EELECTRICLECTRIC PERSPECTIVES JANUARY/FEBRUARY 2013 NextEra Energy’s Lew Hay III Meeting the Cyber Challenge The Outlook for 2013 Customer Engagement How resilient is your enterprise? A series of extreme events For more information: over the past few years has highlighted the vulnerability of Todd J. Jirovec our energy infrastructure and Vice President lead many to reconsider how Dallas they think of risk. Now is the time 214-746-6525 to invest in the capabilities and [email protected] assets that will increase the resiliency of the energy industry. 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All rights reserved. EELECTRICLECTRIC PPERSPECTIVESERSPECTIVES THE MAGAZINE FOR MANAGEMENT IN AMERICA’S SHAREHOLDER-OWNED Features ELECTRIC COMPANIES JANUARY / FEBRUARY 2013 • VOLUME 38, NUMBER 1 22 The Outlook for 2013 The electric utility industry faces another year of complex challenges. BY DENNIS WAMSTED 22 30 Customer Engagement What will it take to change customers into active energy managers— and keep them as customers at the same time? AN ELECTRIC PERSPECTIVES PANEL 30 40 Meeting the Cyber Threat Electric utilities have stepped up their game as they face a formidable foe. 40 The electric utility industry is not in the law enforcement or intelligence gathering business, and“ the government has limited experience For more operating the electric grid. PAGE 40 content, visit eei.org/EP ” ■ Read the digital interactive edition ■ Download apps for iPhone/iPad and Android phone/tablet ELECTRIC EELECTRICLECTRIC PERSPECTIVES Jane S. Nunnelee PPERSPECTIVESERSPECTIVES Editor & Publisher, 1981-2001 THE MAGAZINE FOR MANAGEMENT IN AMERICA’S SHAREHOLDER-OWNED STAFF ELECTRIC COMPANIES Eric R. Blume Editor & Publisher [email protected] Bruce Cannon Associate Editor [email protected] William Bickel Art Director/Production Manager [email protected] LaVonne M. Rose Departments Subscription Coordinator JANUARY / FEBRUARY 2013 • VOLUME 38, NUMBER 1 [email protected] EDITORIAL BOARD Edward Comer 6 20 Vice President, General Counsel, and Corporate Secretary President’s Message Power Poll Richard McMahon Vice President, Finance The power of unity. The pursuit of higher learning. and Energy Supply Jim Owen Executive Director, Member Relations and Meeting Services David Owens 8 21 Executive Vice President, Powering Change The Energy Business Operations Ryan Rudominer The year of electrifi cation. Economist Executive Director, Communications Headwinds for Quin Shea Vice President, Environment power sales. Stephanie Voyda Senior Director, Advocacy 10 and Strategic Communications IEE at Work Brian Wolff Senior Vice President, External Affairs Innovate at the speed of value. 48 CIRCULATION Diversity LaVonne M. Rose 202/508-5584 NiSource’s [email protected] 12 “Building the Subscriptions: $100 per year. News & Trends NextGen: Women Superstorm Sandy in Leadership” ADVERTISING SALES stats…nuclear William Mambert program. Electric Perspectives thumbs up…smart 600 Cameron Street Alexandria, VA 22314 grid uncertainty…California car- 703/751-9864 bon…rising natural gas prices… [email protected] retention strategies for top perform- ers…green is the new purple…offi ce 51 moves…and more. Financial Mailing label corrections: send old label and correct title and address to A seesaw pattern for utility stocks. Subscription Coordinator, Electric Perspectives at EEI. Allow 12 weeks. Postmaster: send address changes 19 to Subscription Coordinator, Electric Perspectives, EEI, 701 Pennsylvania Building 56 Avenue, N.W., Washington, DC 20004-2696. Periodicals postage paid at Washington, DC, the Future Another Perspective and additional mailing office. Brunswick Get integration right. Electric Perspectives (ISSN 0364-474X) is published bimonthly by County Power Edison Electric Institute, Inc. Station. 701 Pennsylvania Avenue, N.W., Washington, DC 20004-2696. www.eei.org The title is a registered trademark of Edison Electric Institute. Statements of fact and opinion are the responsibility of the author(s) alone and do not imply an opinion on the part of EEI, its employees, or members. Each advertiser and advertising agency assumes full liability for all contents of advertisements printed. Copyright © 2013 by Edison Electric Institute, Inc. EEI Publication No. 43-13-01. On the cover: Lew Hay, executive chairman of NextEra Energy and chairman of Edison Electric Institute, highlights the cyber threat and what the shareholder-owned electric utility industry is doing to meet the challenge. (Photo courtesy: NextEra Energy) wwww.eei.orgww.eei.org/eepp Utilities and Wind Power at WINDPOWER 2013 Wind power’s long-term price certainty, reliability, and