How Energy & Utilities Must Adopt Intelligence Best Practices to Compete Against Disruptive Developments

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How Energy & Utilities Must Adopt
Intelligence Best Practices to
Compete Against Disruptive
Developments
A Complimentary Webinar from Aurora WDC
12:00 Noon Eastern /// Wednesday 25 May 2016
~ featuring ~
Kathryn Valdez Dr. Craig Fleisher

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Kathryn Valdez
Kathryn Valdez serves as an advisor to clients in the Energy & Utilities sector.
She is also the Principal and Founder of Mapleton & Sloan, LLC an energy
consulting company focused on energy issues for the electric and gas sectors.
She has a wide range of experience in environmental policy, strategy
development and implementation, energy technology strategy, fuel supply
management and logistics, and strategic intelligence gathering and
assessment. Previously Kathryn spent 11 years with Xcel Energy in various
leadership positions including managing corporate strategy development,
expert witness for numerous regulatory filings, developer of innovative clean
energy programs, and lead strategic planner for compliance with new
environmental regulations.
Email: Kvaldez@mapletonsloan.com
The Intelligence Collaborative is the online learning and networking
community powered by Aurora WDC, our clients, partners and other friends
and dedicated to exploring how to apply intelligence methods to solve real-
world business problems.
Apply for a free 30-day trial membership at http://IntelCollab.com or learn
more about Aurora at http://AuroraWDC.com – see you next time!

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Questions, Commentary & Content

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Today’s Discussion
Part 1
 Not your Dad’s utility business. The need for
strategic intelligence
 Accelerated energy sector evolution
Part 2
 Formation of a strategic intelligence function
 Intelligence methods and tools including assumption
development and business model analysis
 Requirements for future success for energy utilities

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Electric Utility Sector Performance
 A happy alternative in a low interest rate environment
 Steady stock price appreciation over the last decade
 Disruption may not be evident in this trend
Source: Fidelity Investments
S&P 500
Index of Electric
Utility Stocks

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Not your Dad’s Utility
0
5000
10000
15000
20000
25000
2010 2011 2012 2013 2014 2015
Electric Consumption by Type (Trillion Btus) – EIA data
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
Fossil Fuels Nuclear Renewable Less Hydro
55% increase
6% decrease

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Business Evolution Acceleration
 Technology, customer
preferences, and price
are threatening
certainty of the electric
utility business model
 Electric utilities facing
new competition and its
not just solar
 Several years of
discussion of the “utility
death spiral”

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Wanted: Strategic Intelligence
Sales Price
Price
180.00
190.00
200.00
210.00
220.00
230.00
240.00
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Cents per KWh CPI-U
ElectricityPrice(allcustomerclasses)
CPI-U

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Strategic Intelligence Function Necessity
 How do you keep executives informed of the important
business developments and why they matter when so
much is changing?
 How do you answer questions from your executives? Who
do they always ask for those answers?
 How do you provide better answers and make answering
these questions more efficient, collaborative, creative and
complete?
Answer: Implement a thoughtful strategic intelligence process

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Finalized Strategic Assumptions
Began with
46+ “beliefs”
Narrowed
down to ~20
tied to four
5-year
corporate
Initiatives
Executive team
selected 4
assumptions linked
to corporate
initiatives and 2
underlying
assumptions

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Strategic Assumption Qualifications
Are:
 Tied to 5-10 year corporate
strategy and goals
 Include beliefs about
customer preferences
 Include beliefs about
regulatory landscape
 Include technology
performance and cost
expectations
 Primarily externally
focused
 Measureable
Are Not:
 Interest rate assumptions
 Sales forecasts
 Weather trends
 Based upon company
initiatives around culture
 Open ended or without a
time horizon
 Too obvious

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Collaborative Subject Matter Experts
 SME networks established for each assumption
 SME networks included the known company “go-to”
people and additional nominated members that are up
and comers/high potentials
 Each of the six assumptions was given a project plan for
validation and a desired frequency of revalidation

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Challenges of Assumption Proving
 Specific definitions within the assumptions:
 What measurements to use to assess impacts of
changes?
 Timeline for which assumption is expected to hold true
 Key Intelligence Topic and Question development:
balancing the importance of thoroughness with
analysis that is “good enough”
No burdens. Only engaging and valuable work allowed.

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Business Model Analysis and Regulatory
Intelligence
 Utility business models generally very transparent, just
read their regulatory filings!
 New entrants in regulated footprints causing discomfort
 Tweaks to regulatory compacts are small, but
compounding
 Professional services firms can help understanding
competitor developments through business model
analysis and primary research

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German Perspective 2011 to Today: Regulatory
Intelligence
 American disbelief as
Germany transformed its
energy mix, reducing
imported fossil fuels/
nuclear and increasing
renewable generation
 German utilities misread
the regulatory landscape;
lost tremendous market
cap
 Today, general public
acceptance and feeling
that “at least the money is
going to the farmers” New Wind Turbines near Frankfurt, Germany

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Electric Utilities Critical Role to Continue
 Disruption is not providing something that will replace
electricity it is replacing how the power is made and who the
customer pays for it
 Key intelligence areas for utilities to focus on today are in the
Business Model and Regulatory Intelligence areas
 Technology evaluation is important, but competitive success
will require more
 A thoughtful process around intelligence will position a
company to act more quickly than their peers
 Don’t forget to look internationally

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Thank you! Now how about a
little Q&A?
Email: Kvaldez@mapletonsloan.com
The Intelligence Collaborative is the online learning and networking
community powered by Aurora WDC, our clients, partners and other friends
and dedicated to exploring how to apply intelligence methods to solve real-
world business problems.
Apply for a free 30-day trial membership at http://IntelCollab.com or learn
more about Aurora at http://AuroraWDC.com – see you next time!

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