Conversations about the utility of the future inevitably revolve around disruptive technologies and new business models. But there’s another factor that is an undercurrent to all these conversations: the evolving workforce. What will happen to energy utilities, and utility regulation, as Millennials enter the field?
Yesterday I had the fortune to give a presentation on this subject at switch~ 10.
This post lays out the data and analysis that went into my talk. Because that could only be 5 minutes long under the Pecha Kucha format, I’ve supplemented it with a considerable amount of further information and analysis.
My interest in the subject came about because of an anecdote on futurism from The Atlantic:
Terry Grim, a professor in the Studies of the Future program at the University of Houston, recalls a video she saw from the 1960s depicting the office of the future. “It had everything pretty much right, they had envisioned the computer and fax machine and forward-looking technology products.” But there was something missing: “There were no women in the office,” she said.
Overall, we’re better at anticipating technological futures than social futures. So I started to wonder: what are our blind spots in the world that I work in, the regulation of electric utilities?
Acknowledgments: Special thanks go to Sammy Reifer, who has been gently reminding me to work on this for a few cycles of switch~, and who encouraged me to submit the proposal. Thanks also to my partner Justin for helping me refine the flow and the data used in my presentation.
UPDATED TO ADD: Thanks to switch~, here’s the video!
Slide 1: Introduction.
Tonight we’ve heard a lot about technology and best practices, but I want to talk about people, and specifically, the people who make up our energy workforce.
Slide 2: Who This Presentation Focuses On.
There are three groups of people I’ll talk about. First, utility employees. Second, the staff of the state agencies that regulate those utilities. Third, the elected or appointed decisionmakers of those agencies.
Slide 3: The Utility Workforce Is Aging.
Roughly 25% of utility workers will be eligible for retirement in the next five years. Certain areas, like power generation, will be hit harder. While the nation’s overall workforce is aging, what’s different is that utilities expect to be short about 80,000 skilled employees by 2030.
In 2016, Utility Dive’s annual State of the Electric Utility found that an aging workforce was the #1 concern of the utility executives they surveyed. There are as many permutations of the percentage of utility employees who will be eligible for retirement within some near future as there are employees ready to retire. As near as I can tell, the 2017 Quadrennial Energy Review (QER) has the most reasonable/accurate/sourced statistics (p. 1-27):
- 25% of employees eligible to retire within 5 years; and
- 15% of lineworkers, 19% of technicians, 17% non-nuclear plant operators, and 15% of engineers may retire from 2016-2020.
This may disguise a large number of linemen who have already retired, given that a 2006 Department of Energy report noted that as much as 50% of the lineman labor force could retire in 5-10 years–meaning now.
This isn’t out of line with the nation’s overall workforce, which is aging. The median ages in the slide come from 2016 labor force statistics from the Bureau of Labor Statistics (BLS). There are a few industries that are “older” than utilities — real estate and agriculture. And funeral homes. However, an important takeaway is that certain portions of the workforce are more at risk than others, including rural utilities, specialized technical skills, and utility executives. PriceWaterhouseCoopers found that as of 2012, over 60% of power utility executives would be eligible for retirement within 5 years–likely because of lower hiring levels in the 1980s and 1990s, reducing the pipeline to executive status.
Slide 4: Commissions Are Aging.
Public utility commissions are experiencing this challenge too. California, Texas, and Hawaii have all admitted to concerns about losing institutional knowledge due to retirements, even as they find it difficult to fill vacancies.
As near as I can tell, there is no nationwide data on this issue–just the general sense that commissions are “graying.” I drew on some anecdotal evidence for this assertion, but these sources also reveal other workforce issues, like industry competitiveness:
- The Texas State Auditor’s Office issued a workforce plan for the Public Utility Commission of Texas that included demographics for its 167 full-time employees (FTEs) as of fiscal year 2014. The average age for its employees is 46 (p. 7), and over a quarter of its employees will be eligible to retire during 2014-2019 (p. 12). While the PUCT is experiencing turnover rates slightly less than Texas state agencies generally, a significant amount of it is coming from employees with 2-4 years of service, meaning retention is a challenge (p. 10).
