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The High Cost of Low Wages!

Explore the importance of adequately compensating utility managers in public power entities to optimize stakeholder value and maintain competitiveness in the industry.

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The High Cost of Low Wages!

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  1. The High Cost of Low Wages! Tennessee Municipal Electric Power Association July 11, 2019

  2. Why Public Power Exists • Initially, for-profit utilities would not provide service, but now Public Power is viable, competitive service provider. • While Public Power is not-for-profit, stakeholders are due a return for their investment. • Public Power stakeholders receive their return in payment-in-lieu of taxes, shared service allocations, and lower rates.

  3. Well-run utilities are measured by: • Safety: Employees and customers go home every day alive and with all their parts. Lost time accident rate. • Environmental Compliance: A utility that is prohibited from operating is worthless. • Reliability: Outages are of more concern to customers than rates • Cost/Rates/Profit/Stakeholder value.

  4. Tacoma Public Utilities 2014 Performance

  5. Henderson, Kentucky Municipal Power & Light 2016

  6. What is the compensation paid for these results? • 2019 Compensation study of 24 municipally owned joint action agencies and 28 rural generation and transmission cooperatives. • 2018 Compensation study of western and northwestern municipally owned, cooperative, and investor-owned utilities. • 2017 Compensation study of southeastern municipally owned utilities and rural cooperatives. • 2017 Compensation study of 21 municipally owned joint action agencies and 23 rural generation and transmission cooperatives. • 2015 Compensation study of comparably sized southeastern municipally owned utilities and rural cooperatives.

  7. 2019 and 2017 Compensation studies of municipally owned joint action agencies and rural generation and transmission cooperatives.

  8. 2018 Compensation study of western and northwestern municipally owned, cooperative, and investor-owned utilities excluding California.

  9. 2017 Compensation study of southeastern municipally owned utilities and rural cooperatives.

  10. 2015 Compensation Study of comparably sized southeastern municipally owned utilities and rural cooperatives.

  11. Who were the consumers for this talent in 1978?: Demand side of the equation. Investor Owned Utilities Public Power entities Rural Cooperatives Consultants Vendors

  12. Who are the consumers for this talent today? Traditional Investor Owned Utilities Rural Cooperatives Public Power: under acquisition fire from coops, IOUs, and private equity players. Consultants Vendors Independent Power Producers Independent System Operators/Regional Transmission Organizations Reliability Organizations Private equity investors KKR (Texas Utilities) McQuarrie (Puget Sound Energy; Duquesne Light; Central Louisiana Electric) Berkshire Hathaway (MidAmerican Energy; Nevada Power) Large industrial customers Google and Amazon?

  13. Supply side of the equation. Baby Boomers: about 78 million and declining; Generation X: about 50 million; Generation Y “Millennials: about 76 million; motivated to be rich and famous.

  14. Potential Solution: Aggregation • Missouri River: hires and dispatches line personnel. • Oklahoma Municipal Power Agency hires and dispatches line personnel. • ElectriCities of North Carolina manages the utilities of 4 member cities.

  15. How does public power not become a farm club for the rest of the industry? • Acknowledge reality. Municipalities have no service providing competitors except their utilities. Those utilities provide funding for other non-profit services. • Public service is not the sole domain of public power. Rural cooperatives are also consumer owned. • Equating other managers with utility managers defeats the municipality from attracting and retaining intellectual capital who can optimize stakeholder value. • Why is it important to pay the front line competitively, but not the intellectual capital that optimizes stakeholder value?

  16. If Public Power management was rewarded for improving stakeholder return, what would their communities receive?

  17. Questions

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