Teri Viswanath: The rate at which new technology is being introduced to the marketplace is speeding up. It took 30 years for electricity to reach 10% adoption in this country. ChatGPT, the popular chatbot from OpenAI, is estimated to have reached 100 million monthly active worldwide users in just two months.
In this changing world, utilities have to adapt. Certainly to continue to provide reliable and affordable energy, but also, to stay competitive. That said, new strategies and service offering have costs to implement. But there’s also costs associated with inaction.
To better understand what the co-op business model might look like in this age of technology innovation and heightened competition — and most importantly, how to adapt – we caught up with the leadership from two founding co-op members of the Rural Electric Management Development Council (REMDC).
Hello, I’m Teri Viswanath, the co-host of Power Plays and the energy economist at CoBank. And, as always, I’m joined by my colleague and co-host Tamra Reynolds, a managing director here at the bank. Hello Tamra.
Tamra Reynolds: Hey Teri. I had the pleasure last winter of contributing my thoughts on REMDC’s committee tasked with updating their white paper series. The most recent iteration of their reports focused on opportunities for co-ops to lead transformational change through energy innovation. The committee discussed the wide array of changes that are occurring within the electric utility space that could prove disruptive for electric co-ops if these impacts are ignored.
For this conversation, I invited both Cameron Smallwood, the CEO of United Cooperative Services in Texas, and Julie O’Dell, the chief administrative officer for Blue Ridge Energy in North Carolina, to discuss REMDC’s deep dive into these topics. For our listeners, this work is captured on their website in their updated report, “Opportunities for Cooperatives to Lead Transformational Change Through Energy Innovation.” You can check it out at REMDC.net.
Viswanath: So, the function and purpose of REMDC is to improve the effectiveness of management at rural electric systems. Why is it so important to take stock of recent changes occurring around us? Well, here’s what Julie had to say.
Julie O’Dell: One of the things that I like to share with other cooperatives is Blue Ridge Energy utilizes the strategy execution process that was taught by Harvard professors Robert Kaplan and David Norton. That's how we run our business.
Each year we go through a full strategic planning process that includes what we call our environmental scan or PESTEL, which is basically looking at political, environmental, societal, technological, economic, and legal to make sure we're assessing all key issues affecting us. That white paper is full of information that we utilize for our environmental scan.
This tool was used for us to be able to make sure that we are developing strategic goals, initiatives, all the things that help make sure that none of this stuff surprises us and that we're controlling it rather than it controlling us.
This is basically, the white paper to me is a guide. And you first and foremost, need to sit down and read it, it's long, it takes a while so I wouldn't say read it all at one time, but I would take and read portions of it and do you feel like is it a part of your strategic planning process? Do you even have a strategic plan? Are you missing some things by not taking the opportunity to learn what potentially is facing your cooperative?
I don't think there's a difference between cooperative size at all on the need to potentially use this. How you do that might be more difficult, a larger cooperative has more resources, may be able to assign somebody like a position like I have in overseeing the strategic planning process and coordinating all this so that we make sure that we have no surprises.
A smaller co-op may have challenges with that. Could they lean on sister neighboring cooperatives? Could they lean on their statewide organizations? I can tell you that if anybody wanted to call me and ask me some questions, I'm definitely open to assisting any co-op that may need some questions answered as it comes to the white paper and incorporating that in strategic planning.
Viswanath: Why is it so important for co-ops to shift focus, shift gears from tactical into strategic, and do this sort of landscaping exercise, especially in the moment we're living through?
O’Dell: You've got to know the direction you need to head. What direction do you need to go in? If you don’t know your landscape, if you don't know the external factors that your cooperative is facing, you could go down the wrong direction. You can take some opportunities and know that you can shift that pattern or that direction to better improve what you're doing to serve the members of the cooperative. This white paper gives you a guide. It's loaded with information.
You've seen it, you've read it, but you need to go through it and find out what's directly impacting your cooperative. To know we're headed this way, but I may just share this information with us. Maybe we need to look at it a little differently from what we have been planning, so you may need to shift gears and change your direction so that you don't get too far off track and actually have to react instead of being proactive.
Reynolds: Cameron, when you think about managing change, what do you think has been maybe the hardest part of watching this evolving industry since the late '50s when this group originally came together to today?
Cameron Smallwood: One of the things that we recognize is our members' expectations are different than they used to be. You take Amazon and what Amazon has done to things, or Spotify, all these different services that are out there have changed the game completely.