- A 2015 internal audit observed that there was limited workforce planning at the California PUC, in part because the agency “struggles to identify strategic priorities and plan or forecast its workload” (p. 14). The Energy Division specifically “considers knowledge loss a major risk” given that the only three employees with detailed cost of service experience may retire soon (p. 30). Last year, the California PUC added 58 external hires while it lost 62 staff, half of them to retirement. In an interview, Chairman Michael Picker noted that it currently has 20% vacancies. California Energy Markets, Feb. 10, 2017 (No. 1423) (subscription only). At full capacity, the California PUC would have about 1,300 FTEs.
- The Hawaii PUC shows another dimension of the issue, which is hiring and retention in a competitive marketplace. While authorized for 65 employees, it currently has 10 vacancies, according to local media. Earlier articles (2011, 2014) reveal this challenge has been going on for years, highlighting the difficulties that the Hawaii PUC has in being competitive with private industry.
According to Public Utilities Fortnightly, there are about 8,300 PUC staff around the country. While states can differ, they tend to fall into the categories of “advisory” (supporting the commissioners) and “trial” (participating in proceedings), with others in compliance, education, and operations. While I don’t have supporting data, I’ve observed that they tend to come from economics, engineering, or legal backgrounds. Higher ranking PUC staff may also have worked for the utilities they regulate in the past, meaning they skew toward older, and reflect some of the demographics of the overall utilities industry that I’ll reference farther below. (Regulatory historian Richard Hirsch, in Power Loss, describes the opposite trend–former commissioners defecting to executive positions in utilities.)
I focused on staff rather than commissioners because there is at least some evidence out there that this is an issue for commission staff (and commissioners have terms so retirement isn’t as clearly an issue). However, commissioners skew toward older as well. IPU’s Commissioner Demographics 2016 report found that about 20% of sitting commissioners had 10 or more years of experience. Nebraska’s commissioners have a combined 75 years of experience sitting on the commission.
Slide 5: The Danger Zone
Transitioning retiring staff and onboarding younger employees creates a risk to institutional knowledge so great that it’s drawn the attention of national reliability bodies. Moreover, utilities and their regulators have to solve this challenge together to avoid unevenness.
A 2013 report by PricewaterhouseCoopers, Power and utilities changing workforce: Keeping the lights on, highlights risks due to retirement that range from loss of institutional knowledge to inability to continue using legacy software to overall reliability. As early as 2006, the North American Electric Reliability Council (NERC) issued a Long-Term Reliability Assessment that recognized that the aging utility workforce was a key challenge to electric reliability (p. 25-26). A report issued by the U.S. Department of Energy (DOE) in the same year expounded on one reason why reliability is such an issue: lineworkers may be retiring at a higher rate than the overall utility workforce, and it takes 4.5 to 7 years to train a lineworker to be a journeyman (see, e.g., p. 7).
Slide 6: #Millennials
While Baby Boomers make up the largest share of utility employees, Millennials are beginning to step in. Millennials are now the largest living generation, meaning the only thing more prominent than Millennials is thought pieces about Millennials.
While the range is a bit fuzzy, the Pew Research Center defines them as people who were 18-34 as of 2015 (so turning 20-36 this year). That same article states that we have now surpassed the Baby Boomers as the largest living generation.
Millennials are noticeably beginning to enter the utility workforce. According to the Second Installment of the DOE’s Quadrennial Energy Review issued in 2017, even as the largest share of electric and natural gas utility employees aged from their late 40s to their late 50s between 2006-2014, those in their late 20s and early 30s gained ground:
What this shows is that between 2006 and 2014, more Millennials entered the utility workforce, making them now second only to Baby Boomers who are nearing retirement. According to the QER and other sources (for example), utilities generally didn’t hire as much in the 1980s and 1990s due to mergers and restructuring, which has created a generational gap where fewer Gen Xers entered the field. This is one of the major reasons why I think it’s critical to tackle the issues I lay out in this post head-on.
