Many regulated utility companies do not operate in competitive environments. Because prices and service areas are fixed, these companies may not be motivated to perform better than is required. Indianapolis Power & Light Company (IPL) has an entirely different view.

“Monopolies have gotten a bad rap because customers don’t think they care. They don’t act like they care because there is often no incentive to be the best at what they do,” said Ann Murtlow, president and CEO of the AES subsidiary.

“In the utility industry, we are motivated to be good enough, but not to be great,” she continued. “Using aggressive but reasonable benchmarks, we have developed our Be The Best (BTB) operating philosophy. We want to create an internal environment of competition that constantly focuses on balancing the competing interests of all our stakeholders to create long-term value.”

A new perspective
When Murtlow joined IPL three years ago, she decided that to create a competitive environment, the company needed to step back and consider the people who relied on its performance, including customers, shareholders, and the surrounding community. “We needed to determine what great service looked like to them,” she said.

Through that process, the company developed a list of seven areas of performance that, when fine tuned, would raise the bar for the entire industry: safety, customer service, environmental stewardship, reliability, financial performance, employee commitment, and corporate citizenry.

“We looked at other utilities across the country to figure out what they were doing in each of these areas. Not many companies were at their full potential in all seven areas simultaneously, so we made it our goal to become the best utility in the country by doing just that,” Murtlow said.

Safety first
Although IPL has the training and equipment to operate safely, Murtlow noticed a lack of focus and decided to bring safety to the fore. To that end, the company dedicates one day a year to safety education and awareness company-wide. The event is run by employees in all six locations and addresses occupational, public, and personal safety, as well as health-related issues. The event is different at each facility with employees designing programs around what is relevant to them.

Before Murtlow came on board, IPL’s safety ranking was in the 50th percentile; today, it is in the top quartile. IPL’s safety initiative has proven so effective, the utility has been helping other AES companies implement similar measures.

Providing customers with superior value is next on the list of performance areas IPL is honing in on. Murtlow describes value in three parts: customer service, reliability, and price. In the customer service arena, IPL improved call center performance by bringing wait times down from three and a half minutes to less than one in the past three years and is now achieving a 90% customer satisfaction rating.

As for reliability, the company has significantly reduced the number and frequency of power outages by 40% by identifying and fixing poorly performing circuits and bolstering its vegetation management systems. IPL has done all of this while maintaining residential rates lower than those in the 20 largest US cities served by investor-owned utilities.

“Our customers care about two things. They want to have power when they turn on the switch, and they don’t want to pay very much for it. Because we are always finding better, more cost-effective ways of doing things, we have been able to offset otherwise increasing costs and have maintained our base rates since 1996,” said Murtlow.

As a utility company with a fleet of coal-fired power stations, IPL has an inherent obligation to protect the environment. Murtlow explained that one of the major concerns regarding the use of coal is short-term opacity emissions (a measure of how opaque a cloud of gas is when it is emitted from a power plant chimney). By fine-tuning equipment and training operators to react quickly to changing conditions, IPL has been able to reduce short-term opacity emissions by 70% in the last several years.

In addition, the company has invested more than $200 million in environmental upgrades, including advanced nitrogen oxide (NOX) removal systems and low NOX burners. An additional $200 million will be invested in systems to control sulfur dioxide emissions.

Competing for customers
To increase financial performance, IPL is doing something not many regulated utilities do. It treats customers as though it was competing against other utilities for their patronage. Financial performance goes to both rates and shareholder value, Murtlow explained. “Both of those things are naturally conflicted. You’d think that the more you can charge your customers, the more you can pay your shareholders and visa versa, but that is contrary to what I believe.”

“If you concentrate on continuously delivering the best service to all your stakeholders, you are going to maximize long-term shareholder value,” she continued.

When it comes to employee commitment, Murtlow’s philosophy is simple: give each individual in the company a reason to be proud of the work they do. “I’m an 18-year veteran of AES, and one of the values I have carried with me is fun. It sounds hokey, but it simply means employees feel a deep satisfaction about what they do and how they do it. The loyalty it has created throughout AES is a competitive advantage,” she said.

Last, but not least, on IPL’s list of performance areas is corporate citizenry. Murtlow encourages all employees to volunteer for or donate to a cause they feel passionate about. The company donates about $2.5 million a year to the various local charities, some of which is given through direct matching of employee gifts (the company will match up to $1,000 annually per employee). Also, when employees volunteer their time to a charity, IPL will match it in dollars to that organization.

“We are integral to this community,” said Murtlow. “There are so many worthy causes here in Indianapolis, and it feels wonderful to be a part of that.”