Power to the People

Bob Young is plugging into a career's worth of energy industry experience to lead Central Vermont Public Service Corp. through deregulation

by Pip Vaughan-Hughes

As deregulation sweeps through America's electric utility industry, utilities are losing their traditional status as power-providing monopolies and are facing a new era of free enterprise and competition. That's the case with Central Vermont Public Service Corp. (CVPS), Vermont's largest electric utility. Under the leadership of Bob Young, president and CEO since 1995, CVPS is meeting the challenges of deregulation head-on.

President/CEO Bob Young has been preparing Vermont's largest electric utility for deregulation since 1993. The plan reduced CVPS's employee roster and brought in officers with a variety of backgrounds to compete in an international market.

"It's a drive to take the last major monopoly -- electricity -- and inject competition into it," Young explains. "The other drive is to provide consumer choice," he continues. "Vermont is the only New England state that doesn't have a fully fledged deregulation plan, but we are in the process, and the target is fall of 2001." Young admits, "It's a new world," but one that he is well-equipped to deal with.

"He's smart; he's tough," says Gov. Howard Dean. "He's extremely dedicated to his community. He's an enormous asset to CVPS, and to the state."

"I've been in the energy business my whole career," Young says, "and I've seen it from a number of perspectives." As well as president of CVPS, Young is chairman of the board of directors of Vermont Yankee Nuclear Power Corp., a director of Yankee Atomic Electric Co. and a director of Vermont Electric Power Corp. Since 1997 he's sat on the board of directors of the Edison Electric Institute.

Growing up outside Boston, Young attended Beloit College in Wisconsin before working for Bechtel Power Corp. in San Francisco. At one of the world's biggest engineering firms, he worked on the construction of power plants, nuclear as well as fossil-fuel-powered. He earned a masters in business administration in finance and general management at Stanford, before returning to Bechtel. "I spent two years in Western Canada at a mining and refining plant that synthesized bitumen into crude oil," he recalls, "then came back East to do corporate development in New England.

"I did a lot of work in the gas industry, which was about 20 years ahead of electricity in terms of diversification and restructuring," he says. "I got involved in oil and gas exploration, in developing an insulation company and a propane business." He worked for consultants Arthur D. Little Inc. as a senior management consultant. Then in 1987 he joined CVPS as vice president of finance and administration. "I was hired in part for my experience in the gas industry and with diversification," he remembers. "What is happening today in the electricity business is generically the same as happened in gas. I've been here before."

Young lives in Proctor with Vicky, his wife of 26 years. Their four children are "grown up and gone," he says. One son is an equine vet in California; another is an arborist in Oregon. "Our youngest son just graduated from Norwich University, and he's about to receive his commission in the Marines as a second lieutenant," Young reveals with more than a little pride.

"We lead pretty active lives," he continues. "Vicky is executive director of the Crossroads Arts Organization, and she's very involved in the Rutland area -- on the medical center board and the mental health board." Young is a former trustee of the Vermont Symphony Orchestra. "We both love music," he says. "I became involved in the VSO early in our life here."

Young has a real affection for his adopted home state. "We love Vermont," he declares. "It's not just the beauty of the outdoors, but also how much there is to do from a cultural standpoint. We've done more here than we ever did in Boston. I tell potential hirees: 'You'll be amazed by the cultural life here.'"

CVPS founded Catamount Energy Corp. nearly nine years ago when it started buying small generating plants that rely on renewable fuel or energy sources. Pictured: Mindi Tiraboschi, customer service.

Since coming to CVPS, Young has seen big changes, many of which he has presided over. "I felt very strongly by 1991/1992, when the federal government first became determined to deregulate, that our world was going to change. By 1993, when I became executive vice president, I knew we had to prepare for a very different environment, however far off those changes might be."

CVPS is a $400 million utility, Young explains, with 150,000 customers in Vermont and New Hampshire. "We had to be able to run a cost-effective utility, but also create value for our shareholders." Part of the preparation for change was a dramatic restructuring of CVPS. "We took out roughly 35 percent of our employees," he remembers. "We went from 790 to 530 employees virtually without layoffs. We restructured the board of directors, adding four or five new directors. We knew we were heading towards a national and international stage, so we brought in new officers with different skill sets and backgrounds.

"We do not want to stay in the traditional generating business," stresses Young. "We decided that for a number of reasons. First, it's very competitive but has a low margin of profitability. We're a medium-sized utility in a very small state, so we wouldn't be able to really capitalize. We're a rural company with relatively slow growth. We like being in the transmission business, and we want to stay in the distribution business." Transmission is the high-volume distribution of bulk power; distribution is the process of delivering that power to customers.

While CVPS is moving away from traditional generating, it has by no means abandoned the production of electricity. Catamount Energy Corp. was started almost nine years ago, when CVPS started buying small generating plants -- "from 10 to 150 megawatts in size," explains Young -- that relied on renewable fuel or energy sources. "These are small hydroelectric, wood-burning or natural gas plants," says Young. "We have eight operating projects, and one under construction -- which is a 100 megawatt hydroelectric plant in West Virginia, on the largest remaining (non-generating) hydro site in the eastern U.S."

Catamount is already de-regulated, Young continues, "so we can get a market return. We want to keep on building this business." The company is expanding beyond national boundaries. "We even have a small plant at Thetford, outside London," Young says. Fueled by chicken litter, compost and horse bedding, "It's the largest bio-mass plant in Europe," according to Young.

"We also felt that while we didn't want to be in the electron business in the way we used to be, we did want to find other ways to provide comfort and convenience, particularly to small businesses and homeowners," he continues. "So we did some work with Arthur D. Little Inc. We wanted to discover what opportunities there were for an electricity company in a de-regulated environment, and whether utilities could be effective marketing agencies for products outside their traditional range."