[One thing I love about that Electricity Journal article I just linked to? It suggests recruiting people to the industry through a TV show that focuses on heroic electric workers.]
A couple of other sidebars that didn’t make it into my presentation, but I think add some intriguing dimensions:
- Millennials are more interested in mission-driven work than recent generations (at least, there are a surfeit of thoughtpieces out there asserting this–mostly without data, but this Fast Company article includes various references and surveys to support its claims). Both public power and rural electric cooperatives have aimed to draw new employees from that perspective.
- Numerous articles and reports (see, e.g.) assert that Millennials are more progressive than prior generations — while generally true, this betrays pretty glaring polarization based on race and geography. An analysis on 2016 exit polls by the Center for Information & Research on Civic Learning & Engagement (CIRCLE) found significant variations in who voted for Trump vs. Clinton based on race (p. 5) and urban/rural designation (p. 6). This appears to cover only voters aged 18-29, so not quite the full range of Millennials.
- On average, Millennials are more likely to have completed a bachelor’s degree than prior generations, with particular gains for Millennial women–Pew Research Center asserts that we are “the most educated generation” (possibly in part due to deferring work in the recession…).
Slide 7: Generational Views on Climate Change
There are a couple of trends that distinguish Millennials from prior generations and are relevant here. First, we tend to be more concerned about climate change and more supportive of clean energy, including rooftop and community solar.
This information comes from the University of Texas at Austin’s Fall 2016 Energy Poll (see charts and press release), a survey of about 2,000 Americans. Additionally, Pew Research Center found that Americans aged 18-49 are more inclined to consider solar than older Americans, and research by ESource roughly supports younger Americans’ positive views of solar. This article is anecdotal, but it does raise an interesting point, which is that Millennials are less likely to be homeowners and therefore may find community solar appealing.
I find this a bit hard to reconcile with the statistic that indicates that Millennials are less likely than prior generations to consider themselves environmentalists, but it might be our supposed tendency toward dismissing “labels.”
Slide 8: “Digital Natives” (image credit)
Second, we grew up with technology. We may have generational differences in perspective on privacy, security, customer service, and how we want to engage with the world around us that could impact our relationship with energy and utilities.
I find the whole “Digital Native” thing a bit weird (source of term comes from this 2001 article by Marc Prensky)–just because Millennials use technology regularly doesn’t mean we know how to assemble a computer. But we do seem to have a different relationship with technology than prior generations, particularly in areas like privacy. Slate provides some interesting examples of this, as does the Pew Internet and American Life Project (which, I’ll note, found that being knowledgeable about cybersecurity was more correlated with education level than age).
Slide 9: Racial Characteristics (1)
A third distinction relates to diversity. The current racial demographics of utilities and utility commissioners tend to reflect those of the Baby Boomer generation. Because PUC staffs sometimes draw from former utility employees, I expect that their demographics may be similar.
Utilities have made progress in diversifying their workforce, but they remain disproportionately white. The 2017 U.S. Energy and Employment Report breaks down the workforce in a number of ways. While there are also statistics for power generation and fuels (both fossil and renewables), this slide uses data from transmission, distribution and storage utilities–over 400,000 workers (table 7, p. 57).
The breakdown of commissioners by race comes from a dataset I created using Ballotpedia, NARUC, and PUCs’ websites. You can download this data here. It includes 198 current regulators, who have served for an average of 5.1 years each (5.6 years for men and 4.1 years for women). I did my best to denote everyone by the correct race or ethnicity, but if I need to correct anything I will do so promptly. This updates more extensive datasets from IPU (see 2016), although IPU does not collect race. In a previous post, I performed an extensive analysis of gender among PUC commissioners.
