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Episode #183: "How this utility CEO balances innovation + reliability" with Frank Reynolds, President & CEO of United Illuminating [an Energy Central Power Perspectives™ Podcast]

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To modernize infrastructure or optimize for reliability—that's the question utility leaders like Frank Reynolds, President and CEO of United Illuminating, are facing on a daily basis. The need to transition to cleaner energy sources and address the challenges of aging infrastructure are often at odds with utilities' efforts to maintain reliable power delivery. So which do you choose? And can you have it all?

Today on Power Perspectives, Frank guides host Jason Price and producer Matt Chester through key topics impacting his work in Connecticut, including...

  • The relationship between utilities and regulators
  • The impact of performance-based regulation
  • How United Illuminating is navigating financial and operational hurdles

If you want to learn how this utility leader is steering a company through unprecedented times—all while embracing innovation and the future of clean energy in Connecticut—this episode is for you.

 

Prefer to Read vs. Listening? Scroll Down to Read Transcript

Thanks to the sponsor of this episode of the Energy Central Power Perspectives Podcast: West Monroe

Key Links:

Ask a Question to Our Future Guests: Do you have a burning question for the utility executives and energy industry thought leaders that we feature each week on Power Perspectives? Leave us a message here for your chance to be featured in an upcoming episode: www.speakpipe.com/EnergyCentralPodcast 

 

TRANSCRIPT

Jason Price:

In Connecticut, the landscape for electric utilities is facing unprecedented challenges. From aging infrastructure to the clean energy transition, the need for significant investment in our electric grid has never been more critical. How do utilities navigate these complex issues while ensuring reliability and keeping pace with evolving energy demands?

Today we're excited to bring an industry leader who is at the forefront of taking these challenges on. We'll dive into the heart of regulatory environments, infrastructure investments, and the future of energy in Connecticut on today's episode of Energy Central's Power Perspectives Podcast.

Welcome to Power Perspectives, where we continue to bring leading minds from the energy industry into the podcast booth to discuss the challenges and trends that are transforming and modernizing our energy system. And now our listeners can submit a recorded question to a future podcast episode. Just look for the SpeakPipe link in the show notes below the episode, and leave us a voicemail with a question for our future guest. And a quick thank you to West Monroe, our sponsor of today's show.

I'm Jason Price, Energy Central podcast host and director with West Monroe, coming to you from Orange, Connecticut, in the headquarters of today's guest, and with me as always from Orlando, Florida, is Energy Central producer and community manager, Matt Chester. Matt, where can Energy Central members plug in and hear from their peers about the challenges they face when it comes to navigating the regulatory environment?

 

Matt Chester:

Thanks, Jason. That's a great question. And I want to use it to give a call-out to the Energy Central's community platform, and specifically our sub community called the Utility Management Group. It's built for leaders and decision makers in the power sector to share their lessons learned, their questions, their successes, and even their failures, all as a way to collaborate and lift up the entire industry.

So any of those types of how do you navigate this regulatory challenge questions or topics that you might expect to be covered on the dais or in the exhibit halls at a utility industry conference, those conversations are also taking place in the digital sphere on a daily basis at energycentral.com, and again, within our Utility Management community. So I would definitely point people to check that out.

 

Jason Price:

Thanks, Matt. Our next guest resides in one of those most critical states navigating the regulatory and investment landscape for electric utilities. Please welcome Frank Reynolds, President and CEO of United Illuminating, the second-largest utility in Connecticut and one of the many operating companies of Avavngrid. Frank Reynolds, welcome to Power Perspectives.

 

Frank Reynolds:

Glad to be here. Thank you for having me.

 

Jason Price:

Frank, to kick things off, please give us an overview of your career and how you ended up in the power sector and ultimately serving as CEO of United Illuminating.

