When I embarked on a career in the electric utility industry, I joined a safe, stable, mundane industry. Thirty years later, our industry is no longer mundane. Instead, it has become a “risky business.”

Listen to the words of Austin Energy (AE) General Manager Juan Garza:

“Today, the electric utility industry is being rocked by change, the magnitude and swiftness of which the industry has not witnessed since its birth. This change will completely redefine the electric industry over the course of the next two decades. I believe utilities that prepare for this change will be part of a new and dynamic energy future. I also believe those utilities that cling solely to the past will find themselves rendered obsolete and irrelevant by this change.”

I met with John H. Baker Jr., chief strategy officer at AE, to find out just how his utility is positioning itself for this change. Baker rattled off threats AE faces, including fuel price volatility; regulatory trends; a slowly recovering local economy; loss of customers to deregulation; loss of a skilled workforce; failure to anticipate new technologies; and accidents, storms, terrorism and weather. Baker broke down business risk into broad categories and helped me explore the risk elements in each.

Local Business Risk

AE's customers are now subjected to extreme cost pressures brought about by global competition. The Austin region is susceptible to the offshoring of work, particularly in the software and call center areas. This utility also has seen the closing of semiconductor fabrication facilities as competing facilities in Asia have come on line. Companies including Motorola, IBM, AMD, BAE and Intel have experienced significant job losses in AE's service territory. Because the health of the Austin community depends on the existence of successful businesses, AE is participating in economic development, building partnerships with the local chambers of commerce, businesses, community groups and the city council.

Customer Service Risk

A healthy utility provides excellent customer service. AE set an aggressive goal to achieve an aggregated customer satisfaction score of 83 out of 100 by 2010. But only satisfied employees can truly satisfy the customer. AE is committed to improving employee satisfaction and will track progress with its “Listening to the Workforce” survey. AE has committed to increase positive responses by 10% by 2010.

Reliability Risk

AE's customers have consistently rated reliability as a critical component of service. AE set goals to achieve a SAIDI (system average interruption duration index) score of 60 minutes by 2005. It also set a SAIFI (system average interruption frequency index) score of 0.8 interruptions per year by 2005. To improve reliability while holding down costs, AE is going to self-directed work teams, automating work order dispatch, embracing automated metering, installing line reclosers and increasing investment in tree trimming.

Energy Resource Risk

Nothing is more risky to the future of a utility than a mishandled generation portfolio. Investments in long-term assets exposes a utility to greater technology, business and political risk. AE has decided to seek renewable energy and conservation solutions to meet new energy needs before resorting to traditional fossil fuel sources. AE is committed to identifying and evaluating emerging renewable technologies, but will deploy these technologies only after the risk has been quantified and the value determined.

To meet its customers' energy needs, AE set the following targets:

• Obtain 20% of supply needs from renewable resources by 2020.

• Invest in energy efficiency and peak load management to obtain 15% of energy supply from energy-efficiency efforts by 2020

• Close inefficient fossil fuel plants and delay adding base-load generation to at least 2008.

Too few utility executives have long-term vision, concentrating instead on meeting quarterly earning targets. Garza and Baker are looking further down the road. It's time for us to borrow from AE's playbook. Our business is about meeting customers' needs, being active in the community and investing in our employees. It is about having access to generation at a price our customers can afford. It is about investing wisely in our power-delivery systems.

If we develop balanced strategic plans and properly execute those plans, we can take significant risk out of what has become a risky business.

Editor's Note: Austin Energy has shown its commitment to renewable energy, having sold more green energy than any other utility in the nation. AE sells in excess of 380 million kWh of renewable energy annually.