In general, there’s almost no information about the demographics of commission staff. California is the largest commission in the country, and according to correspondence, they don’t explicitly track this. Neither do NARUC or Public Utilities Fortnightly.
I was able to find only two examples addressing this workforce, both of which come from commissions that have long had some reputation for diversity. The D.C. Public Service Commission (DCPSC) was recently recognized as one of the most diverse commission staffs in the country, according to Public Utilities Fortnightly magazine. According to The First 100 Years: Protecting the Public Interest, 80% of staff were non-white, 50% were women, and 20% were foreign-born as of 2013 (p. 10). In addition to the DCPSC, the Texas State Auditor’s Office report referenced for Slide 4 provides demographic data that indicates that about 46% of the staff is non-white, with a quarter of the staff being Hispanic.
Certainly, whether a commission is “diverse” is a geographic question as well as a numbers question. My suspicion is that, as state agencies, commissions probably do have better diversity statistics than the rest of the industry, but general perceptions from people I’ve spoken with anecdotally suggest that this is an issue and that DC and Texas may be outliers.
Slide 10: Racial Characteristics (2)
Millennials, on the other hand, are the most racially diverse generation of adults. Hispanic and African-American Millennials now make up a significant proportion of those minority groups. Millennial diversity will dramatically change the demographics of the nation’s workforce by 2030.
Millennials are the most diverse adult generation to date, and subsequent generations are only increasing U.S. diversity. This data comes from Pew Research Center’s 2015 article, Comparing Millennials to Other Generations.
To be completely clear, I used a population diversity comparison instead of a workforce diversity comparison here. Millennials are now the largest generation in the workforce, but there are still a large number of them aged about 18-24 who are in the university system or some other continuing education program. This means that workforce projections may be more relevant than the precise workforce breakdown right now. (A 2016 Utility Dive article noted this as well.) According to a 2015 BLS article, the participation of non-whites in the workforce, and particularly Hispanics, will grow significantly by 2024, to about 40% overall.
Slide 11: Gender Characteristics
While we’re talking about demographics, I’ll also note that there’s a gender disparity at utilities and commissioners, and this may extend to the witnesses that provide evidence in front of commissions, who are often former commissioners or commission staff.
One of the things that’s interesting to me is that if you look at that Pew Research Center article I just cited, it indicates that Millennials and Gen X are not significantly different when it comes to women participating in the workforce, women completing college degrees, etc. But Gen X didn’t enter the utility workforce in as significant numbers as the Baby Boomers, meaning the demographics are a closer match to that generation. This is as stark with gender as it is with race. This uses the following data sets:
- U.S. Workforce data based on gender, age, and race (2016) from BLS, available here.
- Gender of commissioners comes from the dataset referenced under Slide 9.
- If you download that spreadsheet, you can also see the tab that I used to assess the gender of expert witnesses in general rate cases. The assessment that 75% of witnesses testifying in PUC rate case proceedings are male comes from a sample I took of all witnesses in four utility proceedings filed in 2015 and 2016. You can read more about how I created that dataset, and what it does and doesn’t mean (and why it’s important), here.
Gender representation could be better among PUC staffs. The reports from the PUCT and DCPSC referenced in slides 4 and 9 indicate that their staff is about 50% female. While I thought perhaps that was because of the inclusion of administrative and support services, the PUCT’s 2014 workforce report indicates that about half of the professional staff is made up of women (p. 8)–while I’m not completely sure, I think that would include economists, engineers, accountants, etc. So again, while there is not a lot of data, commission staff may be performing “better” than utilities and commissioners on this metric.
Slide 12: Disruption Ahead (image credit)
These characteristics of incoming workers – environmental views, use of technology, and diversity – could have profound implications for how utilities operate, how regulators regulate, and how people use energy more broadly.
