Zpryme talks with SMUD CEO and GM Arlen Orchard about SMUD’s covid-19 response, how they are taking care of the most vulnerable in their community, their remote work transition, and the future of clean energy and mobility.

Links Below to Jump to Key Interview Sections

SMUD’s proactive response to Covid-19

SMUD’s pandemic response planning

Working to ensure the most vulnerable in the community are taken care of

The increase in online activity from customers

The transition to remote working and lessons learned

The outlook for clean energy, renewables, and mobility

Arlen Orchard April 14, 2020 Interview Transcript

Jason Rodriguez:

Good afternoon everyone. This is Jason Rodriguez with Zpryme. I’m joined today by Arlen Orchard. He is the CEO and General Manager of SMUD out of Sacramento. Arlen, how are you doing today?

Arlen Orchard:

I’m doing great, Jason. It’s good to hear your voice and good to see you again.

Jason Rodriguez:

It’s been a few months now and thanks for taking the time in your home there to join us to talk a little bit about some of the things you guys are doing with respect to COVID-19. First off, more of a personal question, as you know, how is your family doing? I understand your son’s a doctor there. So, is everyone doing well?

Arlen Orchard:

Yeah, everybody’s safe and well. We’re all being very responsible with social distancing, and thanks for asking about my son. He is an ER doctor and he’s being very cautious, but he’s got a job to do, so I’m very proud of him, but a little anxious about that also. Then just on the home front, everything’s great. My partner, Paul and I are learning to be together 24 by 7 which has actually been surprisingly easy, although we’re both eating and drinking more than normal. So, that’s probably not a good thing.

Jason Rodriguez:

Okay, got it. Got it. Well, glad to hear. So our first question, I think we’ve been asking policymakers and utility leaders is one of the reasons reaching out to you is SMUD was one of the first ones that we identified and communicated with us some of the actions being taken there. So, I guess the question would be, why was it important for SMUD to lead the response so early and taking that leading position? Maybe talk a little bit about some of the conversations that led to some of the early decisions. I think a lot of the utilities acted two or three weeks after some of the things that you guys put in place.

Arlen Orchard:

Well, I think for me I start from our core values. For me, my number one priority is always to ensure the health and safety of my employees and the public we serve. So, as the news about COVID-19 was starting to come about and you started to see some exposures and some people getting sick and we saw some in California, actually Sacramento was one of the early places in California that we saw one of the early cases. It seemed to me that we need to be really thoughtful about what does this mean for us as a business and what does this mean for our community, because at the end of the day, we’re an essential services provider. Bottom line is without electricity, nothing works. So, our risk profile is maybe different than other types of businesses when it comes to this type of stuff. So, we had conversations about, gosh, this looks like it could be something, maybe it won’t, but we better make sure that we’re thinking about it and preparing for it.

In general, I think utilities are really well positioned to deal with these kind of crises. We are really good at putting together disaster recovery plans. I know at SMUD every department has one. They’re all integrated into a companywide disaster recovery plan. We practice, we test, we test not only internally, we run scenarios with other local agencies and jurisdictions, whether it’s law enforcement or public health. So, we’ve got a long history of doing that, testing everything from really severe winter storms to earthquakes to floods. In our protocols, we had protocols for a pandemic. That was really important because it provided a foundation of how we should initially respond to the crisis. Now obviously, the information around COVID-19 was and continues to be pretty fast paced and evolving. So, we’ve had to pivot a lot, but at the same time, it allowed us to have a strong foundation to address this.

So, we partially started our emergency operations center in the latter part of February, really from a monitoring and starting to lay the foundation if we had to go to full operation. Then in early March, we went to full operations with our EOC, and I believe it was March 13th which is before the shelter in place orders came out in the state of California. We made the decision to move all of our employees that we could move to remote work. We accomplished that in about three days. As we think about … but that still leaves a large number of my staff that either needs to be onsite. Our power system operators, for example, our distributions system operators, some call center folks and others, power plant operators. So, it was also important to really think about their personal safety, how we were going to manage that.