Studies showed that utilities were popular with customers and people trusted their expertise. So the seeds were sown for CVPS's new venture, Home Service Solutions (HSS). HSS acts as a liaison among homeowners and a network of independent contractors such as plumbers, electricians and carpenters. It performs extensive background checks on the contractors, guarantees their work, and provides them with administrative services like billing and bookkeeping; customers pay contractors through HSS for work performed. HSS is marketed through Wal-Mart affiliate Sam's Club, and on a stand-alone basis in states like Vermont, which have no Sam's Clubs.

"It's difficult for utilities to brand things on their own," Young admits. "People don't want to buy CVPS insulation, but if CVPS is recommending Owens Corning insulation, that sounds like a good package." Also, he continues, "if you take the concept of utilities as marketing channels and combine that with the traditional trust that people have for them, you can see opportunities to market other products that people need in a home environment, like financial services and leisure." Although the idea met with the approval of businesses already in the market -- "they thought, 'Wait a minute, this is just an alternative distribution channel, not competition," says Young. There was less enthusiasm closer to home.

Home Service Solutions, CVPS's newest venture, provides administrative services and referrals to independent contractors like plumbers and carpenters. Research showed people trust the advice of utilities. From left: Nancy Mainolfi, John Lafaso and Donna Barrett.

"We spent a lot of time trying to do this with a big group of other utilities, whose footprint would have covered the U.S.," Young remembers, "but they couldn't get to grips with it, especially the idea of home remodeling and repair services, so they backed off. Then we had the opportunity to buy into a business that had been started by a major corporation a dozen years ago but was now mothballed. We bought the business, and decided to go and find some distribution channels to rebuild it." That path led to Sam's Club and TrueServe Corp., owner of TrueValue, which will help market to states like Vermont that don't have Sam's Clubs.

The possibilities are exciting. "This is a $300 billion per year industry," states Young, "and not one company has more than 1 percent of it. It's highly fragmented; ripe for development. HSS is in 61 major marketplaces in the U.S., and there will be over 200 by the end of this year."

This is a highly traditional industry," states Young. "A company of our size might have to take more risks than other utilities," he continues, "but I am a traditionalist. I feel very strongly about our core electricity business -- our heart and soul. I want to maintain and grow this. But my background gave me the opportunity to experience different things. I'm comfortable in taking reasonable risks, without betting the farm. Most of what we are doing now has ties to what we have always done."

"Bob is very skilled at pointing his company in a direction that's conscientious of shareholders' needs," believes Richard Sedano, commissioner of the Vermont Department of Public Service. "He's worked very hard at building the base of the company so that the shareholders can get value, and he's been pretty successful at doing that with Catamount and now with HSS."

But is he regarded as a maverick by the more conservative utilities? "We're not mavericks," Young insists. "We had the advantage of our small size, and had a bigger imperative to do something."

"We may not have been mavericks," says Steve Costello, director of public affairs for CVPS, "but we were at least five years ahead of our time. A lot of utilities are still trying to figure out what they are going to be in the world of competition."

"We had the environment to actually do something, through the board of directors, and the company itself," Young continues. "We're not very bureaucratic. And it's easier to change the direction of a small ship than a big one."

As captain of that ship, Young keeps a firm hand on the tiller, although as Costello points out, "He's a very reluctant person when it comes to tooting his own horn. Bob's a very interesting person," he continues. "I think of a typical CEO as someone very different from Bob Young. He's open, straightforward. He tells you what he expects, gives you the tools to do it, then gets out of the way."

"I would say I'm very involved," says Young. "I like to know what is going on throughout our organization, but I feel very strongly that the reason we have a lot of good people here is that it's their job to keep things running. I rely on these people. I don't like to look over their shoulders," he continues. "I like the free flow of information. I don't like surprises, but I don't mind bad news."

His wide experience within the industry is an asset here as well. "I spent a little time with a small, private oil and gas company. It was a start-up business, and I used to have to worry about basics, like whether or not people are going to get their paycheck on time."

CVPS is a $400 million electric utility, Vermont's largest, with 150,000 customers in Vermont and New Hampshire. From left: John Murphy Jr. and Mathew Ephier.

Young knows the importance of nuts and bolts experience. Since he became president, all the company's officers are required to spend time in the field with the line-workers. "I go out and dig holes and read meters," says Young happily. "You get feedback then, whether you like it or not." Young sees his primary role as "not worrying about today, this month, this year, but the next five years."

"Strategically forward-looking" is how Young likes to describe himself, and the future for CVPS looks set to be one of expansion and change. "Catamount is just in the U.S. and Britain at present," he says. "We're partners with Rolls Royce in a new gas-fired project outside Birmingham, England, and we're looking at other projects in England, Ireland and Italy, as well as the U.S. and Canada."

Costello believes HSS is the fastest-growing home maintenance and improvement business in the country, and CVPS is always looking for new areas of diversification. Years of working with dairy farmers on ways to improve their energy efficiency led to the development of Smart Drive controls. "We've taken vacuum pump technology and turned it into a range of products aimed primarily at the dairy industry, which we hope to sell around the world. Basically," Young explains, "it's a variable control that regulates the milking pump according to need, and reduces power consumption by up to 80 percent.

"I hope that the whole restructuring process will be over in Vermont by next year," says Young. "Then we can focus on very interesting things. I see an environment in which we can continue to bring traditional values and services to our core customers, and some not so traditional ones as well. And we can also grow on the outside," he continues.

"We want to remain rooted in this state, but as a company with roots worldwide, too, bringing value back to the people of Vermont."

Pip Vaughan-Hughes is a free-lance writer recently arrived in Vermont from London.