The "next generation of leaders" at U.S. investor-owned utilities is poised to guide the sector to a cleaner, greener future as 2022 draws to a close.
The year began with the surprising announcement that "rock star CEO Jim Robo" was stepping down as head of NextEra Energy Inc., the world's largest investor-owned electric utility by market cap. Robo was replaced by John Ketchum, who previously led subsidiary NextEra Energy Resources LLC.
Over the course of the year, senior executives have been announced at companies including ALLETE Inc.; Avangrid Inc.; Avista Corp.; Entergy Corp.; Exelon Corp.; Eversource Energy; FirstEnergy Corp.; Hawaiian Electric Industries Inc.; NiSource Inc.; Pinnacle West Capital Corp.; PNM Resources Inc.; Public Service Enterprise Group Inc., where CEO Ralph Izzo retired and was replaced by COO Ralph LaRossa; Vistra Corp.; and WEC Energy Group Inc.
Several of the largest utilities by market cap — Dominion Energy Inc., Duke Energy Corp. and American Electric Power Co. Inc., or AEP — have also shuffled their C-suites.
AEP Chair and CEO Nicholas Akins said the company and the broader industry are entering "a great time ... for the next generation of leaders."
Columbus, Ohio-headquartered AEP, which currently distributes power in 11 states, recently unveiled a $40 billion capital plan with a substantial increase in clean energy spending and a target of net-zero carbon emissions by 2045. AEP also is streamlining its business through asset sales and sees federal energy policy opening doors to new technologies.
"The fortunate thing is we do have all those avenues of growth," Akins recently told S&P Global Commodity Insights. "The unfortunate thing is that we all get older and it is time to leave it to the younger generation to continue to move that forward."
Akins, 62, will be stepping down at the end of 2022. President and former CFO Julie Sloat, 53, will then take the reins. Akins, who has been CEO since 2011 and chairman since 2014, will remain executive chair of the board of directors.
"In the industry, I think we're seeing a changing of the guard," Akins told Commodity Insights. "Several of us have been CEOs for 10 years or more. I've been CEO for 11 years."
Akins noted that AEP has had a "continual focus on development of individuals" that could take over leadership roles.
"There is no doubt that the company found the right leader going forward," Akins said. "It's been well-accepted too by the investment community."
Guggenheim Securities LLC analyst Shahriar Pourreza said the only real surprising thing at AEP and New Orleans-headquartered Entergy, where CEO Leo Denault retired and was replaced by CFO Andrew Marsh, is that "the CEO job was given to a finance person."
"You had very strong operators there, including Lisa Barton at AEP and, clearly, Rod West at Entergy. They were essentially passed up for the jobs and the jobs were given to CFOs," Pourreza said in a Dec. 9 phone interview. Barton was COO at AEP until the position was eliminated earlier this year, while West remains group president of utility operations at Entergy.
Pourreza does not expect the changes to have any sort of negative impact on the companies or investor sentiment.
"I don't see strategies changing. I don't see any of the capital programs changing or anything like that," the analyst said. "Everything should be beneficial from an investor standpoint. They all should be pretty well-received."
Sloat joined AEP in 1999 and has held several leadership positions over the years including serving as president and COO of utility subsidiary AEP Ohio, the trade name of Ohio Power Co.
"They built me," Sloat said in an interview.
"With each of the roles that [Akins and the board of directors] have given me or asked me to go do, I felt prepared," said Sloat, a former buy-side analyst. "There is always learning opportunities. ... I've just been so fortunate to have those opportunities, particularly when they are tough. That's when you grow."
The succession plan moved more quickly at Exelon.
In less than a month, Calvin Butler Jr. went from being promoted to president and COO to being elected as the Chicago-headquartered company's next CEO.
Butler, who previously served as CEO of Exelon Utilities, will take over the reins from Christopher Crane, who is stepping down at the end of the year to focus on health issues. Exelon, in mid-October, also announced the promotion of Jeanne Jones as the utility's new executive vice president and CFO.
Exelon President and COO Calvin Butler Jr. will take over as CEO at the end of 2022.
Source: Exelon Corp.
Butler, 53, said the quick transition to president and CEO "has been a whirlwind, but it's been good."
"I say a whirlwind from a standpoint that from the outside it looks like things are moving quickly, but on the inside the board and Chris [Crane] have been undergoing a succession planning process for years," Butler said in an interview. "Chris and the board along the way have been signaling to the organization and to [Wall Street], this is our natural progression."
Butler added that the transition in leadership "has been a natural flow" and that Exelon's strategy has not changed.
At the beginning of the year, Exelon completed the separation of its power generation business into Constellation Energy Corp. becoming a pure-play, transmission and distribution utility. Its service territory includes the cities of Baltimore, Chicago and Philadelphia, as well as Washington, D.C.
Exelon now has a $29 billion capital plan for the 2022-2025 period, which the company expects will grow its rate base to about $65 billion in 2025 from about $48 billion in 2021.
Scotia Capital (USA) Inc. analyst Andrew Weisel said Exelon's new management team "plans to be aggressive on cost management and financial discipline, but conservative with the balance sheet," which opens opportunities for growth and combatting potential headwinds.
"Despite new titles, the new-look management team has no desire to change the company's core tenets. Customer satisfaction, affordability, and social equity are top priorities," Weisel wrote in a Nov. 23 research report. "We are confident that the new leadership will provide tremendous consistency."
Duke Energy Executive Vice President and CFO Brian Savoy succeeded Steve Young.
Source: Duke Energy Corp.
At Duke, Brian Savoy, 46, succeeded Steve Young as executive vice president and CFO on Sept. 1. Savoy joined Duke in 2001 and previously served as executive vice president and chief strategy and commercial officer.
"My job is to ensure this company is on the growth trajectory for a sustainable time frame," Savoy told Commodity Insights. "And we have a clear path to growth with our energy transition, the largest in the industry, ensuring our investments are going to the right resources, whether it's transitioning our energy generation fleet, or preparing the grid for electrification growth, and resiliency for storms that become ever more prevalent in our jurisdiction."
Savoy noted that he has been involved in the energy industry for 25 years.
"I was in Houston at the height of energy trading. I loved it," Savoy said. "I never thought I would experience another time in my career that had that kind of excitement, but I would say the era we're in right now in the U.S. utility industry, rebuilding the energy grid and the generation transition, is the most exciting and rewarding time of my career."
Charlotte, N.C.-headquartered Duke distributes electricity in six states and natural gas in five.
More to come
Changes at the top are expected to continue in 2023.
"What we're all watching closely now is who the next successor is for FirstEnergy," Pourreza said.
FirstEnergy disclosed after market hours Sept. 15 that Steven Strah would immediately retire as president and CEO of the Akron, Ohio-headquartered utility. John Somerhalder II, 66, chair of FirstEnergy's board of directors, was named interim president and CEO.
The move came after the board completed its review of FirstEnergy's management team as part of a far-reaching settlement designed to improve corporate governance.
Guggenheim expects an announcement on a permanent CEO in early January 2023. Pourreza believes Entergy's West and former AEP executive Barton are strong candidates for the job.
Wall Street also is watching who will take the helm at Southern Co. once Chairman, President and CEO Thomas Fanning announces his retirement. Industry observers believe the long-time CEO will likely wait until two new reactors at the Vogtle Nuclear Plant reactors begin operation, currently scheduled to occur in the first and fourth quarters of 2023.
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