Name: Michael F. Ryan
Position: Executive Vice President, Narragansett Electric Company
Background: Before coming to Narragansett Electric, Ryan served for eight years as the Rhode Island Director of the offices of United States Senator John H. Chafee. Before that he was public relations manager for AT&T Communications. Ryan also served as a legislative assistant in the office of lieutenant governor and later as a special assistant and press secretary to Gov. J. Joseph Garrahy. Ryan is a member of the Rhode Island Board of Governors for Higher Education.
Education: Rhode Island College (1974)
Age: 49
Residence: Warwick
Family: Married, two children
MICHAEL F. RYAN, of Narragansett Electric.
PBN: Why don’t you explain the ownership structure of Narragansett Electric. I know Coventry, England-based National Grid recently acquired New England Electric Systems, and controls Narragansett Electric, Massachusetts Electric & Granite State Electric in New Hampshire.
RYAN: It is an interesting and positive relationship with National Grid. They were looking hard and long to partner with a U.S. utility. They are famous for their due diligence and they looked at our management structure and our customer base and how we operated as a combination transmission and distribution business. The management structure and how we did business impressed them. We were to see that kind of partnership. First of all, National Grid comes with such a strong capital base that we knew we were going to be partnering for a good, long time. It also allows the structure of management in the United States, in New England in particular, to be maintained. They had a high trust for the way we did business. They demonstrated that in all of our dealings.
Does that tend to be how National Grid operates – in terms of keeping an existing management structure in place?
I don’t think they would have gotten involved with us if they didn’t think we were doing what we were doing well. This was their first venture into North America, so it was an important decision. Their decision was not made lightly. Our decision, that of the board of directors and shareholders, was not made lightly. To have an international company come in, presented issues. We were able to resolve them satisfactorily.
It was completed earlier this year?
Yes, as was the merger between Eastern Utilities and NEES. Now we are involved in a merger with Niagara Mohawk in upstate New York. It should be a year-long process. It will double the size of our customer base.
Exactly who is merging with Niagara Mohawk?
National Grid, USA.
And National Grid USA is composed of which companies?
All of the sister companies – Massachusetts Electric, Narragansett Electric, Granite State, Nantucket ElectricRight now, we have – because of the merger with Eastern Utilities — about 98 percent of Rhode Island. The only areas we don’t have are Pascoag Electric, up in Burrillville and Block Island.
What became of Blackstone Valley Electric?
They were part of Eastern Utilities, along with Newport Electric. We’ve had a period of bringing together the three working units. I think we’ve done a good job of bringing those work-forces together.
So all of those people, from Eastern Utilities – they now fall under Narragansett Electric?
Yes.
How many employees does Narragansett Electric have here in Rhode Island?
Six hundred and forty.
There seems to be the perception at least that utility costs are cheaper down south, in the Carolinas, for example. Is that true in the case of electricity?
The south has always had an advantage when it comes to energy sources. It’s interesting how perceptions come and go. I can remember when I first came here five years ago, the cost of energy, particularly electricity, was on the top of every businessperson’s agenda in terms of why Rhode Island or the Northeast might not be a good place to do business. We have worked very hard with our business customers and with the governor, the attorney general and the General Assembly to do what we can to take that perception off the table. I think we have done so effectively. I carefully watch for poll results of business concerns, whenever they come up – be it in your newspaper or elsewhere. It just doesn’t show up on the chart. We think that’s good. We have to continue to work to maintain the perception that the cost of electricity, though higher per unit than in the souththat we are putting together some programs and we are more competitive than people thought we were. The work that was done by the Rhode Island Genera
l Assembly and the Massachusetts Senate and House — where generation was separated from distribution and transmission — that really paved the way. People are still grappling with it. I’m sure a lot of folks still drive by the Manchester Street Power Station and think that we still own it. We’re out of the generation business completely. Our focus is on delivery. We own the wires. We work hard to ensure that those costs are as low as they can be. In fact, when we had an agreement with the attorney general and the Public Utilities Commission on the recent merger with Eastern Utilities, we agreed to freeze our distribution rates for five years. That’s a challenge to us. We have to find economies where we can do our job better and be a little leaner.
What about these telecommunications companies and all the work they seem to be doing?
They have a right to our poles, under federal law.
What percentage of your wires are underground?
We have about 15 percent underground. We have 3,300 miles of overhead lines – 85 percent of the product. And we have 600 miles underground.
Are those percentages where you want to be, or is there any kind of move to get more lines underground?
There is no movement one way or the other. There are benefits to both. Underground, obviously, is more expensive to put in. Maintenance – at least in the short-term – may not be a big issue. But if you do have a maintenance issue, if can be difficult to get to it. With the overhead, you can get to a problem more quickly, but you always have the issues of storms and tree limbs. That’s a perennial problem with any utility.
What is the most common complaint you hear from the business community?
Most recently, it would be escalating costs. I think businesses generally understand it is not something we created – we are literally, out of the generation business. What is interesting is that had we not restructured, we would still have these increased costs. During the past four years, customers of Narragansett Electric have been able to save upwards of about $135 million. Obviously, with the larger savings going to the bigger users. That’s remarkable and people have seen it in their electric bills. Now, prices are starting to go up.
There is much concern that rising fuel costs could dramatically slow our economy – or worse, send us into a tailspin if the winter is bitter cold. Where do we stand with electricity?
I’ve been to a few of these meetings, one with U.S. Sen. Jack Reed, and more recently with State Sen. John Celona, and the biggest concern I hear out there is with supply. Everyone is concerned about cost and always will be. But supply is the concern.
Is the supply out there for electricity?
We look pretty good. We put into place a program this summer – we solicited customers, particularly the larger users, and asked them to participate in a TIP program – a Temporary Interruption Program. It is a cooperative effort in dealing with a potential shortage. It allows us to come in, at a couple of hour’s notice, and ask them to shut down – and we pay them. It’s a reincarnation of programs in the past.
And businesses have been receptive to this program?
We have had over 200 contracts with companies.
There are several proposals for new electricity plants, including one in Tiverton that will soon be online. What does this mean for the industry?
It ensures supply, and that’s important. It should foster some good, healthy competition, as we enter that phase of restructuring.
You have said that we in Rhode Island are in better shape than on the West Coast, in California, in particular, in terms of supply and controlling costs. Why?
The General Assembly in Rhode Island and the Massachusetts legislature put into place a multi-year standard offer, which I like to call a safety net for customers, be they residential, commercial or industrial. It gives folks a chance to absorb changes.
It’s all part of the Restructuring Act of 1996?
Yes. That safety net brings competition a little more slowly into the mix. It is going to prove to be, historically, the proper way to go. In California, there is a dramatic difference. There was no standard offer for customers – they were thrust into the market, probably at the worst time. There are residential customers with increases upwards of three, four, five times what they were paying. It has caused a revolution on the West Coast. There is one company in California, where what is owned to them by customers represents 50 percent of their net worth. How are they going to get themselves out of that hole? We sort of dragged onto the wagon train – we were gong to get trampled by it, or climb aboard. But because we were one of the first areas – Massachusetts and Rhode Island – to go through restructuring, we are already over the hump of the transition charges. When we sold our generation off, we were able to get rid of that debt quickly and dramatically decrease the transition fee that customers pay. We’re over that hump. A lot of states have yet to get to that curve in the road. That’s a long-term advantage to us.
