As senior vice president and COO at Puget Sound Energy, Gary B. Swofford oversees the operations of the utility, including energy delivery, customer service, corporate planning, facilities and information technology.

After joining Puget as an engineer in 1968, Swofford accepted various engineering and management roles, and in 1980, was appointed director, Conservation and Division Services. He became vice president in charge of Rates and Customer Programs in 1986, led customer operations beginning in 1994, and assumed his present position this year.

Swofford graduated from the University of Washington and completed extension programs in engineering and utility management at Stanford University and the University of Idaho.

Puget Sound Energy (PSE; Bellevue, Washington, U.S.) was already moving toward outsourcing more routine work. Overseeing a process team, COO Gary Swofford took outsourcing one step further. Swofford speaks frankly with T&D World's Editor in Chief Rick Bush about the difficulty in reducing staff, shifting long-term employees and dealing with contentious union issues. He also talks candidly about first response and storm restoration — critical issues for any utility considering radical reconstruction.

T&D World: PSE doesn't look like a traditional utility any more. Why the radical change?

Swofford: We saw the industry clearly going down the path to be deregulated, and we asked what would it take to be successful in a changing environment. We needed to deliver on low cost and best service. We were already on the low-end, but everybody wants to move to the low-end. Our goal was to be the lowest, not low, and still give good service. That was and is absolutely paramount in our minds.

T&D World: How did you get where you are today?

Swofford: When I was running operations in the mid-1990s, we were already moving more to contracting, driven primarily by efficiency of contracting. In the mid-'90s when the industry was moving to deregulate, we brought in one of the larger consulting firms and asked, “When deregulation hits, what do we need to become?” Their advice: “Look at the work you do and do well, and keep doing it. What others do better, let them do.”

We took that advice and looked for the area we could have the most impact in. We decided to take the contracting piece and move it out to the end game. We started talking to potential service providers — 11 at first — and asked, What elements do we need to combine to make this most efficient.” The answer came back: “Let us take a project from beginning to end without a lot of handoffs.” We looked at blocks of crew work and saw that we could gain efficiencies by outsourcing engineering, permitting as well, and reducing the handoffs the contractor required by bundling the work.

Now, I'm talking routine distribution work — hooking up a customer, setting a pole, installing a transformer — not major projects like building a substation or transmission lines.

T&D World: So you outsourced engineering?

Swofford: Most of the work needs a drawing or a plan. Engineering might be too strong of a word, but someone has to estimate the job and get a drawing to the field.

T&D World: How many non-union jobs did you have to eliminate?

Swofford: We let go of 50 to 60 positions, and a good number of these people wound up at Potelco. These folks were doing engineering permitting, processing jobs before they were handed to the crew, material specifications — all that kind of work.

T&D World: What about answering customer calls?

Swofford: Calls still come to us. We take the order and the services provider gets it instantaneously.

T&D World: How is the PSE culture different?

Swofford: You go through a period of mourning for the people who left. Several hundred were here Friday and gone Monday. I felt it, and it was felt throughout the organization. Now, after eight months, the ones that are here are back to work. The atmosphere is good — not a lot of grousing or complaining, more of a “here is what we need to get done.” I was surprised by that. Of course, the work is different. Now the work focuses on inspections, standards and specifications. It's still pretty new.

T&D World: How did you pull it off?

Swofford: In two stages. We have gas and electric service providers. We worked with the United Association of Plumbers and Pipefitters and were able to move this group over quickly. The gas phase was completed pretty quickly, in six months.

In phase two, it took a little longer to get agreements in place with the electrical workers. It took two years from the first meeting until we reached an agreement. I always felt we would get agreement, we knew it was in everybody's best interest. Ultimately, I felt it made too much sense — we would get it done.

T&D World: Would you say your biggest hurdle was internal or external?

Swofford: The biggest hurdle was working out with the unions the way the work would be done. We had to show how this would benefit employees and the company. That took time. We had to respond to stories in the paper. The PUC's attitude was, “We regulate rates, tariffs and services. How you accomplish your work is your business, as long as it doesn't impact service.”

T&D World: How did you end up in the hot seat?

Swofford: I never felt like I was in the hot seat. The support was there. My job was to make it happen. The executive team was committed to doing this. Also, all the members of the operations team understood why this was important. It is critical that everyone from the CEO on down is together, because you do get push back from the media and from the cities. Questions get asked.

T&D World: While you are getting out of construction, your parent company is creating construction roll up, InfrastruX. Why get into the very business you're working so hard to get out of?

Swofford: We are convinced that the contracting is a good business to be in. Of course, this business has its ups and downs. You have to be of sufficient size to survive the downturns.

T&D World: I've talked with utilities that buy into the concept but seem unwilling to address the union issue. Is this fear real?

Swofford: It is real, absolutely. It's an issue you have to deal with in one form or another. Some have decided to go this way but only through attrition, so they are going slowly in this direction. They just don't want to get into all the customer and union issues involved.

T&D World: What was key in PSE getting agreements in place?

Swofford: I draw the distinction that we are getting the work done with local companies, with trained union workers. We are not going against the unions that have held us in good stead. So far, the agreement is producing the results we've hoped.

T&D World: Looking back, what would you do differently?

Swofford: If I were to do it again, I would have more of the plan laid out before I went to the union. I thought we would work out the details with the union, but that actually put the union in a difficult position, with union officials unable to answer member questions.

T&D World: What is the size of the company now?

Swofford: We are down to 2200 employees from 2900, both gas and electric.

T&D World: Have you outsourced other work?

Swofford: We found that there are a lot of people who want to do other functions, but these tasks would only generate incremental savings.

T&D World: What did you keep?

Swofford: We retained first-response responsibility. We make the assessment and decide whether we need a crew or not. If we need a crew, the service provider comes in. If our first responder — a single individual in a single vehicle — can fix it, he or she goes ahead.

T&D World: How do you respond to storms?

Swofford: We have formed an emergency response team. In fact, we coordinate response to events from a center where we coordinate activities. We look at lines and feeders, along with our service providers who come into the center, and we work together to put the system together.

T&D World: So this is a big change?

Swofford: We've always had a lot of need for contractors during storms. But, they never sat in an emergency operation center together. That's the difference. It's clearly now their crews. One of the reasons we went to a national service provider is because they have scale. They have a lot of people and equipment. During a storm, the first place we look is to our service provider. Because they are large, we expect them to be able to handle most storms.

T&D World: How did you end up selecting Potelco, a Quanta company?

Swofford: We wound up with close to a dozen service providers that were interested in doing the work. Quanta actually gave us the best response, working on union issues and costs savings. Actually, they put the best overall package together. It is a plus that our contractors are local. We still wanted our contractors to be affiliated with large organizations. Pilchuk is part of Michaels, and Potelco is part of Quanta.

T&D World: I take it the bigger utilities would have sufficient scale and wouldn't need to outsource?

Swofford: The bigger utilities have an even bigger need for outsourcing. Bigger isn't always better. You cannot necessarily move quicker and faster because you are big. The issue is not quantity; it is the efficiency you can get. I don't think that just because you are big, you are efficient.

T&D World: At the same time, your outsourcing parent company, Puget Energy, is starting up InfrastruX, a national contracting company.

Swofford: Our own view is that the industry will realize it can achieve costs savings by outsourcing construction and maintenance work. We know contracting is a cyclic business. Companies need to be prepared for those times when construction problems come up, but we still think it is a viable business.