There are several articles that cover the implications of a Millennial customer base for how electric utilities operate due to interest in technology, strong environmental beliefs, and other factors. That isn’t quite the focus of this presentation, but it’s certainly relevant in that Millennial employees and Millennial consumers may share the same preferences. You may be interested in these articles from Accenture, Deloitte, and Brookings (which point out the need for the electric industry to up its “cool factor”).
Slide 13: Utility Business Model Evolution
While there are other correlations–such as having some degree of retail choice or having large cities–states that are actively considering changes to the utility business model tend to have commissions with higher than national average diversity in gender, race, or both.
When I say “traditional electric utility business model” I mean rate regulation using cost of service. Some states are exploring alternatives, including performance-based regulation, to greater or lesser degrees. Typically, the objective is to align utilities with growing customer desire for clean energy, but enhancing competition can be a factor as well. Utility Dive provided a good list of states with new and ongoing proceedings that look specifically at the utility business model (not just grid modernization, which doesn’t necessarily change the business model). For more information, see Lawrence Berkeley National Laboratory’s Future Electric Utility Regulation Series.
Like I said, this isn’t a slam dunk, but New York (prior to two departures at the end of 2016) and Minnesota include a higher than average proportion of women, and Hawaii, California, Illinois, and Ohio have commissioners of color represented at a higher than average level.
Slide 14: Why Diversity Matters
Embracing this diversity benefits energy regulation. First, evidence suggests that more diverse teams make better decisions by focusing on facts. Second, commissions make decisions about the public interest, so they should hear different perspectives about what that means.
I don’t think I have to belabor this point for this audience, but Harvard Business Review (HBR) summarized various studies that suggest that diverse teams function “better” in that they tend to focus on facts and build common ground–in other words, they make fewer assumptions than homogenous teams. HBR notes that businesses tend to perform better when they have more diverse boards, and a utility-specific study produced by EY in 2016 found that utilities with more-diverse boards had higher return on equity than utilities with less-diverse boards (p. 9).
Moreover, PUCs are tasked with regulating “in the public interest.” Generally, the public interest is some combination of ensuring utilities make a high enough return that they can cover their expenses, preventing customers from being charged excessive rates, and ensuring basic health and safety standards are met. Some states, like Colorado, include a degree of environmental health in the public interest. But commissions can weigh these factors in different ways, and broader conceptions of the public interest may be justifiable.
Slide 15: Barriers to Entry
But there are barriers to entry for younger people beginning their energy careers. It’s challenging to learn how to operate effectively in energy regulation any way except working in energy regulation. I want to highlight four near-term approaches to help with this transition.
Yes, that’s my bookcase. I provide more information about what’s on it in this post.
While I don’t highlight them much in this presentation, there are other barriers, including the ability of commissions and utilities to pay enough to attract high-quality employees. (The article on Hawaii on Slide 4 covers this a bit.) I’ve heard anecdotally that there’s competition within the industry too, with utilities often better-positioned to recruit people from commissions to higher-paying jobs. There’s the added factor that utilities just haven’t been perceived as creative or sexy since World War II. I think the work that some utilities are doing with regard to distributed energy resources could change that perception over time, but I won’t comment on whether all of that work is “good” or “bad” per se, so much as that it’s very interesting.
Additionally, the proposals I put forward are far from the only ones–I picked four that I personally found significant. A 2014 Forbes article made several other proposals on outreach, education, and changes to the work environment.
At this point, you may be wondering: are there any Millennial regulators out there? There have been commissioners in various states as young as 29, but they weren’t Millennials. While there are likely a couple of other Millennials out there, I was only able to verify one: Travis Kavulla of the Montana PSC, former president of NARUC.
Slide 16: Cultivate Diversity (image credit)
First, we have to be intentional about cultivating a diverse workplace, which won’t always be easy. For example, while a recent survey indicated that utility professionals’ top concern is cybersecurity, that industry has its own diversity problems.
