About This Episode
Jolene Thompson, AMP President and CEO, and Pam Sullivan, AMP COO and AMP Transmission President, join the podcast to discuss some of the most pressing issues in public power and the electric utility sector, including artificial intelligence (AI), cybersecurity, changing baseload generation, and how AMP members might react to these numerous industry issues. This episode is part 2 of 2.
Transcription
The Public Power Line – S2E2
State of the Industry Part 2
Tracy Reimbold: Public power systems are the heartbeat of a community, powering the homes, businesses, and schools across the country. But do you know all that goes into operating a public power system? So whether you’re an AMP Member, employee, or partner organization, or you’re simply passionate about the energy that powers our towns and cities, we invite you to plug in and listen to this podcast, where we explore the topics and issues most important to AMP Members and public power. This is the Public Power Line.
I’m your host, Tracy Reimbold, with American Municipal Power, the nonprofit wholesale power and services provider for more than 130 public power communities across nine states. This is the second of a two-part series featuring a discussion with Jolene Thompson, AMP President and CEO, and Pam Sullivan, AMP COO and AMP Transmission President, on some of the most pressing issues in public power and the electric utility sector.
In part one, we discussed the impact of data centers and other large load additions on the electric grid, the challenge of regulatory and legislative uncertainty, and more. In part two, we will discuss artificial intelligence, cybersecurity, changing baseload generation, and how AMP Members might react to these numerous industry issues. Obviously, one of the large drivers behind the buildout of data centers is the proliferation of artificial intelligence, and as a technology, this is going to have a significant impact on our industry.
Pam, can you talk about how you foresee AI impacting public power and the energy sector?
Pam Sullivan: Sure. Everything we have been talking about here, I think we are going to be using AI to help us modernize the grid. All these co-located generation and load and distributive generation and demand response — and basically, we are talking about a virtual power plant — and I think we are going to have to rely on AI to help us with coordinating that and optimizing both the load, demand response, and generation going forward.
Tracy Reimbold: And Jolene, do you have any additional thoughts on the subject of AI and how it might impact the industry moving forward?
Jolene Thompson: We had the formation, over a year ago, of an AI Advisory Council, which is a cross-departmental group of our staff, to get together and talk about use cases for AI internally — what could benefit AMP and our Members from using AI — and they developed out those use cases, and then we had an opportunity to have a demonstration of those. We did, our Board did, and our Members have. And I have been very impressed with how our staff creatively used AI to improve efficiencies internally.
I still remain concerned to some extent that it becomes a shortcut that cuts out critical thinking for some folks. But what we saw among our staff is that they used it in a really positive way to up their game, so to speak, and allow them to take their knowledge and their expertise and focus on doing other analytical functions that could benefit our Members. So, I have been impressed by that. It is certainly going to reshape how we work and how we learn across the industry, and what does that all look like yet? I do not think any of us truly know.
I find it hard to think that you could — I understand there could be some impact on jobs — but so much of what we do at AMP and with our Members has a personal touch, a relationship touch to it. You can not really make that work from an AI standpoint. So again, from an augmentation of what our staff is doing and the efficiencies and some of the cool ways they have used it, I think it’s got some real pros. We have to worry about data transparency and security and some of those sorts of things, but we are working right now on our policies to roll it out to all of our staff. It has been interesting to hear how some of our Members have found pretty amazing uses for it as well, too, locally.
Tracy Reimbold: As we are touching on AI, that brings to mind another issue, and that is cybersecurity. For our industry, cybersecurity is an increasingly important concern, and it is certainly something that AMP has spent a lot of time discussing, both internally and with Members. Jolene, how does AMP view the current cyber-threat landscape and what are some things that public power utilities can do to become more cybersecure?
Jolene Thompson: Well, anyone who thinks they can cross cyber threats off their list of top risks is foolish at best. Unfortunately, we have had some conversations with folks who say, “well, I have got a crack IT team that are on it; we do not have cybersecurity threats.” Yeah, everyone does. There are nation states, there are other bad actors, they know the electric industry is a prime target in this country and across the world. Our IT team has done a masterful job, I think, of improving our cyber hygiene internally, but we still have intrusions.
