ADIRONDACK LAKES SEE IMPROVEMENTS
The Adirondack region is among the most ecologically sensitive to acidic deposition in the United States. Highly acidic waters, detrimental to aquatic life there, were discovered in 27 percent of the area’s 2,770 lakes during a survey conducted from 1984 to 1987. It was the condition of these lakes, among other environmental concerns, that brought national attention to the issue of sulfur dioxide (SO₂) and nitrogen oxide (NO_x) deposits and resulted in the 1990 Clean Air Act Amendments’ current program to reduce emissions of those compounds from powerplants.

But the lakes appear to be strengthening. A recent study revealed that a “marked decrease” in acidity levels in the Adirondack lakes has occurred over the past 30 years.

According to the study, published in April in Environmental Science and Technology online, decreases in sulfur (in the form of sulfate, or SO₄^2-) were consistent across the 52 lakes that were monitored. Because the decreases were “remarkably uniform,” they are “clearly driven by reductions in emissions of SO₂ that have occurred over the same period,” said the study. Since 1973, SO₂ emissions from powerplants have decreased 38 percent and NO_x emissions have declined 30 percent while electricity consumption has gone up.

The study shows that levels of nitrogen in the lakes (as nitrate, or NO₃^-) have also decreased, though not as consistently or dramatically as sulfur concentrations. According to the study, both decreases also resulted in an increase in the acid-neutralizing capacity—the ability of a body of water to neutralize acid—of the lakes.

The study was sponsored by the New York State Energy Research and Development Authority, the state Department of Environmental Conservation, and the U.S. Environmental Protection Agency.

THE WORLD’S APPETITE FOR ELECTRICITY
Worldwide electricity consumption is expected to almost double by 2025, from 13.9 billion megawatt-hours (MWH) in 2001 to 24.7 billion MWH in 2025, according to the Energy Information Administration’s “International Energy Outlook 2003.” (See Figure 1.) That puts the worldwide rate of increase at 2.4 percent a year.



The “Outlook” forecasts that developing Asia will be the fastest-growing area for electricity use. The report predicts that by 2025 the continent’s population will consume 2.5 times what it did in 2001. Leading this dramatic growth is China, which EIA says will nearly triple its consumption by growing 4.3 percent a year. Market saturation and improved efficiency, on the other hand, will keep growth rates in industrialized nations—like the United States—at 1.6 percent a year.

Natural gas continues to be the fuel of choice for future electricity markets, with use more than doubling in the next 22 years. One of the biggest players in natural gas markets is the former Soviet Union—it accounted for more than a third of natural gas use worldwide in 2001. In 2025, according to EIA, the region will rely on natural gas for 63 percent of its electricity generation. Eastern Europe, as well, will dramatically increase its natural gas use, from 9 percent in 2001 to 50 percent in 2025.

In the United States, natural gas usage will creep up a little more slowly, with rates rising from 18 percent in 2001 to 24 percent in 2025. Western Europe will see triple the consumption of natural gas, though, according to EIA.

EIA forecasts U.S. coal use to remain stable at 50 percent, while the nuclear share will decrease from 19 percent in 2001 to 15 percent in 2025. Europe will experience the biggest drop in nuclear power, from 34 percent in 2001 to 21 percent in 2025.

Generation from renewable energy (including hydropower) is expected to grow 56 percent from now until 2025, though its actual share of total electricity generation will remain near today’s 21 percent. EIA’s study did not comment extensively on projections for wind power in the United States, which is the fastest growing source for new generation in the country.

In Central and South America, hydropower currently accounts for 73 percent of the fuel mix. EIA forecasts those levels to drop to 45 percent in 2025, mostly due to countries attempting to diversify their fuel mixes in response to experiences with drought and the negative environmental impacts of large hydro projects.

AVOIDING THE SEVEN SINS OF CRISIS COMMUNICATION
By Carl Gustin, president and chief operating officer of Clarke & Company, a Boston-based public relations firm, and Jennifer Sheehy, vice president and director of Clarke’s Crisis Communication Center.

In the months following the Columbia disaster last February,  the National Air and Space Administration’s (NASA’s) management and public affairs team earned high marks for its crisis communications. Few organizations will ever face a disaster that attracts such international attention. In NASA’s case, it avoided the sins of crisis communications management—unpreparedness, absence, ignorance, silence, distance, untruthfulness, and naivete.