There are a few existing initiatives that are working to cultivate diversity in energy, such as the National Utilities Diversity Council and Minorities in Energy. Much of this focuses specifically on utility employees (and analyses indicate they have made progress in recent years) as well as suppliers of utilities, the latter being an area in which California has demonstrated leadership. I’m not aware of any similar initiatives specific to commissions–I would assume that as state agencies, there may be some work done at the state level on behalf of the public sector more broadly.
I highlighted cybersecurity here because the 2017 State of the Electric Utility Survey report by Utility Dive found that cybersecurity is now the area of biggest concern to utility professionals (p. 17). This means there’s likely to be a fair amount of hiring in this area. Unfortunately, the cybersecurity workforce has its own troubles with diversity, which is important because there may be differences in how men and women use technology. Utilities and regulators will hopefully be cognizant of these kinds of issues while hiring for particular skills.
Slide 17: Refocus Regulatory Education (image credit)
Certain skills that are valued in the regulatory arena, like the ability to perform a cost of service study, are at risk of dying out. It’s worth considering a range of options from online courses to trade schools to ensure that the mechanics are being passed on.
I think there are some gaps in current offerings related to regulatory education. If you figure out that you want to be in the field early enough, there are undergraduate and graduate offerings at a few universities (although this Energy and Policy Institute report is worth reviewing if you’re considering this option). The Regulatory Assistance Project (RAP) provides some great “101” resources but its audience is more geared toward commissioners. NARUC provides a range on programs, including the more entry-level Rate School, in conjunction with the Institute for Public Utilities (I did attend this in 2015 and it was very useful). But I’m not sure there are a lot of mid-level options to learn the mechanics unless you (1) work at a utility, (2) work at a commission, or (3) have another employer who will fund you going a large number of conferences and trainings.
Slide 18: Pair Older and Younger Workers
Both retiring and younger workers may benefit from being paired for mentorship and even oral histories. Older workers tend to pass on their experiences verbally, meaning these tools can help collect institutional knowledge.
Mentorship is critically important to learn the ropes in an industry like energy and utilities. Almost nothing is ever really “new”; often it was considered in different contexts twenty or thirty years ago. The 2015 workforce audit of the California PUC mentioned in Slide 4 highlights particular successes in pairing new and retiring workers for knowledge-sharing.
But beyond mentorship, I think oral histories could be an interesting way to collect institutional knowledge. Most oral history programs tend to be run by universities or libraries. “Corporate” oral histories about the evolution of practices within a company are a relatively new tool, although I recently learned that EPRI has done some work in this area (see PSE&G case study). If you know someone who has a long history at an electric utility or in utility regulation who might be willing to provide an oral history, contact me!
Slide 19: Improve Data Tools (image credit)
Finally, we should support regulatory agencies to upgrade their data tools. The Washington Utilities & Transportation Commission is piloting an automated data transfer process that is making their review of utility filings less manual and more efficient.
Commissions perform important compliance duties–verifying that utilities are meeting financial, safety, reliability, and other requirements. However, much of this work has historically been manual. Utilities file hard copies (increasingly more electronic, although not always executable) and then staff have to transpose that information into a format that can be analyzed and compared. This could be particularly discouraging to Millennials; a 2013 Wired article discusses frustrations of younger workers in trying to figure out where information is and who the custodian is.
The Washington Utilities and Transportation Commission (WUTC) has been piloting a new way of verifying compliance by using XBRL data language–already used by the Securities & Exchange Commission–to create automated data uploads from utilities. According to this presentation, WUTC is in the process of expanding the pilot to include multiple industries and different filings. Danny Kermode, the WUTC’s Assistant Director for Water and Transportation, told me by email that the pilot has attracted interest from numerous other states and that they’re looking at it partly from a workforce perspective–new workers will want not only access to better data, but tools they can use to manage it.
Slide 20: Conclusion
There’s a generational divide in energy, and it’s not just renewables vs. fossil fuels. But we have a phenomenal opportunity to cultivate new voices and perspectives in energy, and I hope we choose to take it.