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The utility players: how Indiana utilities help area economic development efforts.

A perceptive electric utility executive once observed that since utilities couldn't very well uproot steam generating plants and transmission lines and follow industry to new areas of the country, utilities had to do everything possible to attract industry to their generating plants and transmission lines.

Subscribing to that philosophy, electric, gas and telecommunication utilities in Indiana work hand-in-hand with their counterparts in local community economic-development commissions, regional development organizations and state agencies to attract and retain jobs for Indiana residents.

"A utility is only as strong as the community it serves," says Stu Summers, manager of national business development for NIPSCO Industries in Hammond. NIPSCO is perhaps typical of the renewed emphasis on economic development in the utility executive suite. Two years ago, NIPSCO had an area development department with a director, an assistant and a secretary.

"It was rather reactive," says Summers, the former economic-development director for the city of San Antonio, Texas.

Today, NIPSCO's business development department includes a dozen people and is responsible for traditional business attraction and community development. Summers credits Gary Neale, the electric utility's new president and chief operating officer, with the renewed emphasis on economic development, and he notes that NIPSCO's traditional reliance on Northwest Indiana's steel business for a customer base has a lot to do with the recent spate of activity in the firm's business-development activities. Big steel is once again under competitive pressure from mini-mills and foreign competitors, and a diversification strategy makes sense for an electric power supplier that generates 50 percent of its revenues from 20 of its large industrial customers.

NIPSCO also builds on its local strengths, and that means the steel and steel supply business. For some of the other large utilities in the state, that concept of building on strengths means automatic diversification.

"We're promoting economic vitality," says Daniel J. Brachemyre, director of sales for Indianapolis Power & Light Co. "The manufacturing base is still very good for us."

So also is light manufacturing and assembly, as well as high-tech manufacturing and distribution and warehousing. Brachemyre, a seven-year veteran with IPL, explains that the Indianapolis-based electric utility went through a reorganization of its economic-development function in the fall of 1991. Currently, the sales department has two persons working full-time in business retention, expansion and attraction. A certain percentage of Brachemyre's time is tied up with economic-development activities, and the sales director points out that IPL gets away with its lean staffing by working as a team with the Indianapolis Economic Development Commission and the Indiana Department of Commerce.

"We avoid duplication and redundancy wherever possible," he said. "Our efforts are always in concert."

Another small staff in the Hoosier capital city with a slightly different economic-development mission is the one overseen by Yvonne Perkins, economic-development manager at Citizens Gas & Coke Utility. Perkins, a CPA by training, is identifying specific industries that use large volumes of gas during the summer.

She calls it "an emphasis on leveling the peak" and explains that Citizens, like most natural gas utilities, sells a lot more gas during the winter heating season than it does during the rest of the year. It has a delivery system capable of distributing peak loads of natural gas, but much of that capacity is unused for six months or more of the year.

Perkins is compiling a database for the kinds of industries that use the same amount of gas year-around: fabricated plastics, chemicals, pharmaceuticals and asphalt manufacturers. Even a major economic-development plum like the planned United Airlines maintenance center at Indianapolis International Airport--while eagerly sought after for its job creation and revenue generation--is what Perkins calls "weather sensitive" for the gas company; in effect, it will take a lot of gas during the peak winter-heating season to heat the UAL buildings.

In Evansville, the major thrust of Ron Keeping and his staff in the economic-development department at Southern Indiana Gas & Electric Co. is targeting specific industries for recruitment to the communities in the six counties the utility serves with electricity and the 10 counties in which it supplies gas.

"We're trying to sell low-cost power, location and a quality work force," Keeping says, adding that "we're trying to find new customers." SIGECO's economic-development efforts involve advertising, direct mail and trade shows. Keeping and his department collaborate closely with the city of Evansville in its advertising efforts. "We've divided up the world," he explains. "We consider it a cardinal sin for Evansville and SIGECO to be in the same magazine."

Some companies focus on retaining current industry and promoting expansion. Mark Keillor, economic-development program manager for Indiana Gas Co. in Indianapolis, says his department's forte is industrial retention.

Keillor oversees what the utility calls its "Partners in Community Business, Retention and Expansion" program. Designed to assess community strengths and weaknesses, the Partners program features an intensive interview process, asking community business leaders some 200 questions. Then comes an analysis of the answers by an outside consultant, who writes a report for the community.

Partners is designed to reveal attitudes about business retention and expansion. Indiana Gas lets local sponsoring organizations make all the decisions, but the utility is willing to make general recommendations arising from the report.

Although Indiana Gas is based in Indianapolis, its service area is for the most part outside the state's larger urban areas. Indiana Gas completed its first Partners survey in 1987 and currently is completing one project in Richmond while kicking off projects in Anderson and Terre Haute.

Keillor says the program in Anderson will be particularly interesting, because a similar program was conducted there about three years ago. The survey will make comparisons with the answers from previous interviews and "see if there is any measurable change. That's one of the most valuable features."

There are other utilities promoting economic development outside the major urban areas of the state as well. In recent years, rural electric cooperatives, rural telephone companies and regional municipal power agencies have all become actively involved in attracting business to the small towns of Indiana.

"The rural telephone industry involved pro-actively in economic development is a fairly new phenomenon," says Bill McDermott, director of economic development for GTE North in Westfield. McDermott has responsibility for economic development in 10 states, including Indiana.

GTE North doesn't do industry recruiting as such, but it does concentrate its efforts on what it calls "capacity building." McDermott and his staffers assist communities in strategic planning for economic development. The company will help underwrite the cost of training and strategic planning, and will cooperate with other utilities "to try and leverage everyone's dollars."

McDermott says GTE North makes grants to local development corporations and helps communities with business-retention surveys. The company is also involved in helping its communities set up small-business incubators, so that "little businesses get bigger." And when little businesses grow, they invariably use more telephone service.

GTE North is not alone in its philosophy of letting its local communities take the lead in economic development. Both of the state's major generation and transmission cooperatives--which serve essentially all of the rural electric cooperatives in Indiana--don't themselves engage in industrial recruitment.

"We try to generate the leads and let the locals do the closing," explains Steve Hilton, manager of economic development for Wabash Valley Power Association in Indianapolis. Wabash Valley, serving 22 central and northern Indiana rural electric cooperatives, maintains a database and prints county profiles for 54 Hoosier counties. Hilton's activities are primarily marketing-oriented. He and his administrative assistant do display advertising, exhibit at trade shows, make corporate calls and do some direct mail.

That's much the same story at Hoosier Energy, the Bloomington-based supplier of power to 19 rural electric cooperatives in Central and Southern Indiana. "As a cooperative, we have a responsibility to bring our members jobs and tax base into service area," says Mike Rampley, director of economic development, describing Hoosier Energy's mission statement. "We want to encourage retention and expansion."

To that end, Rampley and his staff serve as facilitators for local communities, making available financial assistance to local economic-development councils through the cooperatives, providing leads, arranging meetings, developing collateral marketing material and providing technical and engineering studies.

At PSI Energy in Plainfield, Bob Hutchings, the utility's manager of community development, serves a similar role for the small towns scattered across the Hoosier state that are served by PSI. "The communities have to close the deal," Hutchings points out, adding that his department of 20 people is structured around two main missions: community development and marketing. Among other things, the community-development department at PSI makes available aerial photography (an often overlooked consideration in site location decision-making), collateral marketing materials and manpower.

On the marketing side, Hutchings says that PSI concentrates first on marketing the state of Indiana, and secondly on its own service territory. Hutchings explains that "we're (PSI) probably going to benefit" if a major employer locates almost anywhere in Indiana. "What's good for Indiana is good for us."

