven how important it is to be prepared.
Going forward, a more decentralized approach with staffing and operations will be important to ensure that “all of your eggs are not in one basket.” I do not think that observation is unique to AMP, and I think many of the changes we have seen in the industry will remain in the future.
From the generation side of things, the pandemic has really put an increased focus on the essential employees who work in our facilities. Regardless of what was going on with the pandemic, we needed to ensure the continued operation of AMP’s generation assets. Doing that requires people. Figuring out how best to protect the health of our employees and secure our generation facilities has really been a dynamic process. Since the start of the COVID-19 pandemic, we have reviewed some of the practices and activities that have occurred at our generation facilities historically and reassessed how we might better handle them. We now know that some of the meetings and activities that occurred in these facilities were not critical and AMP made policy changes to reduce them. I anticipate several changes sticking around to prevent unnecessary exposure of critical employees and keep them safe moving forward.
I think the overall biggest change that we will see because of COVID-19 is in the workforce. People have experienced remote work, and now they want to work from home. I think in some cases it can work, in others it cannot; but we need to be more flexible to attract and retain staff.
From my perspective as chief risk officer, the biggest change will come in planning. Before the pandemic, I would say that most organizations were not really prepared for something like COVID-19. Four or five years ago, when we were building the crisis management plan, we would often talk about pandemics as if something to this degree could never happen. Yet, four or five years later, here we are. From this point on, we must be prepared for a future pandemic and have better plans in place, which are the exact things that have been happening over the past year.
From an AMP perspective, the COVID-19 pandemic has changed some of the ways that we think about our workforce. Throughout this ordeal, our focus has been to keep our employees healthy, which is why we transitioned to a remote workforce. Now that we are back in the office, there are new issues that we need to consider: How do we help employees to feel healthy and safe in the office? Do we expand our workforce capabilities? The decisions we make and the way we adapt moving forward is going to be very important if we want to attract and retain employees.
I am encouraged by the insights provided here and, while it is impossible to know exactly where our industry is heading, public power is in a strong position to drive innovation and adapt to change.