NASA was, wittingly or unwittingly, sensitive to the new paradigm for organizational humility. The bursting of the stock market bubble and corporate accounting scandals have marked an end to “corporate speak” in managing reputations. Corporations and organizations must face the fact that society currently values the ability to speak openly and frankly, to acknowledge mistakes, and to present realistic and achievable expectations for future action. This goes for electric utilities as well, especially at a time when eliciting confidence in what a company communicates is so important.

Despite charges that NASA’s internal safety review apparatus could have been more effective, the agency weathered a series of high-profile revelations relatively well. The lesson here is that losing the initiative early in such situations can be your downfall. NASA clearly learned from its own missteps in addressing public concerns following the explosion of the shuttle Challenger in 1986.

NASA management was prepared to communicate. It no doubt drilled its crisis plans. Those plans include clear lines of authority for speaking to media and government officials, as well as to a host of other critical audiences. That was evident in the frequent updates NASA began to broadcast within an hour of initial reports of a problem and the speed with which the first press conference was convened.

Management was not absent from the scene. NASA administrator Sean O’Keefe was at Cape Canaveral and available to media within hours. Shuttle manager Ron Dittemore was a consistent and steady voice, sharing the latest available information.

NASA seemed to understand its priorities when it came to recognizing the information needs of the astronaut’s families, the media, and the general public. The administration appeared to provide full disclosure of critical information early on, which has served it well as time has passed. Even when it meant admitting errors in judgment, it did so apparently realizing that credibility and trust were at stake. The management team recognized the importance of declaring its accountability—something seldom found in a crisis, although critical in establishing credibility.

NASA was open to the public in the days, weeks, and months following the accident. It held press conferences twice a day, and press staff were readily available. It did not appear to avoid tough questions—a strong characteristic, in that the questions met with no response only get tougher when the public demands answers. The lesson here is to retain control of the information flow, even when it may not be positive. Losing that control ultimately means that your opponents or competitors have an opening to put their own “spin” on the information.

NASA stayed in the public eye. As time goes on, pressure on a management team can build to the point where it tries to put some distance between itself and the issue. The “boardroom bunker mentality” in the early stages of a crisis can devastate any chance of establishing credibility. Pulling back too soon, before the public and the media are ready to return to a more normal cycle of news on the topic, can be as damaging as being silent at the outset.

There may have been problems with the internal flow of information related to the safety of the Columbia mission, but there has been no sign that NASA hasn’t been truthful. It responded to inquiries quickly and effectively. It acknowledged and clarified information and put it in context when necessary.

Lastly, NASA dealt with the situation realistically. Companies in such a crisis run the risk of being ignorant of the standards to which they will be held and acting as if “it can’t happen here.” Standards have changed dramatically over the last few years. Today, almost any action by a company or an organization can prompt an inquiry and become a pathway to media coverage and criticism. 

NASA is an exemplar of the value of crisis communication planning. Executives and managers should anticipate and be prepared to respond quickly, completely, and accurately to a wide range of potential crises. For an electric utility, large or small, effective crisis communications planning is an investment in risk management whose payoff can be measured in the degree of trust and confidence shown by stakeholders after the smoke clears.

MORE DISCLOSURE, BETTER BOARDS
These days, companies are having a harder time finding individuals to serve on their boards of directors, according to a recent study by Sibson Consulting and Spencer Stuart. One reason the pool is shrinking, said the study, is the increased scrutiny of corporate leadership, which makes potential board members warier of serving.

So what do “quality” directors look for in a company? Based on the 2001 proxies and annual reports of 385 companies in eight different industries (including the energy sector), the study examined how many companies provided 52 nonmandated governance and disclosure items—these included codes of conduct or ethics, charters and mission statements, responsibilities and duty guidelines, compensation guidelines, director performance evaluations, training, and skill and competency definitions. The results suggest that recruitment and retention of a quality board member hinges on the individual’s perception of risk and reward, which is, in fact, largely based on the information available to him or her about a company’s disclosure practices. Board candidates will look at several factors when considering joining a company’s board, says the study—formal governance design, social dynamics, and overall transparency.



Some key results:

• On average, companies disclosed only 4.7 percent of the 52 items surveyed.
• Large companies tended to disclose up to three times as much information as their mid-size counterparts.
• The largest companies, with the highest disclosure scores, also had higher financial performance (though the study’s authors do not suggest a direct causal relationship). (See Figure 2.)
• Companies with governance committees scored nearly three times higher overall than those without (7.2 percent versus 2.8 percent).
• Biotech and pharmaceutical companies ranked notably higher overall than other industries.
• Only 10 percent of companies said they were implementing any new governance guidelines.
• No companies indicated having a board mission statement. Only 3.5 percent said they had board governance guidelines.
  

According to the study, “in most cases, investors, employees, and prospective directors must still take it on faith that companies are taking a proactive approach to corporate governance.” For a full copy of the report, visit www.sibson.com.

WHAT THE RATINGS AGENCIES ARE SAYING
From the ratings agencies,  the regulated side of energy companies continues to enjoy more soothing words than the unregulated side does.

Fitch’s “Global Power Quarterly” newsletter reported that unregulated entities succeeded in avoiding a liquidity crisis, at least for the near-term. “Slowly but surely,” according to Fitch, “progress was made during the first quarter of 2003,” with companies like Allegheny Energy and its subsidiaries; CenterPoint Energy; Dynegy; and Reliant averting an immediate crisis of liquidity. Each company had its own strategy that involved securing extended deadlines for loan maturities or refinancing existing bank credit facilities.

In almost all cases, according to Fitch, banks have required security in exchange for extended loan maturities. “The scope of collateral has been significant for distressed energy merchants, who have been pledging virtually all unencumbered assets and/or subsidiary stock to their banks,” said Hugh Welton, senior director of Fitch Ratings. The result is that unsecured bondholders will have a reduced amount of asset protection.

While Fitch says it has had to reduce ratings further to reflect that decreased protection, the agency believes the benefits outweigh the negatives—which might have included, in some cases, bankruptcy or liquidation. Even bondholders, says Fitch, can recognize this as a benefit.

The positive developments in resolving near-term liquidity issues may have “a moderating influence” on the negative ratings trend as 2003 progresses, according to Standard & Poor’s (S&P’s) “Industry Report Card: U.S. Electric/Gas/Water.” In some cases, strict credit terms will continue to put pressure on firms to find new sources of capital. And, even with the extended deadlines, for many, time will be up as late as the end of 2005. At that point, unless the sector experiences a growth spurt (and even if not), companies again will have to find other avenues for offsetting or further delaying repayment of those debts. “It is not at all clear,” according to S&P, “that these companies will not face precisely the same refinancing challenges when the newly structured bank agreements mature.”

Regulated utilities, on the other hand, fare better. “With limited exceptions, regulation is expected to remain reasonably supportive of credit quality,” said S&P. The one downside is that some financial measures have been weakening and could lead to ratings actions in the future.

As for the combined regulated and unregulated sector, S&P stated that its “continued downward slope” could be directly traced to investments in the merchant generation sector. Still, the successful refinancings “may begin to slowly restore”
investor confidence.

MILLIMETER MIGHT
The promise of fusion to produce unlimited amounts of electricity cheaply and efficiently captures our imaginations. Fusion occurs when atoms of a certain element (deuterium or tritium, for example) are excited by intense heat to the point that they collide together with great force, causing their nuclei to bond. The process creates a reaction that releases large amounts of energy—the same reaction fuels the sun.


Thousands of electrical currents shoot through the bowels of the "Z" machine,
Sandia National Labs' fusion mechanism.  The precise timing of electricity
pulses results in billions of released neutrons.

Most fusion technologies have focused either on compressing low-density plasmas in huge magnetic fields or using lasers. The most recent technological effort, developed by Sandia National Labs, is a machine that causes fusion using a massive pulse of electricity—about 12 million joules’ worth in the span of  7 nanoseconds. According to Sandia, the process is more straightforward than others and less expensive.

The Z machine sends the electrical pulses which create an intense magnetic field that crushes tungsten wires into a foam cylinder to produce X-rays. The X-ray energy, striking the surface of the target capsule embedded in the cylinder, produces a shock wave that heats and compresses the deuterium atoms to the point where fusion occurs and neutrons are released. The reactions take place inside a 2-millimeter-sized capsule, where the deuterium gas (heavy hydrogen) is compressed to 160 microns and heated to a temperature of 11.6 million degrees Celsius. The capsule itself is in a container about the size of a pencil eraser, which sits in the middle of the circular Z machine (120 feet in diameter).

Sandia researchers measured a yield of approximately 10 billion neutrons, corresponding to a modest level of nuclear fusion—about 4 millijoules of energy. Currently, the technology requires more energy to cause the reaction than is produced. But that could change, according to Sandia, since a successor to the Z machine could create “high-yield” fusion—which is when more energy is released than consumed.