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United Cooperative Services News

A New CEO’s Views

Driven to succeed, rising to the task

He had to know how it worked.

As a small boy, Cameron Smallwood built towers of Legos, created machines with an Erector Set and stockpiled broken electronics for later autopsy. He chuckled when he remembered delving into the remains of a discarded VCR and even disassembling his mother’s hairdryer.

That curiosity and a natural gift for understanding math and science led him to earn two engineering degrees, pursue a career in energy and, most recently, achieve his appointment as CEO and general manager of United Cooperative Services.

Now leading one of the nation’s most successfully run co-ops, Smallwood holds both reins as he guides the organization toward a successful future. Though his past experience and thorough training have prepared him well, he looks down a rapidly changing trail fraught with pitfalls.

We sat down with Smallwood to find out what makes him tick, the direction he’s taking the co-op into the 21st century, how he hopes to respond to the rapidly changing energy landscape and what keeps him up at night.

Q: You started your career at United in 1998. When did you know you were interested in becoming CEO of United?

A: I sure didn’t come here with that expectation. At first, I was thinking “Where do I want to be five years from now?” But within just a couple of years, I began to see that this was a really great career and working for the co-op would be something special. I think most United employees are quick to figure that out. Once I got to that point where I knew this was where I wanted to be, I thought. “OK, where do I want to be long-term?” I had always wished to become a leader, especially when there’s a worthy purpose to pursue. The co-op program is pretty special that way. We serve our members. It’s a great purpose, and it’s just that simple. And at some point when I was ready and I had earned the opportunity, I wanted to lead an organization in realizing such a purpose.

Q: You said most people working at a co-op find out that it’s special. What makes it special for you?

A: It comes down to serving people. There are many industries out there that have a single purpose—to increase revenue, make more money, and serve distant corporate shareholders’ interests. The unique feature of the co-op business model is that we put all our efforts into serving member-owners who purchase the product we sell. It’s that people connection that really separates us from more typical business relationships.

Q: When you embarked on your career here in 1998, where did you begin?

A: I was director of planning engineering. Our distribution system is just like the wiring at your house; you can only put so many devices on a plug before it trips a breaker. We have to plan for the growth of our system so we’re ready to serve new residential, commercial and industrial members as they join our cooperative. Our infrastructure has to be correctly sized to serve the amount of energy that’s needed by our members at any given time.

Q: With almost two decades under your belt, that must give you a good perspective on how the industry has changed. As a professional engineer working in the industry for this long, do you see this pace of change continuing?

A: Our industry is changing rapidly in both the way energy is produced, and the way it’s used. Expectations are different today, too, from the membership and from consumers in general. In the next five years, I think the cooperative will have to adapt to rapid changes taking place in other industries. Take the cell phone industry, for example. Who would have thought 15 years ago you’d be walking around with a computer in your pocket today? But that’s where we are. With the cooperative there’s always going to be wires and poles and transformers. But the expectations for how we use energy, how we deliver that energy—even how members themselves make their own energy and how we work with them in that vein—is evolving. We’ve always been agile in adjusting to our changing energy landscape and that will be our approach as we go forward.

Q: What do you consider as Texas’ biggest advantages in the electric power industry as we move forward in one of the nation’s fastest growing states.

A: In Texas, we’ve seen a significant change in how power is produced, which, in the end, has affected costs for our electricity consumers, including United members. Fifteen years ago, we had a fraction of the wind generation we do today in Texas. We witnessed the beginning of the gas shale revolution in the United States here in the Barnett Shale, which has benefitted our members by driving gas prices down, which has a significant impact on the cost of electricity generation. Take that with the addition of about 16,000 megawatts of wind generation—our power cost is as low as it’s been in a very long time, and that’s a good thing for our members and consumers in Texas.

Going forward, solar will become a bigger player in Texas. In the next couple of years, we’re probably going to see some very large solar projects built in this state that will continue to help keep prices low.

Q: How about challenges?

A: One of our biggest challenges is maintaining cost competitiveness when market dynamics are changing. That’s something we’ll always be focused on. There are a lot of question marks out there. Natural gas prices are likely to go up long-term. How that, combined with a growing renewable generation mix, affects and interacts with the market will be interesting.

Another big challenge is the prevailing clean power plan and the United States’ view of carbon emissions. With the new administration, we’re not sure exactly how that will play out, but we’re paying close attention to it. The state’s explosion in wind generation has sort of saved us, if you will. However, tax credits for wind and solar are phasing out over the next couple of years. Unless that changes, the cost-effectiveness of constructing new wind and solar won’t be as lucrative as it has been.