So, we started social enforcing and encouraging social distancing before the guidelines became formal. We started looking at how do we keep our essential crews safe. So, we started splitting shifts up so you wouldn’t have that issue of cross contamination. We started staggering work times, start times for our crews so they wouldn’t interact with our power systems operations folks. We moved the day shifts out to our backup control center and the night shifts at our normal control centers, so they would never cross. We changed our cleaning protocols. So, it may took a lot of early action as a way to slow the threat of exposure on our employees. I’m happy to say that I think our early action has paid off. While we have quarantined 29 employees because of potential exposures, we actually have not had a single positive case yet among our employees. So, I think that early education and those early actions are paying off.

I will say we are moving towards the end of this week or the first part of next week to sequestering on site our 24 by 7 critical employees or PSO, DSO and real time traders are going to be enjoying life at SMUD in RVs for awhile to ensure that those critical functions aren’t endangered. So, we’re not taking that lightly because obviously it’s taking them away from their families during a time when it would be difficult to be away from your families. So, they’ll be onsite with us for 10 days and then two days home with their families.

An important part of that decision was the availability of testing. Testing has been a big problem in many parts of the country and getting access to it. So, working with a local research lab company, we were able finally to get some testing opportunities for those employees that we’re going to put into sequestration if you want to avoid sequestration, if you don’t know people are healthy. So, that helped make that decision for us. So, a lot of early action I think is paying off, but this is the real deal. So, testing all of us I think.

Jason Rodriguez:

Agree. Two quick followups there that struck me is, one, that you guys had a pandemic response in a plan. So, there was immediate course of action to be taken and you guys started mid-February. Is that correct? How long has that been in place, just out of curiosity?

Arlen Orchard:

Yeah. So, there’s been over the last several years a concerted effort in the company to really focus on our business continuity plans and to really focus on those. So, this is really the outcome of that hard work that our staff has done over the last several years, probably three or four years quite frankly. So, we did have … pandemics were considered in those business continuity plans. Obviously until you get into it, you don’t know exactly everything you’re going to have to think about.

I guess every pandemic may be a little different. Only lived through one of them, and this is it, so … but it did lay a strong foundation of how we should initially respond. We followed the plan, which is initially you’re spending time communicating with the local public health officials. You’re paying attention to what the CDC says and the World Health Organization and following all the media and talking to local agencies here and in the state to make sure that you’ve got the best available data in which to make your decisions along this way.

So, we started off with a monitoring function, which was called for in our plan. So, we had a partial activation of our emergency operation center for that purpose. As the news got graver and it looked like this is more than everybody hoped it would be and worse than it was going to be, we escalated the threat level within our organization. In early March, fully activated our emergency operations staff. So, that’s a group of people, cross functional people, across the company who come together and their job is to manage this and keep us all coordinated and help make sure that we’re making those decisions in a timely fashion as we need to take pretty decisive action in order to protect our employees and ensure that we’re continuing the operations.

Jason Rodriguez:

Okay, good. Then the quick followup also to that is, there must have been already plans of how you communicate across the other key infrastructure in emergency response and hospitals as well?

Arlen Orchard:

Yeah. I mean part of what we’ve done in the past is when you’re … we test locally around emergency response. So, when you do that, you’re coordinating with police and fire and other first responders including healthcare in all of that. I’ll say the other thing that’s been really beneficial is you don’t do this in a vacuum. So for example, I’m on weekly calls with the large public power council CEOs where we are raising questions, sharing best practices. My heart goes out to my friends in New York City and the state of New York, but the learnings that I have been able to pull from what’s happening at NYPA and LIPA have been instrumental in helping us prepare for an increase infections in Northern California. So, it takes a village to figure out how to do this, adjust to this pandemic. So, that’s been a really important resource.

Jason Rodriguez:

Okay, got it. So, we’ll move a little bit further on I think in terms of talking about the people in those who get sick. SMUD has always had great outreach programs and communicated and work closely with the city there to serve the most vulnerable, whether it’s a solar program, EVs, you guys have always been at the forefront of inclusion. So, what are some of the steps Sacramento and maybe SMUD has been doing to enable the vulnerable to be taken care of and any lessons learned like you just mentioned?

Arlen Orchard:

Yeah, I think it’s a great question because we know when a recession where you’re having, or this kind of a crisis, when you’re having massive layoffs, that those employee, those folks who live in disadvantaged communities are often the first ones to lose their jobs, the ones who have the most limited access to healthcare. So, we’ve been very, very conscious of that. So, working with the county and the nine cities in our service territory has been instrumental in understanding what their response is.

