10 Jun, 2006
Community Service
I had the privilege of attending the Arizona Public Service Emerging Markets Leadership Forum (APS is the local power company). It's billed as a round table discussion of community leaders to promote diverse business. It was held at APS offices on May 23, 2006.
What this means is that as part of APS’ commitment of on-going community support, they make the effort to reach out to organizations that support their member communities. My example is that I serve on the Board of Directors for the Chinese Chamber of Commerce in Phoenix, Arizona. Yes, I was attending on behalf of the Chinese Chamber.
Well, in classic poor planning form, I failed to correctly estimate morning traffic and showed up late. The whole point of this was to get the free breakfast. Bummer.
I recognized Robert Esquivel, Manager APS Supplier Diversity and Development. I’ve seen him around at many meetings for many years supporting APS efforts for Diversity.
So there was this stately looking gentleman at the center taking about potential for building more power lines. It just felt like this guy was not at the bottom of the food chain. But to digress, because it is a blog, it didn’t occur to me until I was writing this that he was the only white male there. Not surprising since the APS’ goal of this meeting included diversity. Yeah, this was a pint of gasoline on a racial campfire to brighten a humble blog.
I’ve always had an interest in energy. Yes, a degree in engineering will permanently alter you like a Borg implant. So I seized the opportunity to ask about how an electric company stores its energy. I learned about mine-mouth power plants (a coal fired electrical power plat located on the mine site). Hence, they have practically infinite storage. With regards to nuclear, they can run it full-on for 18 months at a time. Then they just shut it down to refuel and they’re good for another 18 months.
During the Question and Answer period, it came out that one-third of APS’ power comes from nuclear, one-third coal, one-third all other including natural gas and power grid purchase.
Other facts that came out when the solar questions were asked was that it costs about 37 cents per kilowatt for solar and six cents per kilowatt for coal. That lead me to ask the next obvious question, how much does it cost to generate electricity with nuclear? The reaction was as telling as the answer: He paused, he looked down, he said with a slightly softer tone, “0.6 cents per kilowatt”. To me, that was a major “Wow!” for many reasons.
It’s very obvious why they peak-shave. Max profitability for this organization is one-third capacity. Anything more than one-third capacity is diminishing their profits.
I’ve seen the electric bill for a 40-story high rise in the down town Phoenix area and it was in the $80,000 per month range. This would be a really nice profit if this was your typical customer and all your power is generated via nuclear. But the follow on is that I understand how they can afford a small army of employees running around doing the job of running an electrical power company. Anyone who has the responsibility of management of a “for profit” company will tell you that payroll is a tough line item.
The final realization is why I run a small company. It’s because I have yet to find a product with a similar markup to a captive market (Duh, suddenly I feel like Homer Simpson).
Well, upon leaving I got to reading the meeting program. Ok, it is entitled “APS Diverse Business 2005 Annual Report”. But it read like a program because it has pages written by all the responsible parties and lots of good information. While reading this program, I quickly pieced together what I missed during the introductions (including who the stately looking gentleman was that was talking while I entered late). The guy that I peppered questions to is Jack Davis, President of Pinnacle West Capital Corporation, President and Chief Executive Office of APS. Thanks Jack, I guess I owe you a beer.