One good example of that philosophy, he says, is the decision to locate the U.S. Postal Service hub and the UAL maintenance base at Indianapolis International Airport. Although both facilities will get their electricity from IPL, PSI benefits because about 20 percent of all airport employees live in Hendricks County, and many of those residents get their electric power from PSI. With an additional 6,300 jobs expected from the UAL facility alone, Hutchings anticipates a substantial number of those employees will become Hendricks County customers of PSI.

Among the tools that PSI and the rest of the state's electric utilities can use to attract new industries to their communities are lower industrial energy rates. Called "incentive rates," they are a recognition by the Indiana Utility Regulatory Commission that companies in start-up or in an expansion mode have heavier capital costs.

Jim Elam, manager of Indiana-Michigan Power Co. in Fort Wayne, says his company has electric incentive rates for new and existing customers. Those rates are available for up to a three-year period on a declining basis, and they are applied up-front, when a new business or expansion is getting off the ground.

"That's when they need the help," Elam says of customers seeking the incentive rates, adding that I&M still considers existing customers a priority for economic-development assistance.

At the Indiana Municipal Power Agency in Carmel, there are about 10,000 kilowatts of electrical power currently available at an economic-development rate to the vast majority of the municipal utility members of the organization, according to Gary Roe, manager of IMPA's economic-development department. The power agency is involved in joint-venture generating partnerships with other utilities, and also buys power from other regional electric utilities. It in turn sells power wholesale to its members, some 30 municipally owned utilities in Indiana.

Certified municipal members of IMPA--those in the PSI service territory--have blocs of power available to them at what is essentially a below-cost rate for enticing new and expanded business. Roe says that the allotments have traditionally been made in 1,000-, 2,000- and 3,000-kilowatt segments. That way, smaller municipal power utilities have the opportunity to avail themselves of economic-development incentive rates.

But low utility rates, marketing assistance and databases aren't the only things that Indiana utilities can offer new and expanding businesses. There are those who argue that the state's utility infrastructure--the network of electric power lines, gas and water pipelines and telecommunications cables--are second to none.

Dick Notebaert, president and CEO of Indiana Bell, calls the communications network in Indiana "the highways of tomorrow." The 23-year Bell veteran notes that the creation of a modern communications infrastructure in the past five years is one of the major reasons for Indiana's success in recent years in attracting corporate clients like UAL, Subaru-Isuzu, Nucor, and the Japanese-owned auto-parts industry that is growing like ivy along the trellis of the Hoosier interstate highway corridor.

Indiana Bell has spent more than a billion dollars improving its communications infrastructure in the past five years, Notebaert says, $200 million alone in 1992. Last September, the Indianapolis-based utility reached the 100 percent level of computerization in all of its switching facilities. Notebaert says about 40 percent of Indiana Bell's 1.7 million lines are served by analog computers, which will be changed over to faster, more reliable digital switching in the future; by 1995, some 85 percent of Bell's customers will be served by a digital-switching system.

Indiana Bell is also making significant investments to fiber optics cable networks. Using glass fibers the size of a human hair, the fiber optics networks are capable are transmitting huge volumes of data and are more impervious to water damage than conventional copper cables. Notebaert says that "we are blessed in Indiana" with a growing network of fiber optics. Bell will install another 7,000 miles of fiber optics by the end of the year, bringing the total to 54,000 miles on the Bell system.

It's that kind of state-of-the-art telecommunications that so impressed the site-location specialists for United Air Lines, Notebaert says. "You have to maintain a modern communications infrastructure," Notebaert adds, "because the highways of tomorrow are the communications links."

When all is said and done, there are no hard and fast rules governing economic development by electric, gas and telephone utilities in the Hoosier state. Roger Fisher, community development manager for United Telephone in Warsaw, perhaps sums up the philosophy best.

"All of us have a different role," he says of himself and his four other counterparts at United Telephone. "There's no set pattern. We stay visible in our community, and we try to contribute where we can."
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Author:Beck, Bill
Publication:Indiana Business Magazine
Article Type:Industry Overview
Date:May 1, 1992
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