SDG&E; President Moves Utility Into New Era
The second chapter of the Tom Page era at San Diego Gas & Electric Co. has unfolded as top executives have been shuffled into new positions to plan for the firm’s eventual diversification as an energy management company.
Realigning several top slots, Page late last month divided the company into two major components--utilities and non-utilities. The move signals the first time that the company will venture seriously and with a master plan into businesses other than oil and gas.
Moreover, within the utilities segment, gas and electric operations will function separately and may even compete with one another.
The competition and reorganization rings with a spirit of entrepreneurship and is indeed a different approach to the stodgy utility industry of years past.
Counters Reactive Philosophy
The move is designed to counter what Page conceded has been SDG&E;’s reactive business philosophy, at the mercy of “whatever walks in the door.”
“We’re going to be stronger and do things more aggressively,” he said in a recent interview. “There is a different and proper use for each of our energy products. We are re-establishing a marketing program to more aggressively (promote) the attributes of each.”
Reducing electric peak load--”demand-side management” in utility parlance--will become one goal, Page said.
For example, the utility plans to push for commercial gas air conditioning to take the place of new electric systems. “That suppresses our electric load and provides gas load at a time when gas is just limping along waiting for winter,” he said.
New Top Posts
Organizationally, Page replaced his three group vice presidents with an executive vice president for utility operations, Jack Thomas; a senior vice president-finance, Richard Korpan, and a senior vice president-consultant to the president, Harold A. Monsor, who will be responsible for the company’s diversification and its new look as an energy management company.
Reporting to Thomas will be Al T. Davis, senior vice president of gas operations, and Gary D. Cotton, senior vice president of electrical operations.
Thomas had been group vice president of customer service. Korpan had been group vice president of finance, and Monsor had been a consultant to Page. Davis was group vice president of operations, and Cotton was vice president of engineering.
Also reporting to Thomas will be the public relations division, headed by Richard Manning, a vice president. Manning previously reported directly to Page.
Second Refocusing
The reorganization, approved by the board of directors, represents the second time the utility has refocused its efforts in the past six years.
In 1979 Page and Korpan fashioned a five-year financial plan that reversed the firm’s poor financial positions and raised the company’s bond rating from triple-B to A.
That plan was the first chapter in the Page era. The reorganization to expand non-utility ventures is the second.
The diversification--which may include establishing the utility as a holding company--will expand both the firm’s existing but sleepy non-utility operations and develop new ventures.
SDG&E; now has a handful of subsidiaries whose activities Page describes as “modest.”
They include a 20% stake in Applied Energy Inc., the co-generation subsidiary spun off two years ago, a land company and a financing operation.
Various Options
Among diversification options are co-generation, land development, engineering, laboratory work and consulting.
“It won’t be the pizza business,” quipped Page, adding that he is looking for “something where we can bring some talent (and) money.”
Included in the plan may be acquiring an existing company and a portion of an existing power supply in hopes of fighting off what Page described as the firm’s “deficient” energy supplies in the 1990s.
Page admitted that some veteran SDG&E; employees, accustomed to the predictable utility industry of the past, may find it “very difficult” to adjust to the new entrepreneurial spirit.
Employee Questionnaire
It may only be a few months until Page finds out what workers think about the firm’s new direction: Its 5,000 employees are now finishing a confidential 34-page questionnaire designed by The Hay Group, a Philadelphia consulting firm, to measure workers’ attitudes about SDG&E.;
The survey--with more than 60 questions--will be conducted every two years, according to company sources.
The last such survey at the utility was conducted in 1953.
Meanwhile, Page said he isn’t worried about industry speculation that utilities have become “cash cows,” ripe for takeovers. (SDG&E; now has about $150 million cash on hand.)
“I don’t perceive (takeovers) as a real threat,” Page said. But he conceded that management has “talked about” the possibility.
‘Let Them Come’
“If someone wanted to do that, they’d have to offer more than 120% of our book value,” he said. “If someone comes in and thinks they can make a regulatory rate of return on equity of 20% on good will, let them come.”
SDG&E; stock closed trading Monday at $23. The stock is trading at 125% of book value.
The utility’s board of directors isn’t the only group interested in its diversification plans.
The Utilities Consumer Action Network (UCAN) also is concerned, but for different reasons.
Holding Company a Concern
“I’m not afraid of a utility setting up an energy management company, but I’d be worried if they set up a holding company and went into non-regulated businesses,” said Garry DeLoss, UCAN executive director.
The problem, DeLoss said, is that the utility “could divert management resources away from making SDG&E; more efficient.”
Other utility holding companies in California include Pacific Lighting, which owns Southern California Gas Co., and Pacific Telesis, which owns Pacific Bell.
Page insisted that the diversification and talk of a holding company is not an “attempt to escape regulation.”
Although SDG&E; will have its tentacles in a variety of businesses by 1990, all of them will likely be related, Page said.
