Energy News: November/December 2012 | NARUC Update

November/December News

Business Opportunities for Woman, Minority and Disabled Veteran Owned Companies in the Utility Sector

By D. Olandan Davenport

The National Association of Regulatory Utility Commissioners (NARUC) just held its 124th Annual Meeting in Baltimore Nov 11 -14. NARUC is a non-profit organization representing the state public service commissioners who regulate the utilities that provide essential services such as electricity, telecommunications, water, and gas. NARUC's members include commissioners from all fifty States, the District of Columbia, Puerto Rico, and the Virgin Islands.

The topics of the four day conference ranged from the need for infrastructure modernization to the impact of water shortages on the cost of electricity to consumers. One topic of the conference focused on business opportunities for women, minority and service related disabled veteran owned businesses (WMDvBEs) within the utility sector. NARUC started a subcommittee in 1994, Utility Market Access (UMA), to serve as a vehicle through which WMDvBEs would penetrate the utility industry most effectively. The discussions during the subcommittee meeting on UMA focused on how the program could be improved to take advantage of the current and future opportunities in the sector.

Harold Williams, a Public Service Commissioner for Maryland, is the chair of the subcommittee on UMA. According to Commissioner Williams, in Maryland voluntary Memoranda of Understanding (MOU) have been reached with 17 of 33 qualifying utility companies operating in Maryland to commit and try and reach a goal of 25% of the signatories’ required spend with WMDvBEs. In 2011, the latest complete figures, the total spend requirement of the utility companies signed on to the MOUs was $2,461,783,254. The total diverse spend was $387,775,428 or 15.75% of the total spend. That means $227,670,385 spend is still unmet under the current level of spend under the voluntary MOUs. Commissioner Williams and other commissioners believe that the UMA program, with voluntary MOUs signed with utility companies across the country, can have a profound impact on the volume of business opportunities for WMDvBEs.

According to NARUC agenda materials, estimates predict the cost of modernizing the electricity, water, and natural gas systems will exceed $4 trillion over the next 20 years. Several participants at the meetings believe the UMA activity can be greatly benefited by President Barack Obama’s economic platform for his second term. According to President Obama’s Plan for Jobs program, he will pursue on the expansion of small business. President Obama states in his plan that “small businesses create two out of every three new jobs.” Most WMDVBEs are small businesses.

Commissioner Williams expects that the UMA program will have a significant effect on local WMDVBEs interested in doing business with the utility sector in the Baltimore – Washington corridor. According to Reginald McCauley, Director of Supply Chain, Pepco has just begun it program to rebuild its infrastructure with its Reliability Enhancement Plan. Pepco will spend more than $1 billion on this project over the next 5 years. Pepco has signed on to voluntary MOUs with NARUC in MD and the District of Columbia to increase the spend with WMDvBEs, and is searching for qualified WMDvBEs to bid on its spend requirements. The product and service requirements will range from construction to waste management to IT services and high tech equipment.

At the UMA subcommittee meeting, Emmett T. Vaughn, Director of Diverse Business Empowerment for Exelon Corporation, presented a compelling strategy for increasing WMDvBE business participation with utilities companies like Exelon. He suggested that historically, supplier diversity programs have focused on non-critical path spending in categories like janitorial, temporary staffing, and promotional gifts.

Mr. Vaughn noted that part of Exelon’s strategy to expand relationships with diverse suppliers was to provide opportunities in professional services categories of spending. This opens the door for investment banking, legal, and a variety of intellectually capitalized business opportunities, not often available to smaller firms. “When corporations include minority and women owned firms that operate in high margin categories of service to corporations, the chances for wealth creation and increased economic returns to underserved communities increases as well.” said Mr. Vaughn.

According to an Exelon spokesman, Exelon, the nation’s largest competitive energy provider, recently purchased Baltimore Gas and Electric (BGE), the largest utility company in Maryland. Exelon is doing business in 47 states, the District of Columbia and Canada. BGE serves approximately 1.8 million customers in the Maryland – DC corridor. Commissioner Williams is working with other Commissioners like Timothy A. Simon, from California, utility companies and WMDvBEs to develop a new strategic plan to “take the program to the next level” he said. One initiative being considered is a mentor protégé program for WMDvBEs in the utility sector.

The program is still under development. Its thrust will be to pair established and successful companies in the utility industry with WMDvBEs. Supporters of the mentor protégé initiative believe that guidance and assistance with relationship building and best practices could be one fundamental pillar of the UMA program objective to increase WMDvBE business share of the spend requirement in the sector.

An initiative already undertaken by UMA is a project with the National Utilities Diversity Council (NUDC). “We are developing a supplier diversity “toolkit” stated Laurie Dowling, Interim Executive Director of NUDC. The toolkit will be a document designed to prepare WMDvBEs to engage more effectively in the utility sector. The document is projected to be completed by February 2013.

How quickly any infrastructure modernization will roll out was the subject of much discussion at the various meetings conducted during the conference. Two of the several major factors discussed as the determinants of the time frames for development are the requirements of the new federal regulations on utility companies dealing with environmental concerns and the price of gas. The regulations are a big issue to be resolved, according to Mayo Shattuck, III, Executive Chairman, Exelon Corporation.

Most participants at the conference believe that the issues will be resolved given the reality of a crumbling utility infrastructure in this country and the dire consequences if the work is not done. From increasingly extreme weather patterns like Super storm Sandy to the growing threat of cyber terrorism to the growing population electricity demands, failure to rebuild the infrastructure will lead to extreme economic conditions. Long time MBE entrepreneurs like Will Johnson of Visage Energy Corp believe that the time is right for WMDvBEs to pursue business in the utility sector. “I have been in the energy business for 20 years, and have seen many cycles.” stated Mr. Johnson. Mr. Johnson traded natural gas for many years before getting into consulting and engaging in the commercialization of new technologies and processes in the energy sector. Any WMDvBE must be willing to “pay some dues” and “work with the companies to learn the business.”

NARUC will have its winter meeting in Washington, DC from February 3 – 6, 2013. The UMA sub- committee will meet during those meetings. Anyone interested in learning more about the UMA program can go to http://www.naruc.org.