 

Frank Reynolds:

Well, I'll try and give you the short version of that. I enlisted in the military in high school, I joined the Army National Guard. I had a long career as a military officer. But out of college I actually worked in the manufacturing sector for a few years. And at that time we were really focused on total quality management, continuous improvement, Kaizen, Kanban, all these manufacturing real expert types of activities that we were focused on.

And then I got recruited by Southern Connecticut Gas into a rotational engineer program for two years. And so I thought perhaps I could utilize a bit of my leadership skills gained in the military, as well as some of those things that I learned in the manufacturing sector and apply them to the services sector. So that brought me to a Southern Connecticut Gas as a project engineer, rotated for a couple of years. During that rotation, somehow caught the attention of the chairman and CEO, and during my fourth year with the company, I became his assistant.

Make a long story short, we grew from Southern Connecticut Gas to become Energy East. Energy East became Iberdrola USA, Iberdrola USA became Avangrid. We are part of the Iberdrola Group, which is one of the largest utilities in the world. I've had a number of different roles through all of those companies that I just mentioned, and that pretty much led me to the role that I have today.

 

Jason Price:

Fantastic. So as the leader of United Illuminating, one of your key responsibilities is dealing with the regulatory compact with the state of Connecticut. For our listeners who may not be aware, can you explain what the regulatory compact is and why it's central to your organization's relationship with the state's regulators?

 

Frank Reynolds:

When I think of the regulatory compact, this image of a three-legged stool comes to mind. So we have PURA, which is the Public Utilities Regulatory Authority here in Connecticut. That is our regulator. We have customers. Those are typically folks and businesses that live within our service sector or within the towns that we serve. Many people say we don't need to compete for those folks, but I like to have the mindset and share with our employees that we do have to compete for them. And then we have the utility and its investors.

So all three of those components I think need to work harmoniously together in order for that to be a sturdy stool, meaning our regulator allows us or sets the rates that we can charge to customers. Those rates have to be fair and reasonable. And they also set the return on equity. That also needs to be fair and reasonable, the return on equity that our investors are able to recoup from the investments that we make. All three of those things need to work so that we can deliver safe and reliable service to our customers, which we pride ourselves on.

 

Jason Price:

I want to ask you about the relationship with you and the regulators, particularly in recent years, how it's played out. What's the current state and what does it mean for you and the way the utility operates and conducts business?

 

Frank Reynolds:

I guess unfortunately Connecticut right now, and it's not just United Illuminating or our gas companies, but I think if you were to talk to any utility in the state, whether it be electric, gas, or water, you would find that we're in a what we call unpredictable and unstable regulatory environment right now, which makes it incredibly difficult to operate and deliver that safe and reliable service that I just made mention of.

Case in point, I guess, is within United Illuminating, we filed our first rate case in six years back in 2022. We filed a three-year plan. It was around $130 million that we were requesting to continue to invest in our system to be able to deliver that safe and reliable service. We got approved by PURA roughly $23 million. We didn't learn until the draft in that case that PURA had utilized an entirely different standard. We were not noticed, no notice was provided that PURA was going to use an entirely different standard in evaluating the investments that we had put forth within our standard filing requirements, standard filing requirements or the files and tools that we've used for decades whenever we file a rate case. And unfortunately, PURA decided to change rules without providing any notice to us.

And so that led to, as I said, an unpredictable outcome, and unfortunately an unstable situation that we're living with today.

 

Jason Price:

So a little more than a year beyond that decision. Where does UI find itself now? What is the company doing to mitigate those challenges and obtain the revenues it needs to run the business?

 

Frank Reynolds:

Yeah, Jason, great question. And I guess I would sum it up and say that we're in a precarious situation right now. Over the last year, we've reduced our capital expenditures by roughly 50%. So essentially, we're not investing at the rate that we had hoped to invest in our infrastructure. We're not investing in our fleet technology, our workforce, all of that is being deferred unfortunately because of the situation that we're in.