Q: Do you think United is poised to take on challenges of a rapidly changing industry?

A: We’ve got a new, simplified mission statement. “United Cooperative Services will provide exceptional service and value to its membership.” I think that’s key in how we handle future challenges. We’ve proven we can do that in the past, and we’re going to do that going forward.

One of the new strategies we’ve put into place is a new power supply division within the cooperative. About 70 to 80 percent of our members’ bills goes directly to our power supplier, Brazos Electric Cooperative. As a distribution cooperative, United delivers that electricity that Brazos provides. Now, we’ve worked many, many years to minimize the costs for United’s 20-30 percent share of the costs. We’re one of the most efficient cooperatives in the nation and we’ll continue to look for ways to streamline here. But, now we’re going to focus more on that 70 to 80 percent power supply side. That’s going to be key to meeting the needs of our members going forward.

Q: As the CEO of United Cooperative Services, you’re leading 155 employees to serve over 56,000 members who have over 81,000 meters. What keeps you up at night?

A: I guess the first thing that keeps me up at night is our security and our safety. We’re in a relatively safe business, but there are a lot of opportunities for bad things to happen. We have to have a safety focus on everything we do at United. I think we do a really good job of that. We’re approaching almost 2 million hours without a lost- time injury, which means our employees are going home every day to their loved ones without harm.

Added to those concerns is preparing for the future. I always wonder if we’ve done everything we can do to be prepared for what the future holds. The great thing is that we’ve got an amazing team of 155 people who understand we have to be prepared for whatever challenges crop up.

One of the challenges on the near horizon is succession management. We’ve got a great team here who understands the United purpose and mission. However, a third of those people can retire within the next five to seven years. So, the challenge will be bringing in new employees who will understand our culture—putting our members first. We need to ensure new employees embrace our mission of providing exceptional service and value.

On the security side, one of the things we have to do is continue to upgrade our technology, policies and procedures as new cyber and physical threats emerge. There are a lot of evil-doers out there obsessed with finding vulnerabilities in corporations’ information technology. It’s imperative that we stay one, two, and even three steps ahead of them.

Q: In the last several years, United has been adamant about informing members about the changing electric utility industry. Why do you care so much about getting the word out?

A: One thing that always has been a very high priority for us at United is communicating with our membership, being transparent and honest, and using as many channels as possible to meet those objectives. There aren’t many companies who practice or see value in communications, but United always will. Whether it’s through our monthly newsletter here in Texas Co-op Power, the many community meetings we hold throughout our service territory, our annual membership meeting in October or simply in our daily one-on-one conversations with our members, we will strive to be our members’ trusted energy advisor.

Q: Speaking of communications with members, you’ve been integral to the success of one of the most well respected and well received energy conservation and education campaigns in the country. But doesn’t helping members use less electricity conflict with an organization trying to sell energy?

A: In the general view of things, it does. But when you look at our purpose—we’re serving our membership—it’s more than just selling electricity. Our members expect us to be energy experts. Plus, as a nonprofit entity, we have the luxury of focusing on providing the most reliable service at an affordable rate for members, as opposed to the for-profit electricity providers who expend the bulk of their energy toward generating returns for their shareholders.

Q: What spurred the cooperative’s acute focus on energy conservation?

A: Back in the early 2000s, we saw a trend in rising costs on the power supply side. Rates were continually creeping up because natural gas prices kept increasing—our members experienced a little sticker shock as a result. My predecessor, Ray Beavers, used to emphasize our need to focus on the little old ladies in tennis shoes at the end of the line who were trying to make a decision between paying their electric bills and buying medicine. We actually have members just like that. We felt that, as a member-owned electric cooperative, we had a moral obligation to help our members weather rising energy costs.

Q: So empathy for the co-op’s members was the main driver for that decision?

A: In a for-profit world that doesn’t make any sense. But for a cooperative, it makes all the sense in the world. We decided to embark on a very ambitious program, and we were one of the first in the country to really get active during that timeframe. We’ve been nationally recognized as a leader in energy innovation because we believed in the merit of a philosophy and a program that is still helping our members today. Because we had squeezed every efficiency out of the delivery portion of our rates, the only thing we could do was to try to figure out how we could help our members use less energy on the generation and transmission side. To that end, we’ve performed more than 9,000 free home energy audits, handed out thousands of energy-efficient light bulbs and insulated water heater blankets, and hundreds of thousands of dollars in energy efficiency rebates. Those benefits have and are clearly helping our members waste less energy. It was and still is the right thing to do.