We still have folks that fall victim to a phishing attack. We have had Members that have fallen victim to a phishing attack, and in some cases, paid their bills to a fraudulent actor to the tune of hundreds of thousands of dollars, and then had to work with the FBI and others to try to track through that. So, good internal cyber hygiene is pretty critical, and I would say the root of all of that is education, and you can’t say that enough — education, education, education. That is the focus, because the entry into the vast majority of cyberattacks is coming through a human interaction — there are so many, you cannot fault people for clicking on something or thinking the best of something — but now we have all been trained to be suspicious of anything that is not super familiar and double check even things that are.
Because of how sophisticated these bad actors out there are, it is certainly a grave concern for the utility sector because of the potential to have damage to operational technology, security, all of that. So it’s a big issue. Every time we sit down in recent years and prioritize our risks as a leadership team here internally, cyber shows up in that top tier of risks.
Tracy Reimbold: In addition to the cyber aspect, there’s also the aspect of physical security, which is very important in the electric industry. There is so much tied up in the infrastructure of generation, transmission, and distribution that it is hard to imagine just the sheer amount of physical assets that are out there that could be at risk. Pam, could you tell us a little bit about the physical security of power infrastructure and grid assets and how that is a concern for public power and how is it being addressed?
Pam Sullivan: Yeah, sure. Physical security is obviously a very big concern for the entire industry. As you can imagine, there is a lot of physical exposure on our grid and impossible to control that. So the industry uses a layered defense for security, including fences, security cameras, motion detection, and that is what AMP uses as well. You just have to continue to be diligent and upgrade those defenses as best you can.
Tracy Reimbold: Is that something that you see being addressed from a policy perspective moving into the future?
Pam Sullivan: At the NERC level, obviously, yes. I do not know if additionally beyond that, but certainly at NERC it is being addressed.
Jolene Thompson: Anytime you see lawmakers, and this is no offense to lawmakers, starting to get involved in something like this, it is typically because there has been a crisis and that is not the time when we have our best policymaking, typically.
Tracy Reimbold: It generally tends to swing way far the other direction.
Jolene Thompson: Yeah, it can be a little bit overzealous. You know, we are — I guess I would point out — we are the one industry that has mandatory reliability standards and mandatory requirements on all these fronts versus all the other industries out there. So, the electric industry is prioritized as a focus for these kinds of concerns.
Tracy Reimbold: As many of the traditional baseload plants are retiring, intermittent renewables are growing, and there have been some concerns expressed about managing and maintaining grid reliability. Innovation and new technology will likely play a role in addressing these issues. Pam, what role do you see for new technologies or resources in filling the baseload generation gap?
Pam Sullivan: Yeah, Tracy, there is, I think, a big discussion going on right now on what the definition of baseload generation is. Traditionally, we have considered a natural gas combined cycle facility an intermediate resource, similar to a 5×16 block of power on the market. But I think the time has come that we really need to start considering whether a natural gas combined cycle is more of a baseload resource. You know, when you are talking a 5×16 block of power, that is like a 47 percent capacity factor, and the AMP Fremont Energy Center, which is a natural gas combined cycle, operates closer to a 70 percent capacity factor and acts as an energy hedge during off-peak hours. So, you know, I just think we need to start, you know, thinking about these things in a different way, in a different light.
For public power, I believe the technology of choice is going to remain natural gas for the foreseeable future until small modular nuclear reactors, that technology becomes a proven and cost effective option, which, yeah, I think for public power is probably at least 15, 20 years out. So, yeah, I think we are going to continue to see natural gas combined cycle moving forward, in my opinion.
Tracy Reimbold: Do you think that is viable long term, or will there need to be some additional large-scale solutions developed during that time period?
Pam Sullivan: I mean, I think we are going to see nuclear at some point. I just think it is a couple decades out. So you are going to see more natural gas combined cycle constructed with a lifespan of, you know, 30, 40 years, in my opinion.
Jolene Thompson: Yeah, I would agree. I am bullish on both natural gas and nuclear for baseload in the future, but there is a whole — we talked about it already — there is all the development challenges, there is the equipment availability, regulatory certainty, all of that. But there is, at least for the first time in many years, a focus on the need to build, and the need to keep on viable baseload generation, and the need to figure out how to add new while keeping that all affordable at the same time. So, there is certainly a heightened focus on the whole discussion right now.
Tracy Reimbold: And as we talk about on a regular basis, the electric industry faces significant infrastructure needs — all the way from transmission upgrades to more generation capacity — to meet growing demand. What are the biggest investment priorities for public power utilities right now, and how do you think that they can balance affordability with these demands? And Pam, I will start with you.
Pam Sullivan: Yeah, Tracy, I am going to focus on the transmission side of this, I think. So for years, our Membership, our Members have struggled with receiving comparable transmission service from, I will call the traditional transmission owners. AMP Transmission (AMPT) was formed back in 2018, and I strongly believe AMP Transmission is going to continue to make heavy investments in the transmission grid to provide solutions for the AMP Membership and to improve not only reliability, but also the transmission capacity for our Members.
A lot of our Members are situated in — I will call it dead zones — I mean, it is just where there is not a lot of transmission. They are stuck between two transmission zones, and investments just have not been made in those areas. So, I think there is a lot of opportunity for AMP Transmission to help those members and to get them the service and the transmission capacity that they need.
Jolene Thompson: Yeah, that is a great point, Pam. AMPT has been such a significant benefit to our Members and will continue to be into the future. Certainly, we are looking at additional investment in some base load generation as well as peaking generation because of the strategies that you can deploy there on the RTO system and — at least at PJM — and how do you balance that with affordability? That is what we have to do. We take a look at that. We are not going to recommend something to our Members that does not make sense.
So, we spend a lot of time on the due diligence side of things looking at what makes sense and then do not bring things forward unless they do, and then spend — as you know, Tracy — a good deal of time talking to our Members as we present options to them that they ultimately have to make a decision on based on their own local needs. So, that is what we are doing, is looking at what we need in the future.
We have got an integrated resource planning process going on right now that should be very informative as well, and then just continuing to be flexible and work with our Members as they may see, suddenly, new load growth they were not anticipating, and how do we help them meet that?
Tracy Reimbold: And certainly, that is what one of AMP’s strengths has always been and will always be — what [the idea of] AMP was created on, which was the coming together of smaller entities to be able to really compete and get better representation in a larger group, which that is one of the primary formulators of AMP Transmission that helped drive the need, because now with AMPT in that group, those small Members are able to have a place at the table that did not exist before.
Like I said, I have always found that to be AMP’s biggest strength is that level of representation and the ability to bring together those groups. Do you see that there is going to be transmission bottlenecks as a major concern nationally? And how big of a challenge is that for AMP Members?
Pam Sullivan: Yes, there are definitely transmission constraints on the system, and as we continue to put more load on the system, there is gonna be more constraints. I think, as Jolene said, I mean, the issue comes down to affordability. I mean, how much can you overbuild the transmission system? At the end of the day, I think you need to have the generation closer to the load to make it actually work.
Tracy Reimbold: Now, for kind of a final wrap up here, I would like to ask you both to place yourselves in the shoes of our Members, and if you were a Member official out there listening to this podcast and hearing about the challenges facing the industry, what advice do you have for them? Are there any concrete steps or actions that you would suggest? And Jolene, I would like to start with you.
Jolene Thompson: Yeah, thank you, that is a great question. Well, I would encourage our Members to reach out to us to brainstorm as they look at how to best serve new load, as they look at the policies needed to deal with customer side of generation, as they put together strategies for how they are going to address the changes in the market, make infrastructure investments or meet the needs of their customers. That’s what we’re here for.
