Lights Out for SoCal Edison
Its still hard to believe that it has come to this.
Hard to believe that a blue-chip electrical utility that has been operating successfully for more than a century has just been pummeled to near death in the past nine months. Hard to believe, considering the wellspring of talent and wealth that Southern California Edison could draw upon, just how flat-footed the company was caught in the crisis. Hard to believe that such a venerable corporation could misjudge and mishandle a crisis so completely that it was forced to fire more than 1,800 of its workers -- and put hundreds and maybe thousands more in the cross hairs.
Hard to believe, that is, unless you work there.
For if you have spent any amount of time walking the halls at its imposing G.O. (general offices) in Rosemead or sat through any number of three-hour meetings at its state-of-the-art conference center in Irwindale, just how a bewildered SCE came to the brink so quickly is hardly a mystery at all.
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The short version is this: SCE was so good at what it did for so long -- generating and delivering electricity relatively cheaply and very reliably -- that when the tidal wave of this crisis started to swell in the distance last spring, the ranking brass on the poop deck merely noted it, maintained course and ordered the band to play a little louder. There was a massive, pervasive disconnect, one that seemed to stretch from the water cooler to the executive boardroom. Even as unmistakable signs of impending doom began mounting, there seemed to be an Alice in Wonderland quality to the atmosphere at Edison. Everything was going to be all right. Why? Well, because it just had to be. After all, were SCE . . . the Power Behind Peace of Mind.
Im no expert in the history of corporate America, but SCEs botched response to the energy crisis has to rank as one of the all-time great failures of a major company when its ass was on the line.
The most striking element of the collapse is that, at nearly every juncture since the onset of the crisis, SCE has failed to make its case effectively to its customers, its shareholders, government officials, the people of California and the nation. A disastrous combination of corporate arrogance -- where we made the mistake of believing our own myth -- and a fanatical adherence to a command and control structure produced the slow-motion shipwreck thats been unfolding for the past nine months.
SCE failed to understand that the dangerous currents swirling around it in the fast-moving new market ultimately required a political response -- and in politics, public perception is everything. Yet we clung to our management organizational flow charts like a condemned man would a Bible on his way to the firing squad.
More devastating is the fact that weve lost the confidence of some of our biggest customers, a bleed-out that has been occurring for months.
According to a report circulated among top management last month, SCEs efforts to rally its biggest (and therefore best-treated) customers to its aid fell flat. In December, SCE appealed to more than 1,400 of its top customers, pleading with them to write the governor in support of its position. Only 180 companies agreed to do so.
The meltdown of support among our customers and the public at large finally seems to be sinking in among the top management, as their near-daily e-mail dispatches to the troops are taking on an ever more desperate tone. Taking shots at the media is a favorite of late.
SCE president and CEO Stephen Frank fired off an e-mail to all employees two weeks ago deriding the no-news thats capturing all the headlines over the fact that SCE transferred $4.8 billion to its parent company, Edison International (EIX), during the past four years. He decried the critics misinterpretation of the audits conclusion -- though Frank apparently felt few of us had seen EIX president and CEO John Bryson on KNBC just a few weeks earlier, flatly denying on camera the same figures we were now conceding.
For many of us in the company, there is a simmering bitterness over the crisis and its impact on SCE employees that makes the rage of professional mouth-off Harvey Rosenfield seem pale in comparison. It is a bitterness that springs from the belief that people like Bryson, Frank, SCE senior vice president--customer service Pam Bass, EIX vice president--corporate communications Andrea Simpson and other top executives responded to this crisis with all the effectiveness of the United States Navy fleet commanders at Pearl Harbor, circa December of 1941. We got bombed, and they were out golfing.
Of course, uttering such thoughts -- never mind committing them to paper for publication -- is still pure heresy to many at SCE, particularly in management. This cadre of party-line apparatchiks is the sort who dress in Edison-label clothing on casual days, policy wonks whose idea of a good time is using 15 industry acronyms in a single sentence to impress fellow propeller-heads. If there were an Edison song, theyd sing it, proudly.
Of late, these good soldiers have been ambling around, making sure everyone knows that Bryson is losing sleep over this crisis. His top lieutenants are said to be equally pained by the meltdown that has happened on their watch.
Ultimately, I suppose it doesnt matter what Bryson and his inner circle are thinking now. The real question is why SCE didnt respond much sooner and much more aggressively when the writing was undeniably on the wall. Why did we whistle past the graveyard when we should have gotten ready to fight for our companys life?
Part of that answer may rest in the very makeup of SCE itself, stemming from the ingrained corporate culture that defines the company today.
SCE is a company of contradictions. By its very nature, it seems at least mildly bipolar schizophrenic: a private, profit-driven company charged with delivering a critical commodity in a regulated market for the public good. We make money by growing or building load -- encouraging more and more people and businesses to jack up their electrical usage -- yet we spend millions of public dollars every year encouraging the same people and businesses to conserve and use energy more efficiently.
Those contradictions extend throughout the companys internal dynamics as well, a fact that was apparent as the crisis began to unfold last spring.
Everyone knew there was serious trouble brewing in the market, and as early as April the potential for a statewide crisis began to pop up in management rap sessions. Obscene amounts of money were being lost every day -- bleeding that would either bury us or come back to soak the ratepayers; time was of the essence.
