Viewpoints : Passing a Baton for the Future of Energy

Next Sunday, Howard P. Allen will retire as chairman and chief executive of Southern California Edison, one of the nation’s largest utilities. Allen, who joined the company in 1954, piloted the utility through the 1980s and is an architect of its controversial plan to merge with San Diego Gas & Electric. Before joining Southern California Edison, he was an associate dean and assistant professor of law at Stanford University.

Allen shared insights from nearly 40 years in the utility business and in management with freelance writer Sharon Bernstein and spoke about his plans for the future.

Why are you retiring?

Because I’ll be 65 in October, I’ve been there almost 37 years, and it’s really time for younger people who are more in tune with the times to take a look at the direction of the company and guide it for the next 15 years.

I think that you lose some of your whip, mentally and physically, after 65. I think I am an exception, but every guy that’s been a CEO thinks that, too, and an institution as massive as Edison and as responsible for the energy base, environment and all the other things ought to get looked at critically from the top through different eyes every 10 or 15 years.

Times change, demands change, values change, and institutions ought to change, particularly ones that are charged with a public service obligation.

Why are you leaving before the merger process with SDG&E; is completed?

Because I’ve seen the mischief that egotistical chief executives--who think they’re better than they are--have played or caused in organizations when they had excuses for not getting out at normal retirement.

But hasn’t this project been your baby?

Yes, and by staying on for a year as a consultant to the new management I can achieve and carry on all the obligations I made for the merger without messing up the normal rules of operation for a company, meaning the rule of 65 retirement. I think I can achieve the best of both worlds and still do the thing that is right for the organization and not for the ego of the chief executive.

I don’t have the energy I had at 40 or 50. I think I have more wisdom, I think my decisions might be better, but you’re spoiled as a chief executive. You’re the boss. And it’s awfully easy to kid yourself and cause unnecessary problems.

Do you still believe that a merger is the way to go?

Absolutely. It will mean lower rates, better service, cleaner air, a better place for employees to work and progress. It will give the owners a market that includes San Diego and Orange County, and putting the two together will give us the best market in the world. It will enable us to use all of our generation facilities to create economies of scale, which will not only make it a better company but allow lower rates for consumers.

What is your assessment of current efforts to conserve energy?

Since the 1973 Arab oil embargo, we’ve made tremendous strides in this country in conservation and in energy efficiency. But even though our houses and products have become more efficient, we’re using more energy than we ever have. There are more microwave ovens now, people are using their air conditioners more. Our expectations in terms of quality of life have increased, and the use of energy is going up.

We’ve got legislation that requires conservation measures in new residential homes, like double-paning of windows, minimum insulation and fluorescent lighting. We haven’t been able to make a lot of progress in retrofitting older homes. People don’t want to spend $1 for a light bulb when they can get one for 50 cents.

We’ve made probably the minimum gains in residential. We’ve made tremendous gains in industrial, where they could afford to put investment capital into energy-saving equipment.

Have you learned anything from working with the environmental groups and community activists?

It’s surprising what you learn by listening. That’s one of the things you learn with age is to listen more and talk less. I think in the early days, 20 years ago, when utilities felt they were to provide electricity at the lowest costs and they didn’t want to be bothered with the environment or conservation, they thought some of these people were kooks. And as we got to work with them, in environmental, conservation and equal opportunity areas, we found that these are intelligent, responsible, public-spirited and sensitive people. You may not agree with them 100%, but if you work with them, you can better the public results, and that is really for the betterment of society as a whole.

I learned it most recently with (consumer and employee advocate) Robert Gnaizda. When he wanted to talk to me about better opportunities for minorities and women, I didn’t want to meet with (his San Francisco-based Public Advocates group) initially, because I thought they’d want quotas and things I didn’t believe in. But when I met with them, after 10 minutes I saw they were honest people who had legitimate gripes and concerns, and any decent management had a responsibility to work with them in terms of upward mobility and prejudice.

I thought he had horns in his damn head and was a pain in the ass. And I was so ashamed when I met with him and he was this extraordinarily sensitive and intelligent guy.

Is enough progress being made to improve air quality?

No. We’ve made tremendous progress in the Los Angeles Basin in many of the larger industries. But you’re not going to do anything about air in the Los Angeles Basin without doing something about the automobile. For the third time in my career, we’re going to bring out electric cars. But even if we take care of the cars, we have dry cleaners, back yard incinerators--I don’t know what the answer is. I think this “electro technology” of doing more with electricity than with combustion at the industrial and commercial levels is going to have over the next 20 years a significant improvement in air quality from smaller industries. You can make them more efficient and control emissions much better.

What are the most serious problems facing utilities today?

Changing to meet changing societal needs. I think we’re going to have to be more market-oriented in delivering to the people what they want, not what we think they want. Maybe we’ll have to finance their electric automobiles for the short run, or rent efficient refrigerators. But I don’t think we can do it the old way in the traditional sense. That’s another reason I want to get out, because I think more traditionally.

What is your best memory of your 36 years at Edison?

Becoming CEO. You have the authority and you’ve got to take the blame. And if you’re action-oriented and you enjoy making decisions and leading people, helping them, it’s a unique opportunity in life.

What is your biggest regret?

I think not acting soon enough on matters that I knew had to be corrected because they involved good individuals. These are tough decisions: transferring people, firing them, eliminating jobs, reallocating the health-care costs between the company and the employees. But the longer you delay when you know corrective action is required, the harder it becomes to do it, and the more damage is done before you do it.

What are you going to do next?

For a year I’m going to be a consultant to the new management and get this merger done in a first-class, responsible way. And then I’m going to try to smell the roses and have a little more fun and make up to my wife some of the things that I’ve deprived her of because I’ve been married to my business.