Competing in the year 2000 and beyond: how the new strategic priorities drive NRECA initiatives in training and education.

• Author: Boudreaux, Greg
• Position: National Rural Electric Cooperative Association

NRECA has engaged in a number of activities designed to assess the key strategic issues facing the rural electric program, and has found these issues to be effected by the two key driving forces of increased competition and the significance of system diversity. The conclusions drawn from these strategic planning efforts formed the three broad concepts of competitiveness, community and competence in response. These concepts will drive NRECA in the years to come, including in the Management Services Department to provide the training and education opportunities for directors, managers and management.

INTRODUCTION

In the past year NRECA engaged in a number of activities to assess the key strategic issues facing the rural electric program. These activities were driven by a clear sense that the electric utility industry is changing and that the issues and challenges we must face will be far more difficult than in the past.

With these challenges comes increased need for new initiatives to assist directors and managers. It is NRECA's job to help identify and explain these challenges and to ensure that training and education programs are in place so that directors and managers can acquire any skills they need to help guide their systems into the 21st century. But what are the issues and what are the key skills that managers and directors will need? This article will summarize our assessment and show how this leads to a new focus on the director and management competencies that we believe are critical to our program's health and survival.

THE KEY ISSUES

NRECA's assessment of our industry involved a number of related activities:

* The formation of the NRECA Board Strategic Planning Committee

* The development of the Futures Study

* Strategic planning within each department at NRECA

* Strategic planning at the NRECA executive level to incorporate the results of the above.

The issues addressed at each level were affected by two driving forces:

1. Increased competition. The electric utility industry is entering a new phase characterized by aggressive competition. One manifestation is the increased number of threatened rural electric buyouts. For example, the Central and South West Corporation is a Texas-based holding company that owns two investor-owned utilities that have been directly involved in attempted rural electric buyouts. It is interesting to consider what is said on the cover of the Central and South West 1993 Annual Report:

   The electric utility industry faces a restructuring resulting from competition that will cause dramatic changes in the way it does business. In this new competition, some utilities will win and some will lose. We are shaping Central and South West Corporation to win.

   What Central and South West says on its Annual Report is now openly discussed throughout the industry. Many investor-owned utilities are downsizing or seeking other methods to improve their competitive positions, including merging with other IOUs or attempting to take them over. And within our own segment of the industry, we face more attempted buyouts than at any point in our history. Competition is truly the driving force.

2. The significance of system diversity. With the growing threat of buy-outs, there is also a growing recognition that rural electrics have grown extremely diverse over the past decades. They are diverse in terms of size, rate of growth, geographic location, consumer expectations. neighboring competitors, and local strategic issues that must be faced. Diversity means that one size does not fit all, that there is no single solution that systems must undertake to meet the new competitive threats.

   Our response to this has been to identify four broad categories of rural electrics that we call "diversity groupings." The four groupings are:

   * Large, high-growth systems. These rural electrics serve over 40,000 consumers and have high rates of growth and consumer turnover. Many of these systems may add 8,000 or more new consumers each year, and annually they may process 70,000 service requests. They commonly serve suburban territories with a high proportion of commercial and industrial loads, and these factors attract the interest of potentially aggressive IOUs. High-growth systems tend to be surrounded by and intermingled with IOUs, greatly increasing the competitive pressures. Although there are only about 35 rural electrics in this category (representing about 4% of all systems), they serve 20% of all end-use rural electric consumers.

   * Transitioning systems. The second group consists of systems that are not as large as the high-growth systems, but which share a number of other features. They often serve non-agricultural regions, have a high proportion of commercial and industrial loads, and have generally higher rates of consumer turnover. In general, transitioning systems are highly attractive to aggressive IOUs. For example, Lower Valley Power and Light serves Jackson Hole, Wyoming, and the areas around the Yellowstone and Grand Teton National Parks; Florida Keys EC serves 27,000 consumers, including a large proportion of commercial loads, in a very unique service area: La Plata Electric serves the town of Durango, Colorado, and a large number of commercial and industrial loads.

   * Agricultural systems. The third category consists of systems that are average in size: that serve primarily residential and agricultural loads; that have moderate, no growth or even negative growth; and with generally lower rates of consumer turnover. In 1993 about 220 rural electric systems, primarily located in the middle of the United States, had less than a 1% increase in the number of...