Look for more mergers and acquisitions as utility executives grapple with increased challenges to their business model, says Darren Olagues, president of Cleco Power. Olagues and several other industry executives recently met with The Energy Times for a wide-ranging conversation sponsored by Oracle. Cleco, based in Pineville, Louisiana, serves 286,000 retail customers and employs 1,200.
ENERGY TIMES: Do you foresee greater industry consolidation?
OLAGUES: We’re in the thick of it. We’re being taken private by a consortium led by the Macquarie Group in a transaction that is in the final throes of securing regulatory approval. It’s hard to see that the trend won’t continue. But there are a lot of fundamental factors that would suggest that M&A and privatization is not going to go away. Actually, we will probably get more tail winds in that process than head winds. So I would venture to say we’ll see more of it.
ENERGY TIMES: What are some of the major trends shaping the industry?
OLAGUES: In 30 years I am pretty sure there is going to be a fundamental shift in what our business model looks like. But the challenge is how do you make infrastructure decisions today when you don’t know if the shift is going to happen in 5 years or 30 years? We are not historically in a business of picking winners and losers. You make the decision based on the best interest of your customers, you invest, you adjust rates, and you move along. There is a growing need for massive generation investment that’s coming. There’s going to be significant rotation in generation portfolios. I’m not sure that people have come to realize that.
ENERGY TIMES: What is the future of solar power in your state, given the politics surrounding that question?
OLAGUES: Louisiana has one of the richest solar state tax credit programs around. But when you compare the same solar technology and the amount of energy produced, Louisiana is a third as efficient as Arizona. A lot of politics led to the initial state tax credits. But now it looks like the amount of state credits will be capped and the phase out will continue through 2017. In Louisiana, solar is moving away from being a mainstream concept and something that is politically palatable, in part because legislators and regulators can see that solar installations and the associated credits are primarily for the wealthy. My personal view is that I believe in utility scale solar, and I don’t believe in rooftop solar. The economics of one versus the other are not even close.
ENERGY TIMES: What is your main source of generation?
OLAGUES: We have about 50% coal and 50% gas-fired generation.
ENERGY TIMES: How will the pending federal greenhouse gas emission rules affect Cleco?
OLAGUES:I’m not sure that most coal plants that survived MATS won't be nearing the end of their useful life around 2030 any way. So a big issue will be what’s the glide path for plant retirements that the U.S. Environmental Protection Agency will accept in whatever the final rule looks like. By 2040, what does the country’s power generation mix look like? Is it heavy gas? My sense is it will be. That’s really the longer term issue. That’s the real question people do not talk through.
ENERGY TIMES: How is Cleco handling the large influx of data on customers and operations?
OLAGUES: How can the utility be more nimble? We have all this data and people come and ask if we can invest in new data analytic software. I’m thinking, can someone tell me what the purpose of all the meter data analysis is first? Because the customers are not asking, “How can I get my monthly power bill of $112 down to $107.” Maybe it’s different in California where that same customer is paying $350 a month.
Read more of this series of articles: