In my many posts on energy commenters make the point over and over again that I am too gloomy and don’t offer solutions. My lack of optimism comes from actually KNOWING how the BUSINESS of utilities works, which is independent of the technology, operations, or dreams of a “nuclear renaissance” or “alternative energy” or anything else.
There are only a few utilities that actually matter in the USA. There is Southern Company (NYSE: SO), which benefits from some old-school regulation in the South that actually encourages investment in base-load generation, and is currently building 2 nuclear units at the site of an existing nuclear plant at Vogtle. Another one that does matter, because of its scale (enough market cap to borrow to fund a nuclear plant) and the fact that it already is a big nuclear operator, is Exelon. And an interview with Rowe, the Chairman, explains in his own words, better than I ever could, how doomed we are if any sort of “new thinking” is needed to get us out of the impending base-load crisis.
Here is the dynamic leadership style of Rowe, in his own words:
There are probably only four or five real decisions I make in a year. There are an awful lot of things I just quietly ratify. I find it very hard to get officers to let you in before the food is cooked. Their natural tendency is to want to bring it to you all packaged. By then all you can do is say yes or no. And you usually say yes.
Awesome. And here is a Q&A about hiring, where he admits he isn’t very good at it:
Q. Let’s shift to hiring. How do you do it? What qualities are you looking for? A. Well, it’s not one of my greatest strengths
Most importantly, look at the cutting edge thinking he brings to the question of what he’d ask in an interview:
Q. If you could interview somebody for only five minutes and ask just two or three questions to check for this sense of responsibility that you touched on, what would you ask?
A. I’d probably ask them if they’d seen the old Gregory Peck movie of “Moby-Dick” where the Quaker sea captain says to Ishmael, “Are you man enough to pitch a harpoon down a live whale’s throat and jump after it?” That’s probably what I’d ask. And Ishmael of course gives the perfect answer. He says, “Well, I am, sir, if it be absolutely indispensible that I do so.”
Really? This is the type of question you’d ask – about Moby Dick? I can’t make this stuff up.
Cross posted at LITGM
What’s Rowe’s first name?
If one’s management style is based on extreme decentralization, as Rowe’s apparently is, then having good hiring skills becomes even more important than usual.
I would probably have chosen a different quote from Melville. “I will have no man in my boat who is not afraid of a whale!”
I wonder what will happen when these converging trends finally meet ? Spending, failure to provide enough energy resources, over-regulation of business to the point of paralysis and irresponsibility of the governing class. I feel sorry for my kids but a couple (three, actually) voted for Obama. I really feel sorry for my grand kids. I feel just a bit like Sir Edward Grey, who famously said, “”The lamps are going out all over Europe. We shall not see them lit again in our time.” That was the end of an era of peace and prosperity.
This is the end of another. It took less than 50 years to wreck the economy.
Carl, is Southern Company related to Wendell Wilkie’s company in the 30s ?
Yes that is the same Southern company as Willike. I didn’t know much about utilities back in that era and had to find it out on Wikipedia :) Rowe’s name is John Rowe click on the article to read it directly.
I wouldn’t expect to find dynamic management at public utilities. After all, even today, they face very little actual competition and their corporate culture is entirely based around easy, predictable, if somewhat low profits. The major talent of public utility execs is schmoozing the government.
If did put a dynamic, hard driving, hands-on-exec like, say, Steve Jobs, in charge of a public utility, he’d shoot himself within a year out of shear boredom.
You need some kind plodding but determined tortoise-like person to run a heavily regulated business like a public utility.
I also don’t fault him for the number of decisions he makes a year. It’s not the number but criticality and quality the decisions. Back in the days of sail, the navigator didn’t make many decisions but the ones he did make had to be correct or everyone died.
Good point on the number of decisions. What I found insanely troubling is the fact that he wasn’t worried that he wasn’t DIRECTING the majority of decisions, that they came to him basically already done. He isn’t putting his stamp on the organization… he is making decisions based on whatever bubbles up.
From the people he pretty much said that he hired badly.
Unless they gave him the right Moby Dick reference.
I suspect Rowe is giving us a bit of the “oh shucks” treatment here.
Yes, electric utilities are VERY conservative businesses. First, that’s what their customers want – juice whenever they demand it. Second, they live off their long-term capital investments in infrastructure. The technology is well-proven and not galloping along in leaps and bounds. Investments can easily stay in productive service for a 100 years.
One of my early insights as a new employee of a large West Coast was how like the Communist Party of the USSR the organization was. No competition, no change, just a “foreign policy.” Complete control by the existing management of the Board of Directors and of internal succession. Analog organizations have similar behaviors.
Let me also note that Exelon is one of the toughest companies to deal with. They have a dog-eat-dog culture and play very rough. No one likes to work with them but they are a huge nuclear market so try we must.
Carl, I would recommend reading a biography of Wilkie. In 1944, FDR considered offering him the vice-presidency and, in fact, mentioned it. Wilkie declined but it is an interesting speculation, cut short by the fact that Wilkie died in late 1944 before the election. In 1940, Roosevelt was quite concerned about him and the war probably saved Roosevelt.
While I don’t know his particular remuneration, I expect it to be comparable to the CEO’s of other large corporations. However, it is obviously a different type of job.
This is an example of the Directors pay committees not doing their job, IMO. Big company revenue == Big pay.
Big Difference.
All the committees look over the fence at their direct competition, and at other companies of similar size to determine pay, perks, and parachute size… How wrong.
If I had done my job the way this fellow did, I don’t think I would have earned my pay.
I watched, sort of up close, how AT&T turned itself into a gaunt skeleton trying to compete with the Worldcom that was lying through its teeth about its ROI. The company was gutted to get to the rate of return Worldcom reported. The ‘C Dot Mike’ they imported to perform a turnaround took the money, and did little else. But he got his perks and parachute.
I swear it is a good old boys club that determines who gets on boards, and how much they will pay. Too bad the CalPERS type fund managers go along with it, and their pension fund votes overwhelm the individual stockholders influence.
Sorry, as nice as he seems, his performance does not whelm me, much less overwhelm me.
tom
“I came here to hunt whales not my commander’s vengeance. How many barrels of sperm oil will that vengeance yield? What will it fetch on the New Bedford market?”
Even such worthy goals as Clean Energy and Climate Change Mitigation, which I know that John Rowe believes in — I know this because he told me so over at Wisconsin State Historical Society — such goals ultimately need to be judged in terms of dollars and cents.
Why? Can you put a price on the Environment? Yes you can, and indeed you must, because we have no other way to measure things. A dollar spent on subsidizing some pie-in-the-sky solar project is a dollar not available to develop, say, a more effecient natural-gas fired turbine.
Rowe has earned his position by buying up nuclear power plants all across the country. Exelon is the Big Kunha of the US nuclear business.
So he’s the VERY BIG DEAL maker.
The day-to-day stuff he leaves to minions.
He did one major deal, PECO, to double down on nuclear. The rest of the nuclear plants he inherited from ComEd.
He hasn’t built anything. He is just sitting on the assets, waiting until they are the only game in town, due to shutting down coal plants. Natural gas from shale has delayed the day of reckoning for a few years because now natural gas sets the benchmark price for energy and at around $4/unit that is not a bad price.
If at some point natural gas rises those nuclear plants will be worth an unbelievable amount.