We were formed, as you mentioned earlier, we were formed in 1971, and that was to be a solutions provider and bring the economy of scale and stronger voice benefits of joint action to the table for our Members, and that is our mission today, and it [AMP] remains focused on those attributes. We have a full suite of programs, we have all sorts of different options for power supply projects that we can take a look at, and we have a really deep bench of industry expertise on our staff.
A really, really engaged and active Board who helps direct us and bring the Member perspective to that dialogue, and all of that has been developed solely for the benefit of our Members. We are owned by our Members, governed by our Members and exist to serve our Members, and so just would really strongly encourage our Members to reach out to us and rely on us being there, to be there for their interests and offer them advice that helps them be successful in the future.
It is incumbent on us to see our Members be viable, successful, 20, 30 years from now. So that is what we will be advising them on: policies that help them do that.
Tracy Reimbold: Pam, do you have anything to add with advice to our Members?
Pam Sullivan: Sure, yeah, when I look back over my career at AMP, we have moved forward with a number of very large, capital-intensive initiatives. From four new hydro plants, a new coal plant, a new natural gas combined cycle plant, peaking projects that Jolene mentioned, AMP Transmission, and, you know our Member officials, they have to make some really tough decisions and you are never going to have all the answers you want to feel 100-percent confident in the decision you have to make. But, as we all know, not making a decision is essentially making a decision as well, so, you have to make the best decision you can, based on the environment as you know it today and what you see for the future.
As I said, these assets and investments we are making are 30- to 80- year assets, and during that time period, some of these technologies look more favorable than others. But, I believe AMP’s strategic initiative years ago to diversify generation technologies has really paid off, and I believe will continue to do so. And, as Jolene said, you know AMP, at the end of the day, we are just an extension of our Membership. Our Members own us, we are here for them, so, reach out and we will help you as best we can.
Jolene Thompson: I mean, we have talked on this podcast about a whole lot of challenges, and it can sound really daunting and really scary and really off putting, and that is not what we’re trying to do here. But from an overall standpoint, AMP is a very strong organization.
We have got a strong board, a very engaged board, I mentioned earlier. They are here a day and a half a month and they are very focused on bringing the Member aspect into our management. We have a whole team of really dedicated staff that care about our Members and work very hard on behalf of our Members to try to advance them. So, I am very optimistic about what we can do together and our ability to navigate these challenges. Our Members have proven time and time again — I think Pam used the word “nimble” earlier — that they can be nimble and that they can come up with creative solutions to challenges, and, frankly, the public power business model is the model closest to the customer, and I think there is a great benefit to that as this industry continues to evolve. So I do not want to convey a sense of “well, this is a whole long list of stuff; this is pretty intimidating.” We will look at it as opportunities as well as challenges.
Pam Sullivan: Yeah, as Jolene said, I think our Members’ customers are very savvy. They understand the electric industry, they want to have more input and control, and I do think that the unique business model of public power and how close we are to our customers is really an advantage for our Members, and I see a bright future for public power.
Tracy Reimbold: All right, well, thank you both very much for your time today. We appreciate you being able to spend time to talk about the industry as a whole and really talk about how it is probably impacting public power. So thank you both.
Pam Sullivan: Thanks, Tracy.
Jolene Thompson: Thank you, and thank you for hosting us, and, just to close out, I encourage our Members, if they have any questions, call Pam, call me, we are available any time. Text us, call us. Numbers are out there. We’re happy to assist and direct them to the right folks internally.
Tracy Reimbold: Excellent. Pam, Jolene, thank you so much for joining us today and sharing your perspectives on the current state of the industry. I hope you can both join us again in the future.
I’m Tracy Reimbold, your host for The Public Power Line, where we explore the topics and issues most important to AMP Members and public power. If you like what you have heard on The Public Power Line podcast, please share it and subscribe so you do not miss future episodes. Search for The Public Power Line wherever you get your podcasts.
This podcast is produced by Zachary Hoffman, AMP’s Manager of Communications and Publications. If you have ideas for future podcasts, please reach out to AMP’s Communications Team at [email protected].