There's an expectation now that the utilities should be keeping up with that and innovating in the same way. That's a big challenge, because the utility industry is not built that way, or it wasn't built that way in the past. For us leading, going forward, it's a big challenge to keep up with those mindsets and those expectations.
Viswanath: Going back to my opening statement about the rapid pace of change that’s occurring in the utility sector, I was surprised to see how REMDC’s work had evolved from thR first iteration, that environmental scan back that was issued back in 2019, and then this year’s version. And I asked Cameron about this.
Smallwood: The 2018 annual meeting, or in the '17 annual meeting, we came together and said, we see this member expectation changing. How do we need to prepare for this as we go forward?
That was our foray into doing this first paper. It had the same title, Version 1, if you will. That was done and released in 2019. It was our first time taking that expansive of a look at the industry.
In 2023, there's been more change than any of us expected since we wrote that paper. We felt like, there's price in wisdom in going back to the well and seeing what changes need to be made, or if any need to be made at all.
To our surprise, there was actually a significant amount of change from just four years prior.
Viswanath: You've touched on a wide spectrum of topics, topics that I think that were not part of our vocabulary, even two years ago. I just think that the breadth and depth of coverage from everything from smart homes, internet of things, virtual power plants, data analytics, every area that's top of mind at the moment, I feel that your organization has touched upon.
Smallwood: That was not by accident. The great thing about our group as we work through this project is we have subject matter experts on all the above. Everybody took a role in their subject area of expertise and, we all worked together to put a work together that's really beneficial for the industry as a whole.
Reynolds: I think overall you said it, from 2019 to 2024, that's only a five-year window, but I think there were a lot of things that happened in that time that really caused this catalyst moment, COVID was one of those, right? That happened, and then you had this acceleration trend that happened as a result of COVID, I think in many ways and how people get information, how they could order food and alcohol to your home, which is a trend you never thought would have happened.
I say it wasn't all bad, but it did accelerate change. I think timing was really good on this. If I were to, maybe ask you what you think resonates most with you about this version of it, and maybe what are the biggest outcomes from your perspective that were uncovered, that you were really proud of?
Smallwood: I think that's what we all recognized is we've got to be much more nimble in our long-term planning and understand that you're probably going to make shifts where you weren't expecting it as you operate your business plans and your strategic plans.
Larger co-ops have seen all across the country and it's not just data centers, it's all sorts of things. We're used to having a 500 kilowatt load connect, and that was our big load, 10 to 15 years ago. Our big load today, we're 20 and 30 and 50 and a 100-megawatt loads. That's a completely different world to live in. It's a really big challenge and it's a change in how we do business in a lot of different ways.
Another example, and, I'm sort of shifting to a different topic, but you mentioned COVID, it changed the workforce too. The workforce has different expectations now than it used to, and the dynamic that we have to deal with as well. We address that in the paper too, is, we have a lot of retirements coming and we have this new workforce coming in that thinks about work differently. A lot of new expectations for these new workers that we've never dealt with before, and we're having to adjust and figure out how to live in this new world of employee labor availability and what their expectations are.
The makeup of our boards, the expectations of our board members, which are members, what they expect, how they expect board meetings to work, how they expect the co-op to work strategically, financial aspects of how we operate, all that is going to be under a different view, a different lens than I think what we're used to seeing.
Then the changing member expectation at United, we've tried to be really careful to always listen to what our members expect of us. I'll use internet as an example. Communications is a key component to being successful to operate a utility and key component for our members to be successful in their daily lives now.
At United, we saw a lack of that availability throughout our territory and allowed our members to basically tell us whether we wanted to go into that business. 92% of our members voted positively for us to get into that business, and we're doing it now. We're serving almost 27,000 subscribers and continuing to grow that business.
Our members have told us they really want more from us from a renewable standpoint. We have a community solar program that's sold out, has a waiting list that we implemented. Just this year, started installing solar for any members that want it on their homes.
Most of the time, when we give them all the facts, they choose not to do it, but we did do our first installation recently, and so we're meeting a need there that hasn't been fully met before.
Again, it's all in, as the members' expectations changing, are we there to meet our purpose? That's what, I think the paper identifies that that needs to be looked at very closely, and we've tried to do that here at United.
Viswanath: One of the big outcomes is that behind-the-meter possible disruption that is pointed out in the paper.
Smallwood: It happens in so many different ways, and, solar is just one. I think we have 30 megawatts of home-based solar now on our system. I would guarantee you 75% of that were misleading sales. We've recognized that the only way we can really fight it is to be in that business to help our members, and that's exactly what we've done.
