New Thinking Turns Around Utility's Status

WHEN S. David Freeman was hired as the general manager of the Sacramento Municipal Utility District (SMUD) in 1990, the utility was flat on its back. It had raised rates five years in a row, could barely meet debt coverage, and had fired five general managers. The community was up in arms.

A referendum vote had just shut down the Rancho Seco nuclear reactor when Mr. Freeman arrived. As the head of the Tennessee Valley Authority, Freeman had closed down eight nuclear reactors and put the organization on track toward using energy conservation to create new capacity.

Here in Sacramento, he launched one of the country's most aggressive programs to promote energy efficiency and renewable power sources.

"We wouldn't have been able to do all this innovative stuff if we were still raising the electric bills," Freeman says. "We're taking care of our basic mission which is reliability and rates."

Over the years, his agenda has been harder to sell to employees than to the public, Freeman says. But if "you earn the employees' respect, they perform fiercely for you." In order to gain the support of the whole utility, Freeman gave each department high-profile projects rather than putting "all the new and exciting things over in one department and [letting] the rest of the company be jealous," he says.

The next big project for SMUD will be to tackle transportation. "The electric utility industry has been asleep at the switch," Freeman says. "A fuel cell can give us electric cars that have the same mobility as our current cars - 300 or 400 miles. We want to be a part of a grand plan that will give us an all-renewable source of energy for the transportation sector. That's the only way we're going to have clean air."