For us, we knew that immediately people were going to have to start having trouble paying their bills. So, we put a moratorium on disconnections for not only residents, but for businesses also, because most of our businesses are closed right now. That means, especially those small businesses, restaurants, retail establishments. Revenue’s not going to be coming in. They’re going to have trouble paying their bills. So, we put a moratorium on disconnecting or charging late fees through May 30th and if need be, we’ll continue that on as the shelter in place. Then we’ve implemented a repayment program for them that will stretch over 12 months, so it’ll give them the ability to repay those bills over a longer period of time knowing that they’re going to be having a crunch.

For our low income customers, we have low income rates. So, we’ve been easing the restrictions on how you apply for those. There’s a process of that you have to provide documentation to support your income level to qualify. We’ve suspended that and we’re saying, “We’ll get you started now. You can provide us the information later.” We’ve started moving more and more of those people to our online portal to apply for it. In our program, we also have an annual recertification to make sure that customers still qualify. We suspended that recertification process because it’s just a tough time for people to gather that information and get it to us. It’s a way to make it easier for employee, for customers who are trying to also figure out how do you pay your bills, et cetera, your other bills.

We’ve set up a website that is on the SMUD website that is specifically geared towards all of our customers with information on COVID and how we can assist them. When we think about our program in general, we have a robust partnership with nonprofits and social agencies across our service territory where we will refer customers to them for help, whether it’s a food bank or the Salvation Army or social services to get them set up for some sort of an assistance program like food stamps.

So, one of the first things we did was reach out to all of our partners and assess their capability. Are you still going to be able to function? Can we still refer people to you? Are you going to have the capacity to do that? Obviously, what we heard from some of our partners was we’re struggling to provide services right now. So, we’re looking at how do we understanding their needs help them continue to support their critical measures. So, we’re looking at a couple of ways of doing that.

We have identified that we will have probably some employees who have excess capacity right now because some of the stuff we do in the community just isn’t happening right now. So, can we use those employees to provide support for nonprofits to help them with their critical mission in helping those most in need right now? We’re even looking at … we quickly moved to remote work. Nonprofits don’t have the IT talent that I have at SMUD. So, some of our IT staff are working with some nonprofits to help them remotely set up remote work them so they could again fulfill their message or their mission.

Then finally, we are looking at … we have some economic development dollars that we have to support business and we’re repurposing those dollars and we’re looking at two different programs. One is a loan guarantee program that would be directed at small businesses, and then the other would be a micro loan program that would be targeted to nonprofits to help them over the hump in the next few months, because they’re going to be critical in helping our community recover once we get through the shelter at home program. So, those are a couple of things that we’re really focused on in order to help them be successful and be ready. If they don’t survive during this period of time, our community’s going to struggle a lot more than it’s going to struggle to recover from the COVID-19 economic impacts. So, those are some of the things we’re doing working with our nonprofit partners and looking to really help our disadvantaged customers and communities.

Jason Rodriguez:

Got it. One quick follow up there. We have talked to a few others, said when they moved to this … when the shelter in place orders went on, they saw a big surge in applications, in downloads of apps and usage of online systems for customers. You guys also seen that. I know it’s happening on some of the low income side, but overall, you guys seen a big move to-

Arlen Orchard:

Yeah, we are definitely seeing … we’re seeing a couple of things. We’re seeing much more traffic to our website. We’re seeing from the communications that we send out to our customers, we’re seeing a big increase in the click rate of people opening it, opening those communications and then we’re also seeing more first time visitors to our website than we saw before. So, those are customers who probably were not using the website before and were doing a different channel or just ignoring us and now they’re focusing on that. So yeah, we’ve seen all of those things.

Jason Rodriguez:

Okay. Thank you. I have two more questions for you Arlen, but I want to be respectful of your time. Do you-

Arlen Orchard:

Go ahead, I’m still okay.

Jason Rodriguez:

Okay, sounds good. You touched a little bit about the remote work part and it was great to hear about the community getting involved too. Well, SMUD being involved with the community to support that. I know when we had a chance to visit there about two years ago, you talked a lot about the future of work and what that looks like and really talking about even remote work then and how the utility industry transforms and how SMUD transforms. So, I wanted to see just how has this work from home orders going from a SMUD’s perspective and maybe some challenges and staff feedback.

