Emotions are running high regarding the Energy Department assuming control of the energy trading floor and marketing budget in excess of $200 million from Finance. Much of this angst is due, I’m sure, to the earlier gas trading fiasco that resulted in the loss of several hundred thousand dollars that was initially hidden from the public. I know firsthand about this situation, as I was the first to flag this cover up and have it confirmed after two directors asked me to examine a new annual budget.
Since then much has been done to build a solid group that has performed at a high professional, and financially responsible level. The aforementioned concerns were in part addressed by hiring internal staff to carry out the energy trading function. This change alone has saved the IID significant costs in avoided consulting fees, with much of this credit due the efforts of the current CFO. One of these efforts included countering ZGlobal’s unsolicited procurement efforts to convince the Board to hand over energy trading to their consulting firm, despite an assessment of the trading floor by Shell that recommended this function be carried out by internal staff as it was the most fiscally responsible approach to provide the largest benefit to ratepayers.*
Although I believe organizations should engage in the proven methods of continuous improvement, part of that continuous improvement process includes the alternative of keeping things the way they are if the “change nothing” alternative is the best option. Thus, my first reaction is to ask: “Is it broken?” If not, then why is it being “fixed”? Has anyone asked this basic question? If so, what benefits are ratepayers receiving and how have those benefits been assessed and substantiated? Along those lines, I find it interesting that a “former” ZGlobal employee will now be in managing the energy trading effort and budget that his former firm could not take away from a more efficient internal staff. Hopefully he will not outsource some or all of this function to his “former” firm as he has done with the transmission planning and related functions in Energy.
Transmission Planning and energy trading are two of the most critical and foundational functions in energy. These two functions are open to considerable potential for political influence and are best carried out by internal staff with no connection to outside consultants and associated political forces, particularly those involved in lobbying. Similar situations in the same and similar industries have resulted in huge scandals and associated criminal activity costing organizations tens and hundreds of millions of dollars, or more.
So, will the current group be kept intact with the whole group remaining internal? Will they be allowed to carry out their functions to the maximum benefit of the ratepayers while working under a “former” ZGlobal employee? Appearance sake alone would seem to dictate this group should not be integrated , or outsourced fully or partially to ZGlobal as this would seem to create more of a potential conflict of interest than simply having them work for a “former” firm employee, if that firm failed previously to take over this function. It also brings in to play the possibility of a “both sides of the street” dilemma. And as such, IID’s conflict of interest policy stipulates that actions that have an appearance of conflict of interest shall not be taken.
Finally, since visibility and open interaction with employees, and customers characterizes the most successful companies, I’ll end with what I think is an appropriate quote from the Berkeley Blog: “To erode confidence in public – utility decisions , meet behind closed doors.”
* Some have characterized ZGlobal’s unsolicited procurement, worth $millions, as out of compliance with IID procurement policy and more fitting the definition of Lobbying due to private interaction with IID management and the board. I could not find them registered with the State as Lobbyists.