In the past year, electricity service has gotten a bit better in one ward of outage-prone Rolling Meadows, said Mayor Tom Menzel.
But don’t tell Menzel the tiny improvement is a tribute to John W. Rowe’s performance in his first year as chairman and chief executive of Unicom Corp. and its Commonwealth Edison Co. subsidiary.
“The change has been through our initiative,” Menzel said. “They did respond based on our being extremely proactive; it’s the squeaky-wheel complex. I don’t look upon that as being a new CEO’s impact.”
In fact, Menzel said he’s never met Rowe and sees no evidence the company has made any dramatic shifts in strategy since he came on board.
“I think they’re more internally focused, and I think that’s hurting them.”
Rowe, who took the helm at Unicom last March 16, agrees with that assessment. But judging by the goals he set for himself, many industry insiders give him decent grades for his first year. In fact, some put Rowe on the honor roll for those priorities–even if customers cannot detect a difference at the local electric company.
Before Rowe moved to Chicago from New England, Unicom was a whipping boy for almost everyone in northern Illinois. People complained about high rates and poor service. The company was saddled with the biggest fleet of nuclear power plants in the nation. And after a lifetime as a monopoly, Edison was faced with the prospect of competition.
Today, people still grump about Edison. But the changes Rowe has made inside the company may yet alter the public’s view.
When Rowe walked into Unicom’s Loop headquarters a year ago, his top priority was to establish his own management team. He accomplished that in short order, reorganizing Unicom executives and reducing the number who report directly to him from almost 20 to eight.
He wanted to begin implementing Illinois’ electric-utility restructuring law, which kicked in last year. Because the law is so new, the shape of competition is unclear–but correctly predicting and taking advantage of competition is Unicom’s No. 1 long-term task, Rowe said.
This blends with another of Rowe’s goals, establishing a direction for the company. By putting Edison’s fossil-fuel generating plants up for sale, Rowe has signaled the company’s future more likely lies in transmission and distribution, not generating power. Investors applauded the move, although it may not hearten customers with flickering lights.
Rowe targeted Unicom’s financials. Compared with 1997’s loss of $853 million, anything looks good. But that loss represented the company’s decision to shut the chronically troubled Zion nuclear plant for good and take the financial hit all at once–a decision that Wall Street applauded. For 1998, Unicom earned $510 million.
Of more interest to investors, the company’s stock is inching up. It was $32.81 when Rowe took over and closed Friday at $36.50 on the New York Stock Exchange; its high for the year was $41.18.
Improving Edison’s nuclear program is Rowe’s highest-profile priority. Even critics say Oliver Kingsley, executive vice president in charge of the utility’s atomic generators, is leading noticeable improvements.
And the remaining priority for his first year: “Keep the lights on during the summer,” Rowe said. The company had a close call during last June’s heat wave, and Rowe said the company “deserved at least some of the egg we got for it.”
This year should be better, Rowe says, because all plants should be running for once.
“I think on those items we had a very good year,” Rowe said. “Unfortunately in life, you learn that there’s always more to do than you thought there was.”
There appears to be universal agreement that the major tasks lie ahead. And even people inside the company note that some of the past year’s successes stemmed from decisions made by Rowe’s predecessor, James O’Connor.
That included bringing Kingsley on board in 1997. And Illinois’ electricity deregulation law was passed before Rowe’s tenure, with former Edison President Samuel Skinner considered a key architect.
Now Rowe faces two huge tasks: Putting the company on a path toward growth and offering reliable service to customers who soon will have a choice of electricity providers. Too-frequent power outages and billing foul-ups are keeping ComEd as unpopular as ever in the public eye.
“It just seems like every time the wind blows, you’re going to lose power for a few minutes,” said Arlington Heights resident Mark McBride.
He blames sagging power lines that get tangled with tree limbs. He’s called, written and even sent pictures to Edison, to no avail. He finally bought a generator. “It’s really frustrating to have to do that in a metropolitan area,” he said.
Rowe concedes that problems with Edison’s transmission lines weren’t a top priority in his first year, and agrees that customer complaints are valid. He said Edison will step up tree trimming and work to correct line problems before they become widespread.
In January, officials from most suburbs and the City of Chicago created a task force to address common problems with Edison. Heidi Voorhees, Wilmette village manager, said early signs are good.
“We have been talking for many years with Commonwealth Edison,” she said. “I have to say the tenor of our conversations has changed within the last year. There’s a better exchange of information that’s going on, and we are seeing Commonwealth Edison giving us specific information and giving us budget numbers and what they plan to do, which I think is a marked difference from the communications we have had in the past.”
But she also notes that cooperation from a public relations perspective isn’t the solution. “There has to be engineering solutions to these problems.”
A computer system–also purchased before Rowe came on board–that spews out wildly inaccurate bills isn’t helping customer satisfaction.
Long-term solutions to all of Unicom’s problems, from unhappy customers or too-expensive nuclear plants, will come in a yet-to-be-determined framework: What is the company going to look like in the increasingly deregulated marketplace?
And even Rowe doesn’t have that answer. He’s still sorting through the status quo.
Rowe divides Unicom’s operations into five business units: nuclear generating plants, fossil-fuel plants, power transmission, power distribution and unregulated services.
At the moment, none of these is poised to be Unicom’s growth engine in the coming decade, he concedes.
Power generation won’t be that engine; the fossil plants already are up for sale and the nuclear stations are too inefficient and unprofitable to be marketable.
“There is no way to sell (the nuclear plants) and get anything like the money we have in it,” Rowe said without committing himself to an eventual sale. “We don’t have any choice but to make this a much better operation.”
Hence the pressure on Kingsley to do a turnaround. Rowe’s confidence in his nuclear chief isn’t without basis; Kingsley is credited with salvaging the nation’s second-largest nuclear fleet, the Tennessee Valley Authority, in the past decade.
“TVA’s nuclear program was about as bad as it could get” in the 1980s, said Ike Zeringue, president and chief operating authority of TVA. When Kingsley joined TVA in 1988, all of the government-sponsored utility’s nuclear reactors were shut down for safety reasons.
By the time Kingsley left for Unicom in 1997, all the TVA plants were running at efficiency levels never seen at the utility, said Zeringue, who succeeded Kingsley as chief of nuclear operations.
Rowe said Unicom is a “very good” transmission company. But distribution drew fainter praise. “We’re going to very, very good,” he said. “That’s just essential to everything else we want to do.”
But none of these businesses is likely to be the basis of growth, everybody agrees.
“Those things grow a little, but the only way to grow them a lot is by acquisition,” he said. “They’re not growth engines any other way.
“So it’s my view that, over time, either you’ll have to see Unicom/ComEd acquiring other transmission and distribution facilities, or you will have to see us selling.”
Rowe added that he has no specific plans or even a timetable to make those decisions.
Most industry experts predict Unicom will be a buyer of transmission and distribution operations, but a seller of power-generating ones. On the other hand, even those who believe the company would be better off without its nuclear reactors point out that it will be difficult to find a buyer that wants five plants. The sheer expense may make a deal impossible.
It’s the last business–unregulated enterprises–that Rowe sees as his company’s hope for growth.
“Over the past year, one of our weakest efforts was improving these unregulated businesses,” he said. “If we’re going to have a real profitable growth engine, it has to be in that area somewhere, in combining energy marketing, energy services and new technologies for using energy.”
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