A strategic perspective for the future.

At the base of the new lineman statue in the lobby of NRECA's headquarters in Ballston, Virginia, there is a plaque with the following dedication, taken from rural electrification's 50th anniversary commemorative book, The Next Greatest Thing:

To the founders and pioneers of rural electrification, who - with grit, sweat and vision - transformed rural America from the depths of despair and darkness to the splendor of hope and light, and who serve as our reminder that no job is too tough if the cause is just and the people are determined.

The founders and pioneers of rural electrification certainly had vision. They also had a plan, carefully thought through and strategic. Yet in many ways, they probably were less focused on a strategic plan than they were on the formidable job ahead of them.

Today we talk often of the need for strategic planning, but it all still boils down to the question: What is it that we need to do?

The strategic planning efforts of NRECA - determining what it is that we need to do - will be successful only in so far as they reflect the needs and interests of the NRECA membership. As the factors for success change for distribution systems, for their generation and transmission power suppliers and for the service members of NRECA, so must the goals and priorities of the association change.

To meet this challenge, NRECA's board has established within itself a strategic planning committee. The committee's charter is to identify the changes occurring in the electric utility industry, their potential impact on NRECA's members and a sense of NRECA's role in addressing that impact.

After careful and lengthy deliberation by the board strategic planning committee, a theme has emerged, commonly referred to as the "3-Cs":

Competitiveness Community Competence

This theme captures in a nutshell the basis of a strong working relationship between NRECA and its members as individual members work to ensure their continuing value to consumers. Scratch the surface of the theme and you are at the heart of the real difference between electric cooperatives and other service providers.

Competitiveness

Electric cooperatives were created to address a need not being met by the investor-owned utilities - to provide electric service to the rural areas of the country. We achieved our goal, and the accounting and engineering standards that made it possible to cost-effectively do this are now a foundation for solid service reliability at reasonable cost. Our history and experience with consumers, in other words, have become the foundation of our competitive advantage.

Community

In bringing electric service to rural America, cooperatives proved that communities can indeed achieve astounding things when they work together. Electric cooperatives were built one at a time, on the basis of hard work and grassroots support from local leadership. The community link remains one of the strongest values demonstrated by today's cooperative. The cooperative is an integral part of the community.

Competence

From the beginning, a key element of success was the employees of the electric cooperative - the line crews, the billing and accounting staff, the power use advisors providing ideas to cooperative members on new and productive uses of electricity. The continuing commitment to the electric cooperative employee ensures that the demonstrated competence will be in place in all cooperatives to continually improve service to members.

The 3-Cs thus represent a link between our heritage and our commitment to the consumers of today and tomorrow.

Equally important, though, is the origin of the strategic commitment in the NRECA boardroom. Forty-six board members, representing each state currently serving consumers through electric cooperatives, endorsed the strategic planning committee's view that the 3-Cs should form the basis of all NRECA operational planning and budgets. From that point forward, the ability to support all members in competitive positioning, community involvement, and continuing competence became the test of whether what we are doing is properly focused. The 3-Cs dramatically affected an organizational restructuring, the development of a streamlined budget process, the full integration of the membership resolution process into the budget process and the annual establishment of goals and priorities.

How could all of this result from a theme of only three words? A bridge between the strategic and the operational views of the association was needed. That bridge was built through staff input to the strategic planning committee on how to get the job done. Five key issues were identified as central to fulfilling the intent of the 3-Cs:

Industry Transition Rates and Costs Information Technology Grassroots Support Competencies

Industry Transition

FERC Order Nos. 888 and 889 represent a milestone in the total deregulation of the wholesale power market. Electric power is now being traded on the New York Mercantile Exchange commodity market. Natural gas interests have entered the wholesale market as a result, focusing their efforts on hedging between the price of electricity and the price of natural gas. Many states have introduced legislation to open the retail electricity market to competition. Some states have finalized new rules governing a phased-in approach to customer choice. It has been suggested that this is the most sweeping set of changes affecting the industry since its inception.

Rates and Costs

The transition of the industry has begun to force a new way of thinking about electric rates. The historical commitment to cost recovery as the basis for ratemaking (cost-based pricing) is giving way to a market-driven approach to rate design (price-based costing). Delivery services will likely remain "at cost" services, while the energy supply itself will fluctuate in price based upon market conditions. The ability to "benchmark" the cost of various activities such as billing, meter reading and distribution maintenance will become critical to recovering those costs as a fair rate of return. New accounting and billing approaches will be needed to accomplish this.

Information Technology

Being able to directly track costs in the various functions within the cooperative increases the importance of automation in improving efficiencies and in enhancing service responsiveness. Distribution automation, supervisory control and data acquisition (SCADA) and integrated data bases which incorporate digitized mapping will combine to create new opportunities for time-of-use rates and two-way communication with the consumer. Access to a variety of telecommunications networks, including Internet, for energy information, community services, economic development and marketing, billing, metering and inventory management will all become more central to the business of electric cooperatives.

Grassroots Support

All of these changes in the industry reinforce the importance of consumer involvement in the public policy and political decision making process. It is particularly important for residential and small business consumers to have a voice in the impact of these changes on their lives. Electric cooperatives have always supported the grassroots involvement of their members to ensure that the political process is infused with the strong voices of those who are served. Such an outreach effort is more important than ever in each electric cooperative throughout the country.

Competencies

All of these issues will require a re-examination of the kinds of knowledge and skills which are needed to ensure that electric cooperatives are positioned to thrive in a competitive marketplace. This competence historically demonstrated by every electric cooperative is sustainable only if employee skills are constantly enhanced.

This, in a nutshell, is the strategic perspective of NRECA. Implicit to its success is the idea that we are all part of a highly efficient network, adding more and more value over time to the consumers served by electric cooperatives. In many ways, together we are the best example of how thinking globally and acting locally brings the best, sustained value to America's consumers.

Martin Lowery is Executive Vice President, External Affairs, of the National Rural Electric Cooperative Association. His overall responsibility is to ensure that NRECA continues to serve the needs of the membership and also to assist in the direction NRECA will be taking in the future, according to NRECA's strategic plan.

Prior to being chosen as Executive Vice President, External Affairs, Martin was manager of the Management Services Department Consulting and Training Services Division. His responsibilities included directing the provision of services to NRECA member systems and allied organizations. These activities represent a full range of management and technical consulting and training services, including strategic planning, management audits, merger studies, marketing programs, market research, organization studies, compensation planning, financial management, board and supervisory training and development, member and employee attitude surveys, and management information systems.

Prior to joining the Consulting and Training Services Division, Dr. Lowery served as assistant manager of NRECA's Computer Services Division. He was responsible for a staff of 20 professionals covering all aspects of the data processing environment with particular emphasis on compensation and benefit administration, new applications, database design, system software and computer operations.

Previous experience includes five years as manager, Engineering and Technical Services Division, of a Washington-based management consulting firm.

Dr. Lowery received a Bachelor of Arts (cum laude) from DePaul University and his Ph.D. from Duke University.