Note: This essay was first published in the Marysville Globe on Nov. 21, 2001.
THE SNOHOMISH COUNTY PUD: WHO ARE YOU?
By Dave Aldrich
Speak in French when you can’t think of the English for a thing—turn out your toes when you walk—and remember who you are!
— Lewis Carroll, Alice’s Adventures in Wonderland
For most of its fifty-plus years of existence, the Snohomish County Public Utility District earned a unique status in the community: it was largely ignored. Apart from the days of WPPSS, the nuclear debacle that drove electricity rates through the roof, the PUD has operated in relative obscurity. When the utility conducted a survey of its customers a few years ago, the overwhelming majority of respondents knew virtually nothing about the PUD, its structure or operations. The people did not know that three, part-time elected officials called ‘commissioners’ govern the organization and set its policies. The people did not know that the PUD is a nonprofit entity owned by its ratepayers. The people knew but one thing, that the utility delivered electricity and mailed out bills every month or two, and only a very small percentage of customers had any contact with the PUD, aside from sending in a check. But customers may be forced to start paying attention, now that the PUD’s rates have climbed by over sixty percent in the last eighteen months to the highest level of any utility in the state.
Our story begins a half-decade ago with talk of deregulation. The PUD managers at first feared the threatened restructuring of the electric utility industry. What would happen to the PUD? Would it lose customers? Would it be gobbled up by some huge international conglomerate? If managers weren’t in meetings fretting about deregulation, they were e-mailing one another, poring over the latest industry news reports, or listening intently to an endless stream of experts counseling organizational change as the only way to survive in the brave new world of deregulation. Management heeded the call, and set about to create a different focus. It cast off the utility’s better nature and began emphasizing the need to compete.
“One of the hard realizations of the new, more competitive industry is a new paradigm for all business lines,” said the PUD’s then-general manager Dick Johnson in the summer of 1997. “In order to keep our rates competitive, we must find state-of-the-art efficiency within all areas of our organization. Even our traditional utility lines will have to…meet, and exceed, the industry standards …in order to be competitive. At the same time, our competitive business lines will have to produce positive revenue…If we can’t be competitive doing the work, then we have to get out of the business line.” Mr. Johnson, as you can plainly see, was obsessed with competition. But, as events would quickly prove, the general manager and his direct reports mapped out an ill-conceived strategy that has transformed the PUD from a very good and quiet electric distribution utility to an organization that has forgotten why it exists—to reliably deliver affordable electricity to its present and future customers in a socially responsible manner.
Known as ‘the Business Plan,’ the strategy had the utility engaging in a virtually unlimited array of activities, from the traditional to the bizarre. One PUD manager vowed to “sell anything to anyone anywhere, even on Mars.” The utility would no longer fear deregulation, it would enthusiastically embrace it with bold initiatives designed “to produce positive revenue.” The managers launched dozens of new business ventures that sucked millions of dollars from a burgeoning budget and, in the end, delivered nothing but organizational distraction, huge cost overruns, and skyrocketing retail rates.
Besides hemorrhaging money, these initiatives were based on a completely inaccurate picture of the electric utility industry, which is unlikely to be restructured any time soon given California’s failed attempt at deregulation. Worse, no one in management had bothered to look at state law, which makes it nearly impossible to abolish or sell public utility districts.
Nor was the PUD at risk for losing customers and the revenues they generate. The logic was simple, but nevertheless difficult for management to understand. Distribution systems are monopolies. If you and I want electricity, we must get it from the electric grid that runs within and between our neighborhoods. For this, the PUD collects a “toll,” you might say. In addition, the PUD charges us—as a straight pass through—the cost of the power we consume. The toll and the energy fees add up to the retail rate, what we pay the PUD for the combination of electricity and related services. Thus, in a deregulated environment the PUD does not lose money if a customer chooses to buy power from some other entity, because the PUD will always assess the toll to pay for the non-power costs.
While Dick Johnson was relieved of his duties in 1998, all of his mischievous direct reports, save one, remain. They are among the wealthiest government employees in the state. The new general manager’s salary exceeds those of the governor and the supreme court justices. Yet, why should these people worry? Despite having the highest retail rates in the state of Washington, higher than even Puget’s, the PUD received effusive praise from the editors of the Everett Herald, who intoned, “The acceptance [by the public] of rate increases is a rather impressive sign of trust in the good judgment of the PUD.”
There is another explanation. The PUD’s customers are ignorant. They do not protest, because they do not know. The PUD spends a good chunk of your money telling you that all is well with your local public utility. And the propaganda works—just look at the Herald’s September 24 editorial. The PUD wants you to believe that the bad news—and there is plenty—is the fault of someone else, especially the Bonneville Power Administration, the utility’s favorite whipping boy. You are not supposed to know or care about such matters as the PUD’s failed business ventures; the outlandishly expensive, unwieldy, and grossly counter-productive computer systems; the utility’s silly overseas activities; and the outrageous contracts to replace the PUD’s share of the Centralia Coal Plant.
Better that you shiver in the dark.
Note: For six and a half years Dave Aldrich served as the policy analyst for PUD commissioner Chuck Moon, who died earlier this year. If you want detailed information about the utility and its decisions, please feel free to contact Dave by e-mail at firstname.lastname@example.org.
UPDATE (Feb. 23, 2011): I am now a PUD commissioner. Ironic, yes?