Joe Rigby, Chairman and CEO of Pepco Holdings Inc., discusses the importance of having the right strategies in place to educate customers about the importance of smart energy use.

Full Transcription:

Justin Segall : This is Justin Segall for the Daily Energy Report here with Joe Rigby, the Chairman and CEO of Pepco Holdings. Joe thanks for sitting down with us.
Joe Rigby: It’s nice to see you.
Justin Segall : You were talking today about the importance of engaging the consumer in smart grid. Tell us a little bit about the things that you guys have been doing and the things you found most successful in doing that.
Joe Rigby: The point that I was making earlier is that you have to meet people where they are. You have to really use language that they can really relate to. As it relates to how we’re trying to connect with them, it goes from door hangers, it goes from focus groups, community meetings, Facebook, social media, Twitter, commercials, print ads— the whole thing because there are so many varieties, so many ways in which you can connect with customers. With this particular issue, we want to use every possible channel we can get our hands on.
Justin Segall : What is it that you want customers do? You want to engage them, but what is it that they can do? How can they make smart grid successful and be a partner to you?
Joe Rigby: One is I think we really need to get past the language barrier. We tend to talk in utilities speak. It’s a matter of using the right words. But what I think we really want to get across to them is that directionally, this is going to happen. It’s hard to imagine in ten years that we would still be using analogue meters. So, this is eventually going to happen and then somewhat de-mystify all this. But put it in terms where they can see the positive for them. Obviously, what I think we’ve learned is that the real obvious positive that customers can relate to is really around reliability, quicker restoration and improvement, and some cost-reduction because of the operational efficiencies. I think it’s probably too premature to get into explaining the impacts of dynamic pricing, which get into behavioral changes and things like that. What we’re trying to do is connect with where we think the customers are and would resonate most loudly with them.
Justin Segall : You said that you think it’s too early for communicating things about time of use and pricing, though you guys had a pilot that is often pointed to as one of the most successful time-of-use pricing. What are the learning from PowerCentsDC and why do you say you think it’s too early to be rolling that our broader?
Joe Rigby: I just think what we’re experiencing has own us a little bit too much overload for our customers. And frankly, as the meters are being deployed, there are, in fact, some issues that have been raised that I think complicate the dialogue. Examples of EMF or radio frequency and issues of choices in terms of being able to opt-in and opt-out. To try to then engage in something like dynamic pricing and critical peak pricing, things like that, is the customers can hear us right now. I think while we’re very, very proud of the success we had in the PowerCentsDC, we’re very proud of that experience, and it’s one we’re going to learn from and leverage. I just think that our regulators want to see us build the platform first, get the meters to pull it flawlessly first, then let’s stand on that platform and go forward with the dynamic pricing.
Justin Segall : You talked about how you can have an advantage because you operate in decoupled service territories. How do you see that playing out for you relative to other utilities that don’t have a decoupled environment?
Joe Rigby: We’re very pleased because part of our overarching approach is to help our customers use less of our product. If you are a company that has coupled revenues, the volumetric impact is going to be pretty negative. And for us with such a significant investment program ahead of us, having that ability to point to that revenue stream is critically important. So, that’s what decoupling gives us. I would anticipate that some time in 2012 when Delaware adopts decoupling, we will then have 80% of our distribution sales on the decoupling regime. It doesn’t guarantee profits. It’s a steady revenue stream, but it’s very important when you’re going to the capital market to be able to raise capital for $5B that you can point to a steady revenue stream.
Justin Segall : What have you found as you have been increasingly in decoupled markets that change your ability to go to the capital markets? What kind of different questions are you getting from investors around the decoupling?
Joe Rigby: That’s a great question. The rating-agencies certainly like it. They see that as part of a low-risk profile that we have in our company. I think that when you’re out talking to the equity market, the fact that they can understand the strategy of the smart grid, and understanding that this type of approach the company provides, it breaks, obviously, the volumetric impact. It gives them a little bit more comfort with regard to it. It is protection on economic downside, but it also gives money. We had significant experience last summer in the hot summer. We actually gave a lot of refunds to our customers as we were settling back to the decoupled revenue rate. But my take away, to be more directing in your question, is that the capital market, I think, feels very, very comfortable with that kind of a construct.
Justin Segall : Do you see that as a trend for the industry? Would you tell your colleagues, fellow CEOs at this conference that it’s a good thing?
Joe Rigby: I think, yes, I would. I think that what we’ve experienced maybe four or five years ago when we introduced it in our rate case, there were some eyebrows that went up wondering, “What do you guys doing? Why do that?” But what I’ve seen is that more and more utilities are migrating towards that. I wouldn’t say that it’s the majority of cases, but we’re certainly not as unique as we used to be, and you see more and more cases that are being filed for them trying to pursue decoupling.
Justin Segall : Last question, over the next three years, what do you see as the biggest opportunities in smart grid or energy efficiency for Pepco? What do you see are the biggest challenges?
Joe Rigby: I think the biggest opportunity is to avoid some of the drama, frankly. I think that to the extent that we can do that, we’d be able to continue to move ahead in a very good pace. I think Pete Delaney made a comment about the complexity of this. And it is. This is a massive undertaking, and we want to get it right. And to the extent that we can kind of do it flawlessly, I think we’re going to be able to get to the finish line. I think the biggest challenge is going to be kind of the ever shifting sands of public policy, and what that means to our strategy. But I think, almost under any scenario in the future, I think that going to be a very strong emphasis on energy efficiency and helping our customers manage their energy. So, I feel very strongly about the future.
Justin Segall : Thanks so much.

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