Our most effective spokesmen should have taken to the airwaves in major ad buys to demand immediate price caps from the Federal Energy Regulatory Commission and drastic action from the California Public Utilities Commission, the Legislature and the governor. In best Ross Perot style, we should have used plain English and simple graphics to spell it out for the people -- and our elected officials. Name the generators. Name their execs. List their skyrocketing rates for power and their corresponding profit margins, and contrast them with what we charged for the same amount of energy.
Shudda, wudda, cudda.
Instead, in communications with our residential, business and commercial customers, SCE maintained an almost business-as-usual attitude.
When San Diego Gas & Electric became the first of the big three utilities to pass the generator-inflated costs of energy directly through to the consumers, we sat back and watched as it faced a widespread customer revolt.
But instead of seeing the torches and pitchforks at the gates of SDG&E as foreshadowing the chaos soon to be at our own door, SCE persisted in comfortable denial. There was actually a palpable sense of relief last summer that it was one of our peers who had to weather the price shocks of passing costs through directly to customers. For a moment, we actually seemed relieved we were spending money we couldnt immediately recoup.
In June, for example, SCEs Major Customer Division circulated its quarterly newsletter to nearly 3,000 of SCEs biggest customers. In that publication, we told them about proposed post-transition rates (which we stated were likely to save them money), offered some nifty tips to conserve energy and tried to sell them on some new services we offer.
Not a single sentence as to what the generators were starting to charge for juice.
The same held true for the fall edition, by which time one could have expected that the entire publication would be dedicated to the details of the pricing debacle that was draining our companys lifeblood. There was still the assumption that, with the end of summer, with the cooler temperatures of the fall and winter months, wed be given a respite. Wrong again. The worst was clearly ahead, and SCE still didnt want to believe the sky could indeed fall.
The generators continued to charge insanely high prices. The California Independent System Operator began calling for interruption of service to some of our biggest customers. Why, then, did SCE still not launch an all-out campaign to candidly inform its 11 million customers about the scope and depth of what was happening -- and in the process save its life?
SCEs executives couldnt rise to the occasion because they are party to an organizational fetish running so deep that Soviet-era bureaucrats would blush. Exhaustive meetings on the most mundane minutiae are the order of the day, and Total Control is paramount. Yet the company is rife enough with high-paying jobs that no one wants to take responsibility for even the smallest mistake, so management by mass consensus takes shape.
This plays out in the formation of countless interdivision teams, groups and councils that are charged with even the most basic functions. Ive seen a single-page bill-insert absorb the time -- and salary dollars -- of four or more people over the period of months. On a practical level, this creates a costly, nightmarish process. Projects that would take a week at the most in other companies take months at SCE.
Yet, in a corporate version of Waiting for Godot, the document never seems to move from the pending column on our monthly deliverables chart over to the completed column.
One manager, who seemed to refine SCEs laissez-faire style to near perfection, spent last spring taking the lead on the customer communications for our Voluntary Power Reduction Credit program. Asked during meetings with colleagues how the project was going, the hotshot young manager would lean back and laconically deliver the favored buzz term of the moment in SCEs lexicon: Were on fire.
Well, there was a little more smoke than actual flames.
Delivered in the end were several pager messages and a single-page customer letter. Not exactly a three-alarm blaze. But that was the assignment. He delivered what was expected . . . probably ahead of schedule. Nobody blinked.
SCE cultivated this culture and built this system with great care and expense.
During the 1990s, the company filtered its management prospects through a series of leadership development courses that stressed the latest in emerging management models.
One of the seminars, titled Our New Marketplace, dealt expressly with the role SCE would play in a supposedly competitive market: Through an intensive, two-day combination of discussions, lectures and exercises, participants are informed of the consequences to and responses by Edison International as the industry shifts from a regulated monopoly to a competitive, market-driven industry.
During the same leadership-development seminars, SCEs management prospects spent a day making plaster masks of their faces, which they then studied in an effort to learn more about unspoken message. The only things missing were crystals, incense and some charm beads.
Actually working in a focused environment that demanded real-world results in a competitive time frame was a topic apparently not on the syllabus. That became more and more clear as the ever-evolving holy paradigms were put in play at SCE.
Take for example the meetings at SCE, which often take on a Kafkaesque feel: hours of buzzwords doused liberally with industry jargon that is ultimately pounded into a pablum for the consumer that actually means, in the end, nothing.
Heres a delightful little ditty that emerged as the mission of SCEs Account Management Information System:
We will be recognized as the indispensable provider of automated tools and services that give power to achieving excellence at SCE. By producing hard-hitting results, providing exemplary customer service and achieving personal success and gratification, our group will be known unquestionably as a model of Excellence. Others will be so envious of us that they will be galvanized toward Greater Excellence.
I am guessing that it probably took a team of a half-dozen employees a week or two, or more, to craft that message.
So you can imagine what was happening inside the G.O. when the entire system, the whole fucking playing field, got flipped on its head last year. Deer in the headlights.
With generators sticking a gun into the back of the utilities -- and by extension the consumers -- our most creative response was to usher an awkward-sounding Bryson onto the airwaves, where he nervously told the people, The system is broken.
He was right. But what he didnt tell you is, so is SCE.
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