In 1994, Pennsylvania Power & Light Co. accelerated the process of reinventing itself as a more customer-focused, more productive and more competitive company.
The Allentown-based utility restructured the top levels of its organization and began a re-engineering process for the rest of the corporation.
The 75-year-old company formed a new subsidiary to invest in energy projects outside of its Central Eastern Pennsylvania service territory.
And, in an effort to ensure that the company can continue to provide top-quality service to its customers, PP&L filed a rate increase request with the state Public Utility Commission — the first such request in 10 years.
"For the long-term, the most significant thing that we accomplished during 1994 was restructuring the top levels of the company," said William F. Hecht, PP&L chairman, president and chief executive officer. "This is significant because top-level changes are the beginning of a process that will entirely revamp the way we provide service to customers."
The top-level restructuring, Hecht explained, is being followed by department-level changes that will "reinvent" PP&L as a more consumer-focused company.
"While our organization and our approach to the electricity business have been successful for decades, the changing nature of this industry, and the ever-changing needs of our customers make it imperative that we develop new ways to be responsive to the people we serve," said Hecht. "Our re-engineering effort not only will improve our focus on customers, it also will improve our productivity."
The re-engineering process is being carried out by employee teams at many levels in the organization. The result, he said, will be a company that is better able to quickly respond to customer needs in a more competitive marketplace. Changes in the rules that govern electric utilities have introduced more competition into the business.
"We are very confident that PP&L will be successful in a more competitive environment because we understand that you achieve such success by focusing on the needs of the people who buy your product or service. It is that understanding which is driving our efforts to reshape PP&L," said Hecht.
To take advantage of some new opportunities in the changing utility business, PP&L also took steps to move outside of its traditional service territory. It has formed Power Markets Development Co., an unregulated subsidiary that will invest in electric facilities outside of the United States.
To get Power Markets Development Co. started, PP&L invested $50 million from company profits. No ratepayer dollars will be used to support the subsidiary, which will be headed by Schuylkill County native Robert D. Fagan.
"We are confident of our success in global ventures," Hecht said. "We are pursuing opportunities only in the electric business — a field we know well from our 75 years of experience."
PP&L also is seeking approval to create a holding company structure. If approved, the holding company will become the parent firm for PP&L and Power Markets Development Co. Many of the regulatory approvals have been obtained. At PP&L's 1995 annual meeting, shareowners will vote on whether to proceed with forming a holding company.
Late in 1994, after a decade of avoiding a base rate increase through aggressive marketing, internal cost-management programs and the refinancing of high-cost debt, PP&L asked the Pennsylvania Public Utility Commission to consider an increase in its base charges to customers.
"The decision to request a rate increase was a very difficult one," said Hecht. "We believe that rate stability is extremely important not only for PP&L but for the economic development efforts of the communities that we serve. By late 1994, however, it became clear that the long-term financial health of PP&L required that we request a rate increase."
On Dec. 30, PP&L requested PUC approval of a $261 million increase, or 11.7 percent of total rates. The proposed effect on individual customers varies by customer group and the amount of electricity they use.
Hecht said increases in PP&L's cost to provide service to its 1.2 million customers could not be offset entirely by the company's ongoing cost-reduction efforts, such as a reduction in the size of PP&L's work force.
At the beginning of the decade, PP&L had 8,100 full-time employees. Today, the number of employees is down to about 6,900.
"We expect to continue staffing level reductions as we revamp work processes and reorganize our work force," Hecht commented. "We hope to continue the reduction through attrition, but we cannot rule out layoffs as a possibility in the future."
Last fall, 640 PP&L employees accepted an early retirement package offered to people 55 or older. That figure represents an acceptance rate of 75 percent among the nearly 850 eligible employees.
PP&L recorded a one-time charge against income of about $74 million in the fourth quarter of 1994 to reflect the cost of the early retirement program. The company expects, however, to cut operating expenses by about $35 million a year because of the early retirements.
In May, PP&L's more than 4,000 unionized employees overwhelmingly approved a three-year labor contract that includes wage increases of 4 percent in the first year and 3 percent in each of the final two years, plus improvements in the areas of employee savings, health care and retirement.
Other major highlights of 1994 at PP&L include the following:
Arctic cold creates power emergencies
In mid-January, prolonged sub-zero cold placed a double whammy on regional electric utilities: increasing the demand for power while hampering the ability of power plants to generate electricity. PP&L and other regional utilities instituted rolling blackouts for a short time on Jan. 19. The 10- to 30-minute power outages affected about 250,000 of PP&L's 1.2 million customers.
During the cold spell, PP&L customers set a new record for electricity use of 6,403,000 kilowatt-hours between 6 p.m. and 7 p.m. on Jan. 18. Despite the hardships, customers responded well to calls for energy conservation, avoiding even more serious problems.
PP&L, other regional utilities and the state government investigated the problems and have implemented measures that reduce the chances of future power supply emergencies, while better preparing to deal with any emergencies that do occur.
Nuclear generating units set records
The two generating units at the Susquehanna nuclear power plant had safe, successful years in 1994. Unit 1 set a new record for consecutive days in service by a PP&L generating unit. Susquehanna also established a record for consecutive days with both units in service. Both streaks continued into 1995.
Unit 2's sixth refueling and maintenance outage was completed safely in June. During that outage, PP&L completed work that increased the electrical output of Unit 2 by 53,500 kilowatts. Unit 2 is the first reactor in this country to successfully complete such a project.
In April, the Nuclear Regulatory Commission gave Susquehanna the highest mark in three of four performance categories for the previous 22-month period. In the fourth area, Susquehanna earned the second highest mark. The NRC found overall performance to be "excellent" and suggested areas for improvement in the plant's corrective action programs, which PP&L has been addressing.
Fossil fuel plants prepare for Clean Air Act
PP&L prepared to meet its environmental obligations under Phase I of the Clean Air Act Amendments of 1990. Continuous emissions monitors were built on 12 smokestacks at PP&L fossil fuel power plants. They monitor the emissions of exhaust gases such as sulfur dioxide, a contributor to acid rain, and nitrogen oxides, which contribute to acid rain and smog. Data will be sent to state and federal environmental agencies continually to ensure compliance with new stricter emission standards.
PP&L also began a switch to low-sulfur coal at the Martins Creek, Brunner Island and Sunbury power plants. Use of low-sulfur coal and construction of "scrubbers," which remove sulfur dioxide from exhaust gases, at the Conemaugh power plant in western Pennsylvania will reduce PP&L's total sulfur dioxide emissions by more than 20 percent. PP&L is a partial owner of the Conemaugh plant.
PP&L also installed special burners on most of its coal-fired units. The new burners will reduce PP&L's emission of nitrogen oxides by about 40 percent.
Foreign partnerships expand
PP&L continued to develop a presence in international energy markets through foreign partnership programs. PP&L has established partnerships with Chugoku Electric Power Co. of Japan, the Ukraine Ministry for Energy and Electrification and Armenergo, the electric power company of Armenia.
PP&L hosted an international seminar on the use of anthracite to produce electricity. Representatives from Great Britain, Germany, the Netherlands and Ukraine attended. Also, PP&L conducted management training for utility executives from Egypt and South Korea.