But to try and address that or try to correct the situation in late September, we filed a notice of intent with pure that we intend to file another rate case this year. This would be a one-year rate case and quite frankly, I don't think this is the most efficient use of our resources. However, it's the situation that we find ourselves in where we have to file a rate case on an annual basis for the foreseeable future in order to hopefully get the investments that we feel or the resources that we feel are necessary to make the investments.

In our infrastructure to serve our customers and continue to provide them with that safe and reliable and incredibly resilient service that we spoke about. And unfortunately, we're not just seeing this on the electric side of our business. Not too long ago we received the draft decision in our gas company rate cases and just to sum it up, PURA is recommending a $75 million reduction in revenues at those companies and that exceeds the net income of those combined companies. Roughly last year, they made roughly $60 million to $63 million in net revenue, and a reduction of $75 million exceeds that. So we are, as I said, in a precarious situation here. I am still incredibly hopeful that PURA will seek to partner with us and as we seek to partner with them to address the situation and bring some more stability back to our regulatory environment here in Connecticut, to partner with them to be able to get the resources that are necessary to invest in the system and provide our customers with safe, reliable, sustainable and affordable energy as we go forward.

 

Jason Price:

That's great, Frank. Thank you. You got some serious headwinds ahead of you.

 

Frank Reynolds:

Yeah, we’re definitely trying to navigate those headwinds and look for some stability back here in the regulatory environment. We've heard from Wall Street, as I mentioned before, we've heard additional potential downgrades to our credit metrics from some of the credit agencies and again, none of that is good for customers. That leads to higher costs for customers. And without that regulatory stability and predictability, we will continue to have to navigate these headwinds.

 

Jason Price:

Frank, take us into the C-suite. When you sit down with your team, what are the key challenges on the horizon that you see United Illuminating facing when planning out your investment priorities?

 

Frank Reynolds:

This year we're actually going to celebrate 125 years of providing great service to our customers. And I think United Illuminating has done a fantastic job of investing in our system in a very pragmatic and prudent way over the years by targeting assets that we knew would need investment. And doing it in a fashion that we could levelize those investments so that we could not, or that we could mitigate, I should say, the rate component or the amount that we would be charging to customers so we could just continue to have levelized rates. No rate shock, so to speak.

When I think about our system, though 125 years old, we have sub stations that are of, say, 1960s vintage that are going to need investment. There's one in particular, it's called Old Town Sub, I guess appropriately named, that I think was built, again, back in the '60s, well before electric vehicles were contemplated, well before electrification of heat, cooking, and industries as we are talking about today, was really contemplated.

And that substation could serve as a bottleneck if it does not get the type of investment that is necessary to upgrade the technology, and quite frankly, even upgrade the capacity that is going to be needed to meet that growing demand that I made mention of that's going to be downstream. But we're not able to attract the investment in an unpredictable and unstable environment that's necessary to continue to be able to provide that safe and reliable service.

 

Jason Price:

Yeah. Now I want to ask you a little bit more about that. How is your infrastructure holding up to the common utility challenges of aging, increasing severe storms and the pressure to transition to clean energy, which you spoke about?

 

Frank Reynolds:

Yeah. As I alluded to in the previous question a little bit, I'll just add one other element there. We have a great vegetation program, and that for us I think, because trees are the number one cause of outages, is what we call a resiliency measure. And so we've got a great program, we work with our various towns and municipalities to roll out that program, so it's helping to make our system more resilient.

But as I also mentioned, we had this program, it was called our TARP, Targeted Asset Replacement Program. You know we like acronyms in the utilities, so it was our TARP program. And we systematically focused on these assets that we knew would need to be replaced over time, a 20-year plan is what we came up with. And we've been investing in those replacements over the years to make sure that the system can continue to be incredibly resilient and provide 99.9% reliability to our customers, which they've come to rely on.