The internet of things, as you mentioned earlier, Teri, is a big thing now, and we're the expert we're going to help you make sense of whatever technology you want to deploy on your side of the meter and be there to support you.
Not only that, we're going to give you the internet connection so all that stuff works appropriately in your home and gets you back to the internet, and it's reliable, et cetera. Our long-term view, and it's discussed in the paper, is really that total energy consumer, if you will, is we have the communications piece. We have the energy piece, and we can work that together for the benefit of the co-op as a whole, managing power supply in the future, et cetera.
It's a few years out, but ultimately, generators, solar, thermostats, you name it, having an integrated system that's communicating together and working together with the member of the co-op, getting that advantage of managing power supply with the members’ involvement, is really key going forward.
Reynolds: What would you say are the takeaways or maybe calls to action if you're a large co-op, trying to get your arms around how to digest some of this information?
Smallwood: The paper is organized in two areas, one of which is more of the industry shifts that we see occurring that really you should be paying attention to in order to be prepared for change. The second component of it is really workforce-related, really how you should be working on your cooperative to be prepared for those things as we go forward.
I think the benefit of that paper to the larger cooperatives, it gives you a format of organization, so to speak, to meet the challenges of the future. I think that's a good benefit of what's in the paper that for the smaller cooperatives, it works the same but different. Obviously, the smaller cooperatives just don't have the number of people and the capability to have those kind of skill sets on board.
It still works the same way that you really need to identify partners is what I would say. Whether it be consultants or CoBank or whoever, there's a lot of different partners to do a lot of different pieces, and it's all out there and available.
As we've done, the paper in 2019 and then this update in 2024 and looking at the divisions of labor and the functions of labor within the co-op, it's really helping me to devise the organizational structure for the future for our cooperative and figure out where I need to be training and pushing people here or there to prepare for those specific skill sets that we see needing going forward.
Viswanath: One area that I thought was really interesting was the discussion around data analytics and AI.
If we take a look at first generation AMI deployment we've had in the field, we're taking advantage of that information to tell some important things. One, just outage information and making sure that financially, we're billing accordingly to support our systems, but there's a lot more in this about what we can do in the future of data analytics and AI. I'd love to hear you weigh in on this.
Smallwood: We actually have a group now, a data analytics group at United. I know we are not unique, I know there a number co-ops are doing this now. But we are saving our members an immense amount of money. Now our employees are engaged in it.
We've sort of opened it up to our employee group and said, "Look, here's some of the things we've done. We think we can do a whole lot more. If you have ideas, come talk to the data analytics group." Now they have a list that's quite long of it's the honey-do list of data analytics at the co-op.
Yes, we have a few employees that we're paying for, but their return on investment there is great.
Viswanath: It's wonderful. I think it goes back to that mantra especially when we think about the nature of the organization you're a part of: if we can't measure it, we can't manage it.
Smallwood: Absolutely.
Viswanath: It's a fundamental requirement.
Smallwood: Yes. I'll take that a step further. We're used to measuring things on a larger scale or a bigger scale or more of a bird's eye view kind of thing. What this has allowed us to do is to manage it with detailed data. I can still do it, where we're not looking record by record, but, we have so much better access to what's going on in our business now because we put the effort on the front end of making sure we have all the data pieces that we need to make decisions.
As we go back to the changing expectations of our business and our members going forward, we have to have the data. How does Amazon know what to recommend you when you log in to Amazon? It knows by your history, and there's a ton of analytics going on in the background to say, "Okay, I know three years ago you ordered this, and two years ago you ordered this at this time," and all that's tracked. So when you log in, it knows what it’s doing because there’s calculations for what it’s presenting to you, etc. That's the expectation that we have too, and we better be able to do it going forward.
Reynolds: Yes, and pair that with your customer service reps, your member service reps, however you frame it up at your co-op, that's a powerful tool.
Viswanath: Change is occurring across many sectors that affect electric cooperatives and their membership. Julie and Camerson have emphasized the importance of identifying utility adaptation strategies with an action leaving the door open for others to disrupt that critical trusted energy advisor role that co-ops have taken on.
Reynolds: I really enjoyed engaging with the industry’s best thought leaders at REMDC, and I hope that all of you have enjoyed this conversation. Join us next month when we sit down with statewide association CEOs from Missouri, Minnesota and Arizona to talk about a snapshot of state and local challenges and policy issues co-ops are addressing across the country.
Viswanath: Please join us then and goodbye for now.