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David E. McNabb

This chapter is a brief introduction to some of the more important principles of management that utility operators, supervisors, and commission members need to understand and apply in public service management. It focuses on the open innovation model as appropriate for the public utility operating environment within which managers guide the utility’s activities. It includes an overview of the key constraints and universal principles that guide managers in carrying out their tasks. Management is the set of guiding activities taken by human actors to help others accomplish the many objectives of an organization. Public utility managers apply these activities to accomplish objectives in organizations engaged in providing a public service, including managing all actions relating to the organization’s franchise granted by some public body.
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David E. McNabb

Ethical problems in public and private organizations run the gamut from sexual harassment to misappropriation or outright embezzlement of millions and billions of dollars. Ethics breakdowns are loudly pointed out by the press as examples of the poor quality of public servants in general. Examples include newspaper stories of the alleged sale of presidential pardons and diplomatic passports, charges that a town mayor and nine others misappropriated $10 million in taxpayer money; and the conviction of a mayor on charges of laundering drug money and accepting bribes from racketeers. Public utilities and other businesses that serve the utility industry are not immune to allegations of ethical misconduct, as the example of arrests of energy company managers as a result of misconduct in the California energy crisis demonstrates.
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David E. McNabb

This chapter describes the changes that have occurred in the marketing of public utilities since the big environmental protection movement that began in the 1960s. The marketing function in public utilities occurs at two levels: wholesale and retail. At the retail level, utilities divide their customers into three broad classes: residential, commercial, and industrial. The average of the service demands by all customers in each of three classes of customers over a given period is the utility’s average or base service load. The utility must be prepared to meet all average load requirements—and maintain a reserve for contingencies. Utility wholesaling is the sale of the electricity, gas, or water in bulk to a down-channel organization that will then resell the product on to another channel member or to final customers. Utility retail marketing refers to the activities involved in facilitating the sale of utility products and services to customers who actually use the product.
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David E. McNabb

Operation and maintenance management (OMM) in utilities consists of a number of asset management activities related to the collection, processing, transmission and distribution of the organization’s resources, products and services and residual product processing and disposal. These activities are generally grouped into three broad systems: operations, maintenance, and planning. Operations management is the design, implementation and administration of the actions by which managers guide the development, production or acquisition of goods and services provided the public by all public utilities. The maintenance portion of operations falls into two broad classes: routine and non-routine maintenance. Planning is building on the data established during the analyzing phase for preparing the utility to meet the ongoing and emergency operating activities at various periods in the future.
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David E. McNabb

This chapter looked at ways utilities plan for the operational crises caused by human actions and the many natural disasters that they must deal with on a regular basis. Hazards that result in operational crises can be grouped into four main categories: natural, technological, societal and security. Natural disasters can be, and often are, highly destructive of critical infrastructure and essential services. Natural disasters typically occur more often than man-caused disasters. Moreover, the damage they cause, while great to life and property, are often predictable or come with some warning that give utility managers time to prepare the resources necessary to deal with the crisis. Man-made disasters seldom occur with advance warning. When they do they result in as much or even greater damage to life and property than a typical natural event might produce.
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David E. McNabb

Chapter 2 explains the meaning of public policy and how the American Federalism tradition shapes policy in the five public utility sectors covered in the text. Public utility managers are guided in their everyday organizational activities by two levels of policy: internal and external. Internal policy includes the normal levels of organizational and management policies and procedures that shape the business enterprise. Internal policy is a product of the vision of senior management and board of directors, the organization’s mission, its resources, and the existing organizational climate and culture. Elements of internal policy are discussed in Chapters 14 through 17. This chapter focuses on external policy forces.
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David E. McNabb

This chapter focuses of the rate-setting function in public utilities. The process of setting rates (prices for services) in public utilities involves four steps: (1) determining operating costs, (2) distributing costs among different customer classes, (3) considering relevant load and use factors, and (4) designing the pricing structures that reflect the influences of the first three considerations. Rate setting in regulated utilities is further complicated by the legislative and social requirement that the final rates be “just and reasonable” (fair and equitable). Determining costs involves analysis of four categories of operations: customer service, operations, demand, and overhead. Typically, prices are lowest for large users, such as factories or commercial centers, and highest for residential customers. However, prices will tend to vary more during any period for industrial and commercial users than they will for residential customers.
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David E. McNabb

Chapter 3 focuses on the public utility regulatory environment. Public utilities are subject to a wide variety of local, state, and federal government regulations. These regulations have evolved from a body of laws passed over the last eighty-plus years that deal with such business functions as ownership and governance, raising capital, transactions between company units, environment, and the methods of producing utility products. Additional regulations deal with health and safety issues, environmental concerns, and many other aspects of utility operations. As “natural monopolies,” utilities are considered to be holders of a special public trust and therefore legitimately subject to government oversight. This chapter discusses some of the more important of the regulations under which utilities operate.
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David E. McNabb

Municipal solid waste (MSW) is waste generated by commercial and households and commercial sources that is collected and either recycled, incinerated, or disposed of in MSW landfills that are approved and monitored by the EPA and local environmental and health authorities. The EPA divides municipal waste into four broad categories: containers and packaging, yard wastes, durable goods, and nondurable goods. MSW does not include dried and sanitized sludge from domestic sewage or other municipal wastewater treatment residues. Not accepted in sanitary landfills are demolition and construction debris, agricultural and mining residues, combustion ash, and wastes from industrial processes. Most highly regulated are toxic and other hazardous wastes. Solid-waste programs are managed by states and municipalities according to individual community needs. Landfills are located and designed according to federally mandated landfill design, operating and recycling criteria.
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David E. McNabb

In many ways, the public utility industry is in the best condition it has ever been. However, many problems continue to plague utility managers and administrators; the challenges they face are exacerbated by human and natural events and conditions not previously encountered. The combination of climate change, security threats, population growth, urbanization and road congestion, and infrastructure deterioration form a set of challenges for utility managers that promise to severely strain their financial and operational resources. This chapter looks at five of the major challenges that utilities must surmount over the next twenty-five years and beyond, including making the repairs and replacements necessary in large segments of the industry’s infrastructure, dealing with an increasingly stringent regulatory environment, climate change related environmental repercussions, securing the necessary funding for capital improvements, and protecting against physical and cyberattacks.