Arlen Orchard:

So, as I said earlier, we transitioned about 1,500 employees to fully remote work in about three days. I will say that I may give my chief information officer a huge shout out for this because his planning and his roadmap for technology really helped facilitate that in a pretty seamless way. Part of those things were just a couple of things that over the last couple of years we’ve moved away from desktops and everybody … most employees now have a laptop that docks at your station, which means that when we said remote work, they just took their laptop and went home. Then moving to Microsoft 365 just facilitated a much easier transition for sharing information. We’d already found it with people working at work, but it really created the good foundation and platform for being able to successfully do that.

I think that … so we’re still meeting our operational metrics, which says we’re doing that, but it’s a big change. On an average day, we had about 100 people working from home. Now, we moved to 1,400 or 1,500 a day working from home. It’s a big transition and they’re working from home 24 by 7. Some of the things that we are really clear in this new paradigm is, one, you can successfully do it, but there are things that you have to be really mindful of. As an employer, what has become really clear to me is the transparency within the company becomes ever more important. So, we have stepped up our communications to our employees to make sure they know what’s going on. So, there is now a daily update that goes out to every employee that’s updating them on … it’s a COVID update and it’s not only what’s happening in COVID, but what’s happening in the company. Every single day something goes out.

The executive team is on a call every single day together. Each executive is on a call every single day with their senior leadership team and then it’s a group, we’re on calls two or three times a week. Then all of that quickly gets communicated out to our employees. I’ve always done video blogs for the employees. It’s religiously weekly now to help keep the communication going. So, that’s essential to, I think, make people feel like they’re not living in a hole or operating in a vacuum.

The other thing, quite frankly, is that we’ve learned is, and I think we were talking before this started, the power of being able to see people. So, a lot of our calls started off just being audio. More and more of our work groups are adopting a video must calls. So, you must be on the video. You may not have showered today, but you got to be on the video because it creates that connection that is still important, especially when you work for a company like SMUD where personal relationships and that sense of family is really the core of our culture. So, those are some of the things.

I mean we’re moving now where it’s not that everything has been seamless. We’ve had problems. Sometimes it’s been things like I can’t get … we discovered that in my neighborhood, the pipelines really slow for my internet service. It may be because the employee adopted or chose the lowest speed. So, they have to upgrade to a higher speed to be able to do their work from home. People took their laptops home, but a certain number of our employees need … to be able to need a big screen because of the complexity or they need two screens. So, we’ve had to go back out and outfit some of these employees, but it’s that stuff we’re doing now rather than “Oh, somebody can’t do their work.”

Clearly, when you’re working from home for some employees because of the function they’re doing, it may take longer to do the work than if they could pop into the office a few days. I think the bottom line that’s interesting is that I think this is going to change the way we do work going forward. It’ll be a big cultural change that I think will be durable when shelter in place ends and people are getting back to work, at least at SMUD. I can see that we’ll be much more … most people, I think supervisor and staff will be much more comfortable with people working from home a few days a week.

Jason Rodriguez:

Yeah. I think the humanizing effect in a different way happens and it’s just as important when you get a peek into someone’s work and personal life all in one swoop.

Arlen Orchard:

Then you have to be, when you’re all working at home like this, I mean, you have to even relax your rules about how you work at home. Our work rules around remote work were you need to be working and you can’t be doing childcare at the same time, because obviously then you’re working. Well, the reality is schools are closed, so everybody’s home and so you got to be more tolerant and more knowing that sometimes a little kid is going to come in the room and you’re going to have to say, “Wait a minute, I got to get my son down from his nap or he’s waking up from my nap” or whatever it is. So, I think we’re also learning to be I think a little cutting each other some slack during this period of time.

Jason Rodriguez:

Yeah, I think that’s good for sure. So, the last question here, but I think it’s important, especially to the energy audience in terms of the movement that was built up in the US prior to the outbreak around clean energy and mobility and what the future looks like. You guys have been out in the front of that. So, I want to get your impact, how do you guys see this impacting the future of clean energy? And then secondly, mobility. Those two things which you guys are closely working on. Would love to get some thoughts there from you?