The situation we have today won't necessarily show up in our performance tomorrow, but it will in the future. And what I mean by that is if we're not able to attract the investment that's necessary to continue with programs like TARP, eventually we kick the can down the road, let's say Old Town Sub for instance, eventually that substation is not going to be able to keep up with the demand or it's not going to be able to keep up with the reliability measures that are necessary to keep our reliability up in that 99.9%.

 

Jason Price:

Okay. With that context, I want to bring us back to the regulatory environment a bit. So how does the current implementation of performance-based regulations factor in as you aim to tackle some of these challenges you're talking about?

 

Frank Reynolds:

Performance-based rates is probably close to a year away I'll say here in Connecticut. It is in some places across the nation ... I think Kauai has it and some other states. I think what's really important when I think about performance-based rates is the metrics that utilities, our utilities, will be incentivized around, being able to deliver those metrics. So I think we need transparency on what those metrics are. We need to totally understand and have them well-defined. And quite frankly, they need to be controllable by the utility. Measures that are not controllable or influenced by the utility will be very difficult for us to be incentivized or penalized for.

And so we've had a number of hearings and meetings, if you will, tech sessions in Connecticut around PBR. Our team has been incredibly transparent and providing feedback and comments in terms of how various stakeholders will be impacted by PBR, whether it be customers, business owners, chambers of commerce. There's been many, many voices that we've been able to the table to provide feedback and comment.

Unfortunately, similar to the standard filing requirements that I made mention of that got changed and we still don't really know what the standard filing requirement is today that would support investment, we're not getting feedback on the comments that we provided around PBR. Which I think will make it challenging for us to implement and execute on PBR in the future without necessarily having all the input and dialogue that's necessary to make it a success.

 

Jason Price:

Yeah. Well, I want to stick with the finances for a moment. I want you to talk a little bit about the difficulties that the utilities are facing when it comes to the financial aspects of investment, and particularly how the regulator comes into play.

 

Frank Reynolds:

Yeah. Costs or what we charge customers is a big factor. It's the number one factor. It's the factor people pay attention to at the dining table. And when I think about the bill that we present to customers, as of late, it's broken down into four components to offer a bit more transparency.

And so there's the supply component. As you guys know, utilities in Connecticut were deregulated back in the '90s. So there's the supply component, which is purely the electrons that we purchase from generators, out-of-state generators. Whatever we pay for them, we pass those costs on to customers. There's no markup. We make no profit. It's purely the generation costs. And then there's the transmission component, and that's the high voltage lines that eventually make their way to our substations and out to customers. We own a very small portion of transmission in the utility service territory, in UI service territory, pardon me.

And then there's the local distribution costs, and that's really our poles, our transformers, the wire, our line people, our call center folks, the vehicles, the training that they go through. That's what's comprised there and that's what allows us to deliver safe and reliable service that we're incredibly proud of. Again, 99.9% reliability on a blue sky day, that's what we're incredibly proud of and that's what makes up that portion of the bill. And it's roughly 30% of the bill.

And then what has gained some real attention as of late is this Public Benefits charge. That's the fourth section of the bill. And that's really state-mandated programs, whether it be low-income discount rates or energy efficiency programs, et cetera. That, again, is a pass-through, no profit made by the utility on those costs. But we've been attempting to educate our customers on this component of the bill because again, it's gained a lot of attention and we want them to know exactly what the drivers of the costs in that section or portion of the bill are for.

 

Jason Price:

Yeah. Frank, I want to ask you a question now about just your general impression on the future here. So bear with me on this question. And it just seems like from an outsider listening to what you're saying, that you're facing numerous challenges, particularly in Connecticut, and somewhat unique to Connecticut and maybe not so.

You're facing infrastructure challenges from regulation, pressures on the utilities generally speaking. Share with us what makes you optimistic regarding the future of United Illuminating and the overall energy landscape in Connecticut?

