The electric power industry in Ontario is facing major challenges in the years ahead – challenges which will require a much better understanding of the concerns of power consumers. OPG’s President and CEO Tom Mitchell, speaking to the APPrO conference on November 16, told an audience of more than 500 power industry professionals that new principles and priorities will need to be adopted and communicated by the industry to demonstrate its understanding of the consumer. Notably, some of the principles are reminiscent of work done in the early history of Ontario’s power sector.
Sketching the scale of the challenge ahead, Mr. Mitchell reminded his audience that the power grid of 2020 will be quite different from the one we have today. The next ten years, a period which he called “the critical decade,” will see a line-up of large scale initiatives being undertaken. The power sector will be responsible, not just for updating large parts of the electric system, but also for making sure the public and the industry are “in sync” with each other, and that the public fully understands the reason for the new investments.
Mitchell was frank about the shortcomings he sees in today’s power industry. “A gap exists between us and the ratepayers we serve. And perhaps customers don’t see us as providing the value we should.” His talk had the ring of a company that is coming out of a lengthy period of introspection, ready to re-establish itself on the scene with renewed force and vigour. “More than ever, I believe our industry needs a new value proposition…One that we can all subscribe to and which reflects the new reality I have just described.”
Harkening back to the early days of Ontario Hydro, Mitchell pointed out how effectively Adam Beck and the power industry of his day communicated the value of electricity service to the public. Electricity was presented as a means of improving the daily lives of Ontarians, of building a stronger country, and of creating opportunity for farms and small businesses. Today however, electricity is taken for granted in many cases, and the value of the commodity is not understood as well as it could be. Consumers are as likely to feel irritation and anger as they are to feel pride and a sense of opportunity when they think about Ontario’s electric system.
Speaking even more directly he said, “I believe our industry has a problem. I wonder at times if we haven’t become too far removed from the people we serve.” He said “there is a feeling of frustration that I believe is becoming increasingly prevalent amongst ratepayers in this province and … we should be all concerned about this.” The process of building trust with the public is likely to be more difficult than in the past because Ontario’s grid is mature. In a mature system new investments have a tendency to increase costs for consumers, rather than bringing costs down as they often did in the past.
He spoke about how the theme of building connections is becoming relevant in several respects: Building connections is necessary in terms of expanding the transmission system. Similarly it is vital to understand the connection between supply and demand. And finally it is becoming crucial for the power industry to re-establish its connection with the consumer.
To build and maintain long-term trust with the consumer, Mitchell said it will be important to show dependable performance, and a commitment to a credible set of core values. Although he was speaking about OPG in particular, it was clear that his comments hold relevance to a wide range of players in the power sector.
Among the core values he cited were “openness, accountability and transparency.” Noting that several of the regulatory proceedings which OPG participates in are relatively new obligations, he said they have helped to change the organization’s outlook in recent years. With the company’s increasing sense of accountability, he said the change will “pay big dividends.”
In the last 3-5 years OPG has improved its performance in several respects. This is in contrast to the period of relatively poor performance exhibited over the previous decade. Since 2005, power projects have been coming in on time and on budget in most cases. It has become reasonable for OPG to present itself as a company focused on three simple priorities: performance, value and price. These are all customer-oriented priorities. To the extent that OPG, and in fact the industry as a whole, is able to demonstrate consistent commitment to these priorities, it will be better able to gain the trust of consumers. “(C)ost effectiveness – along with performance and value -- are absolute prerequisites for convincing people that our industry operates in their best interest.”
Stressing the point, Mitchell said, “As an industry, I don’t think we can ignore how important the price issue has become to people. We have to show them that we know this and that we care. At OPG, we are aggressively focused on cost management and cost reduction – and I emphasize the word ‘aggressively.’ Over the past two years, we have reduced our operating costs by more than $180 million. Our next Business Plan will build solidly on this effort. In short, we are creating a strong culture of cost-effectiveness, which needs to be maintained and enhanced.”
Mitchell summarized the three tenets he believes this new value proposition should include:
• First…. Electricity producers must create value for Ontarians;
• Second… We must operate transparently and in the public interest; and
• Third… Electricity must be generated in a safe, environmentally responsible and cost-effective manner.
Concluding his remarks, Mitchell said, “As an industry, we need to come to terms with the issues people have.” Noting that “there are the millions of ratepayers in Ontario who demand and deserve value for the prices they pay,” he stressed that “They want us to be cost effective and responsible. They want us to perform well. They want openness, transparency and honesty. Above all they want us to be an industry that sees things from their perspective.”
No doubt, the Canadian power industry will be considering these words carefully and thinking seriously in the near future about what it can do to re-connect with the consumer.