Arlen Orchard:

Sure. Let me turn that clean energy and de-carbonization first and roll it into that. I don’t think it changes the long term goals that companies have or that I think SMUD remains as committed to achieving our carbon goals and leading in de-carbonization as ever. I think there’s some practical realities that come out of the pandemic and what is expected to be a pretty severe recession coming out of this is that money’s going to be incredibly tight. It’s going to be incredibly tight for utilities. I know we’re looking at a dramatic loss of revenue over the next, at least through the end of 2020 related to business shutdowns, etc.

So, when you’re thinking about a lot of our carbon efforts are required joint investments with our customers. So, in a recession, customers are less likely to have funds to invest in the new energy efficient refrigerator or transitioning from a gas appliance to an all electric appliance. You put those things off as long as you can. So, I think we’ll see it more difficult to achieve some of the goals we’ve set with our customer programs because you’re going to see less uptake from customers just based on the economic realities.

Now, I will say from a utility scale standpoint, a lot of utilities have already executed agreements to have to purchase utility scale renewables over the next few years. Those will continue. You’ve got a contractual obligation, so you’ll continue to see the stuff that’s already contracted for move forward I believe based on the contracts and the financial obligations. I think that you may see some utilities slow the new investments in renewables because money will be tight, or alternatively, if you’ve seen a decline in your load and you have carbon targets or renewable targets and RPS or something, a declining load means the number of renewables you need to buy is actually smaller. So, I think it’ll be a mix. Projects that are already contracted for I think will move forward. I think there may be a slowing by a year or so of utilities scale.

I suspect unless the rooftop solar industry gets really creative, you’ll see some decline in the number of new customer owned generation just because again, it’s the economic reality of it. So, I think that’ll happen. I don’t think the ultimate goals will change, but I think you could see a slow down of these types of things for a year or two as we adjust and come out of a recession.

On the mobility front, I think you’re going to see a similar trend. I saw an article that car sales have plummeted in the last month, which makes sense. I don’t think I drive 10 miles a week now because it’s to the store and back. So, it’s probably five miles a week right now for my once a week to the grocery store. So, people are just not thinking about buying a car right now, so that natural transition from adopting, moving from a gas fired to an electric vehicle, I think you’ll see sales drop across the board because of that.

I don’t think, but I think there will continue to be a lot of investment going into innovative mobility solutions in the future. We know it’s a recession, it’s a couple of years, two, three years before the economy is fully recharged and moving forward. At which point, all of the same goals and aspirations that I know we have as a company or our customers have or the state of California or the nation has around these things are going to fire right back up. So, I think for some of these things it’s a pause on work being done by startups. I don’t think that really slows as long as there is still venture money available to help support them in the short term.

Jason Rodriguez:

Okay, got it. Then just another question. So, I think everyone has their outlets. So, what do you do to just put your mind at ease when sometimes … during this time I think all of us we can get caught in that moment like, wow, like what do you recommend for employees or just people out there dealing with this? What do you do to just deflate?

Arlen Orchard:

I think that I would say go to the gym but the gyms are closed, so there’s no option for that. Things that I have always found that work for me continue to work they’re even more important now. When I have a chance, because my days are actually busier now than they were before because things are so dynamic and uncertain, but getting out and just taking a walk for an hour when the weather’s great helps. It helps clear my head. Making sure I get enough sleep, which I’m successful about 50% of the time because wake up in the middle of the night worrying about things.

Arlen Orchard:

For me, I’m a big reader, so it’s no great book. It’s more likely a murder mystery or a serial killer or something, but it’s an escapism. I like to cook, so that’s an escapism. Then try and make sure I take a chunk of time every day to spend some quality time with my partner so we can connect. So, it’s the things that I’ve always tried to do, but I think it’s more important ever because I think we’re all under a lot more stress as we worry about our families and our jobs and our businesses and stuff. So, I think finding time to take care of yourself becomes the central.

Jason Rodriguez:

I think that’s a great note to end. Arlen, thank you so much for your time. Please tell everyone there at SMUD thank you for your leadership and sharing a little bit more with us today. Thanks for joining.

Arlen Orchard:

Thank you. Be safe and well. Bye-bye.