 

Frank Reynolds:

Yeah. No, you're right. I mean, Connecticut is definitely I'll say an outlier. We've heard that from Wall Street. If you talk to any investors down there today, they talk about the lack of predictability, the lack of stability, value destruction, et cetera. You name it, they're saying it. Their words, not mine.

But you know what keeps me optimistic, again, is we have a fantastic industry. We are going through a significant change right now as we look to electrify. And I think quite frankly, the opportunities that this presents is not only on the electric side of our business, it's presenting opportunities on the gas side of our business as well. As you know, we have two gas utilities here in Connecticut, one in Massachusetts that I'm responsible for.

So what gets me incredibly excited is just the commitment that our employees have to ... Even though we're having these challenges each and every day, whether it's our engineers, our energy efficiency folks, our gas folks, our line workers, you name it, they come in and they give 100-plus percent to the customers that we have the privilege of serving each and every day. And that just gives me great pride in being able to work alongside a team like that.

But not only that, I'm really proud to speak a little bit about our Utility Scholars Program, which we just wrapped up the second year of our Utility Scholars Program. This is a program that we developed in partnership with our union leadership here, and it's focused on rising seniors at inner city technical high schools. These rising seniors come and work alongside our very skilled union workforce for 10 weeks during the summer, between their junior and senior year. They learn about safety, first and foremost of course. They learn about customer service. They learn about the skills of the trade. And quite frankly, they learn some very important life skills in my opinion.

Then they go back to high school, their senior year, and as long as they have a successful senior year, they join us after graduating as full-time employees. And again, we're on our second class at our electric business, we're on our first class at our gas business. And it's been a fantastic program because I will say we're reaching right in our backyards to develop the workforce of the future that's going to be necessary to help us go through this energy transition that we've talked about, Jason.

 

Jason Price:

That's great. I mean, given all the constraints you're facing, you still make time for students. That's important.

Frank, you've given us a lot to think about. You've certainly pulled back the curtain to hear what's going on, so I want to appreciate you for sharing that insight. At this point, we want to shift gears for a moment. We're going to give you the final word, but I want to shift gears and learn a little bit more about you, the person, rather than you, the professional. So we've got what's called the lightning round. I'm going to throw some questions at you. You have one word or phrase response, so are you ready?

 

Frank Reynolds:

I think so. I hope so. Yeah.

 

Jason Price:

Okay. So what would you pick as your power if you were a superhero?

 

Frank Reynolds:

That's a good one. I guess, I was a Star Trek fan growing up, my wife and I, so I guess being able to travel in time, teleportation would be something that would be a superhero power for me.

 

Jason Price:

If you could travel anywhere in the world for a vacation, where would you go and why?

 

Frank Reynolds:

Well, so I was born in Jamaica, so I am a natural beach lover, quite frankly. And while I would go to Jamaica every year, the Maldives looks really exciting and interesting. I'd love to get there someday with my wife and daughters. Who has

 

Jason Price:

Been the most influential figure in your career?

 

Frank Reynolds:

There I have to say my dad. Quite frankly, his work ethic was quite incredible. I've shared with folks as I've chatted with them, he had pretty much three jobs throughout his entire working life, if you will, until he finally retired. And so for somebody who worked from 11:00 PM at night to 8:00 AM in the morning, and then from 9:00 AM in the morning until 6:00 PM, and he did it day in and day out. And then he went to his weekend part-time job.

Incredibly inspiring for me to see how hard he worked in order to provide for his family. So that would be my inspiration now.

 

Jason Price:

We're collecting lightning round questions from past podcast guests to ask future guests. And so this one comes from Nokia's Hansen Chan. He challenged future guests with this following question: how can we promote inclusivity and also economic fairness through the clean energy transition? What are some key tools you'd recommend?

 

Frank Reynolds:

I guess versus a tool, I would go back to the program that we implemented a few years ago because that was a part of the Utility Scholars Program, was looking and reaching and making it a competitive process, quite frankly. And reaching into those inner city communities to help them understand that alignment isn't necessarily somebody you see on a football field, alignment is somebody that does really important and critical work each and every day.