accessibility confirm that it’s a great deal for your utility and your customers. With proven technology and numerous benefits, wind energy can, and should, be a part of your generation mix. At WINDPOWER 2013 in Chicago, you can meet developers and suppliers that are bringing you this low-cost generating option, and learn more about: declining costs of wind energy and state-of-the-art wind energy long-term price stability forecasting techniques wind integration and operational challenges transmission infrastructure development integrated resource planning integrating wind project ownership into utility operations and maintenance activities Solutions for Success Visit our website for more information and to register for this event. www.WINDPOWERexpo.org president’s message THE POWER OF UNITY ver the years, electric utilities, with their unique territories, geography, fuel portfolios, state regulations, and customers, have achieved remarkable things together. As I look back on 2012, I am proud of the way our companies tackled O challenges and demonstrated the Power by Association that EEI represents. Our work together on Dodd-Frank fi nancial reform measures, for example, resulted in signifi cant improvements in fi nal rules issued by the Commodity Futures Trading Commis- sion—and a reduction of burdens on utilities. In 2013, industry coordination again will be critical as the implementation process begins and advocacy continues on key rules. Last year, industry executives worked with the Departments of Energy and Homeland Se- curity to help clarify the respective responsibilities of the private sector and government regarding cyber risks and activities. Congress and the President surely will focus on cyber security in 2013, and our industry will continue to advocate for policy changes that leverage private sec- tor input and focus government authority on responding to imminent threats. The Environmental Protection Agency will fi nalize key utility regula- tions (including its rule regarding cooling water intake structures) and likely propose new ones. For example, EPA’s anticipated proposal for new source performance standards under the Clean Air Act could serve to regulate greenhouse gas emissions from existing sources. As always, such environmental issues require the industry’s concerted response. As the magazine goes to press, I don’t know whether Congress and the President have avoided the fi scal cliff, nor do I know the fate of dividend tax rates. I do know, however, that our In 2012, our industry responded to industry has been united in making our case: low dividend tax rates that are in line with capital so many challenges with strength. gains tax rates matter. The Defend My Dividend But utilities do that naturally, don’t they? campaign has generated hundreds of thousands of messages to Congress, and the industry’s efforts have been dynamic—CEO and CFO fl y- ins to Washington, grassroots mobilization, media and social media outreach and more. As Congress turns to tax reform in 2013, we will need a similar level of engagement. What We Do In 2012, our industry responded to so many challenges with strength. But utilities do that naturally, don’t they? In October, when Superstorm Sandy unleashed her fury on North America, our industry’s mutual assistance network brought together local utility crews, out-of-state crews, and contractors to restore power. Utility employees from unaffected areas headed north and east; some loaded up trucks and supplies on military aircraft and fl ew across the country; and all brought heroic work and relief to hard-hit utilities and their customers. The numbers are staggering—about 10 million customers without power at the peak and more than 67,000 utility workers working around the clock to restore service. The coordination of workers on the ground; the unprecedented partnership among utilities, the Administration, and state and local emergency resources; and the dedication of executives with whom the EEI team spoke every day, at all hours, were mighty things to behold. Perhaps it is overly humble to say, “Well, that’s what we do,” but in fact, that is what we do. That is the power of the unity and purpose the industry will continue to bring to the issues of 2013. Thomas R. Kuhn President, Edison Electric Institute 6 ELECTRIC PERSPECTIVES THANK YOU To The Hard-Working Men And Women Of the Electric Utility Industry. The damage done by Superstorm Sandy was unprecedented in its size and scope. Approximately 10 million customers lost power across more than 20 states as a result of the epic storm and Nor’easter Athena that followed closely after.