And I think it's been life-changing for those students, both men and women, young men and women, quite frankly, that have joined us. And so I think that's a program that I would use to promote inclusivity.

 

Jason Price:

Putting you on the spot for a moment, now it's your turn. What lightning round question do you want to challenge a future guest to answer? And it can be topical and related to energy, or it can be completely unrelated.

 

Frank Reynolds:

One of the things that we really try and practice and have done quite a bit around is just communicating with customers. We've got apps, we've chatbots, all these things are out there, and I don't know that we've hit the sweet spot yet. So if there's anyone out there that can help us develop stronger two-way communications with customers, I'm willing to be a listening ear for that.

 

Jason Price:

And lastly, what will you consider success when you ultimately look back at your career?

 

Frank Reynolds:

I certainly love the workforce that we have. As I mentioned before, they're committed and they're dedicated. And I think as long as they continue to focus on the here and now, which is keeping the lights on 99.9% of the time and doing a fantastic job, safely, quite frankly, as they do each day, but also just thinking about the future. There's certain things that we can't contemplate that are coming down the pipeline, but I think as long as they keep the customer front and center well into the future, as we navigate whatever challenges and opportunities come up, then I'll reflect and know that we did a nice job setting our team up for success.

 

Jason Price:

Frank, I want to thank you for sharing your time today. I know you have a busy role, serving as CEO of this company. Knowing that our listeners are from the C-suite down to the people out in the field, if you could leave the utility leaders and decision makers listening in today with one final piece of advice to take away from today's discussion, what would it be?

 

Frank Reynolds:

Onward, Jason. I think we have to go full steam ahead, and that's the word that comes to mind, onward. Let's do it together.

 

Jason Price:

Nicely stated. Thank you very much, Frank. I know our listeners will have plenty of questions of their own that they'll wish to ask, so I invite them to leave questions and comments in the Energy Essential platform. And, Frank, look forward to future conversations with you. And until then, we want to thank you again for taking time to talk to us on today's episode.

 

Frank Reynolds:

It's been a pleasure, Jason. Thank you.

 

Jason Price:

And you can always reach Frank through the Energy Central platform where he welcomes your questions and comments. We also want to give a shout-out of thanks to the podcast sponsors that made today's episode possible. Thanks to West Monroe.

West Monroe is a leading partner for the nation's largest electric, gas, and water utilities, working together to drive grid modernization, clean energy, and workforce transformation. West Monroe's Comprehensive Services are designed to support utilities in advancing their digital transformation, building resilient operations, securing federal funding, and providing regulatory advisory support. With a multidisciplinary team of experts, West Monroe offers a holistic approach that addresses the challenges of the grid today and provides innovative solutions for a sustainable future.

Once again, I'm your host, Jason Price. Plug in and stay fully charged in the discussion by hopping into the community at energycentral.com. And we'll see you next time at the Energy Central Power Perspectives Podcast.

 

 

About Energy Central Podcasts

The ‘Energy Central Power Perspectives™ Podcast’ features conversations with thought leaders in the utility sector. At least twice monthly, we connect with an Energy Central Power Industry Network community member to discuss compelling topics that impact professionals who work in the power industry. Some podcasts may be a continuation of thought-provoking posts or discussions started in the community or with an industry leader that is interested in sharing their expertise and doing a deeper dive into hot topics or issues relevant to the industry.

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The Energy Central Power Perspectives™ Podcast is hosted by Jason Price, Community Ambassador of Energy Central. Jason is a Business Development Executive at West Monroe, working in the East Coast Energy and Utilities Group. Jason is joined in the podcast booth by the producer of the podcast, Matt Chester, who is also the Community Manager of Energy Central and energy analyst/independent consultant in energy policy, markets, and technology.  

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