In October 2006, City Council member Richard Conlin received a curious and unsolicited e-mail from someone calling himself "Andy Cor." The e-mail charged the city's electric utility, Seattle City Light, with repeatedly awarding contracts to a local company called Lands Energy and, "after spending large amounts of public money," contracting with consultants from this firm to occupy leadership positions at the agency normally held by City Light employees.
"These extended, lucrative contracts seem to have disfranchised many longtime employees and failed to improve efficiency," the e-mail read. "It has become questionable what values these exorbitant contracts bring to the public utility....The repeated turnover and lack of commitment to public services, coupled with lack of responsibility and respect for employees, have contributed to a rapid decline of employee morale and an alarming increase of brain drain at City Light. This may leave City Light ill prepared for the next 'Perfect Storm.' The high costs and longer term detrimental effects to the public utility warrant immediate investigation by the City Council."
Two months later, the so-called "Hanukkah Eve Windstorm" hit, and the agency was indeed caught flatfooted; some residents went 11 days without power. But even before that, the mysterious e-mail, in which Andy Cor is spelled three different ways, caused a storm of its own in the halls of City Light. After receiving a copy, Superintendent Jorge Carrasco promptly called his power management staff— about 20 people who deal directly with the Lands Energy contracts and their consultants—into the executive boardroom. He handed out the e-mail and explained that there was no City Light employee with that name. (He'd also sent an e-mail to the City Council saying Cor's concerns were without merit.) What followed was the kind of verbal dressing-down Carrasco has become known for in the utility's ranks.
"We were all given the third degree, told we had no right to go over their heads," remembers one employee. "Everyone turned red and looked at the ground." That is, everyone but Philip Irvin, a power analyst with 29 years' tenure.
"I challenged him, saying we did have the right to talk to [the] council," says Irvin. "I also said the information was not inaccurate—if this was someone making a wild claim, it would be one thing, but this is very much in the realm of what is acceptable—and that I generally agreed with it." Furthermore, Irvin says Carrasco accused him of being Andy Cor, something he flatly denies.
Carrasco says he didn't ask who sent the e-mail, arguing that the purpose of the meeting was to let employees know that if they have questions about Lands Energy, or the way City Light does business, they should "feel comfortable talking with someone in the organization." Carrasco also claims he didn't lose his temper.
But Irvin says the superintendent was "excessively assertive." "He was upset," says Irvin. "In the worst-case scenario, a grand total of one person there was guilty of sending the memo, but he was like that to all of us. People were reluctant to speak up and get their head shot off."
A short, slight Texan, Carrasco has brought a certain kind of cowboy justice to City Light, unsurprising, perhaps, from someone who earned the nickname "Jorge Fiasco" while city manager in Austin, Texas, the first of three jobs he was ousted from before landing here.
Carrasco came in as a reformer after the 2001 energy crisis brought Seattle's proud public utility to its knees, fired most of the utility's upper-level management, and encouraged the retirements of dozens more employees. Unapologetic about looking for outside talent, he reversed the utility's long-standing tradition of promoting from within, and though top management makes more than ever before, he maintains that the agency still requires more money to afford the people he needs to get the job done.
While he's reorganized the management structure of the agency and brought it back into the black, some say Carrasco, who's up for reconfirmation this spring, has decimated employee morale and has yet to accomplish one of the things the council brought him in to do: implement a plan to manage the pitfalls and rate fluctuation that come from buying and selling public power on the open market, the absence of which helped lead to the 2001 disaster.
Created by Seattle citizens in 1902, City Light is one of few lucky utilities that gets the lion's share of its power from water. In addition to owning a cluster of dams on the Skagit River, a dam on the Pend Oreille River in northeast Washington, and one on the Cedar River near Seattle, City Light buys about half of its electricity from Bonneville Power Administration, a federal agency headquartered in Oregon that also generates hydropower.
The great thing about water is that it's clean and relatively cheap. The dangerous thing about it is that it's unpredictable.
In recent years, City Light has generated more power than it needs because the water supply has been abundant. In flush times, surplus electricity is sold to other utilities to help keep rates low for local customers. But the process of selling extra energy is a gamble that involves a lot of educated guesses to ensure there's still enough power to go back to consumers—and that it's sold for the best price.
At best the practice can—and has—earned City Light a nice cushion. But if managed poorly, it can be devastating to the bottom line. Carrasco's predecessor, Gary Zarker, learned this the hard way during the 2001 crisis, when supply dried up and markets collapsed. The former superintendent, who had off-loaded power for peanuts, was suddenly forced to buy it for "gold bullion," in the words of one former employee. This miscalculation, along with the decision to borrow $600 million just to keep the lights on, ultimately cost Zarker his job—and cost residents a 58 percent increase in their electric bills.
Since Carrasco took the helm of City Light in 2004, he's been able to keep rates steady, even decreasing them by more than 13 percent in 2006. But the utility is still hedging its bets on the open market, and has yet to put into practice rules and procedures for managing risk—something its advisory board has recommended in its annual report since 2004. The 2008 version of this report reads: "Immediately implement best practices risk management. Risk management cannot sit on the back burner any longer."
Carrasco says his agency's risk management plan has been ready for months but has been mired in a bureaucratic and political process. What's more, his attempts to get it done have no doubt been hindered by the fact that he's blown through four power supply and environmental affairs officers—who head the department responsible for implementing risk management—in less than four years.
The latest hire for this post is Steve Kern, a former principal of Lands Energy, the consulting firm called into question in the Andy Cor e-mail. This is Kern's third stint at City Light, but his first time as a city employee. Kern previously held the power supply officer's post as a contractor and also served as the power management director while moonlighting for Lands Energy in 2006. He joined City Light in November as a full-fledged employee, and, at $215,000 a year, earns one of the city's highest salaries—second only to Carrasco, who pulls in $225,000. (Mayor Greg Nickels, by comparison, makes a paltry $159,000.)
Kern's former company has done swift business since Carrasco's been in charge, pocketing more than $1 million from City Light for its consulting services. And Kern's not the only Lands Energy stakeholder who's done a tour through the revolving door of the utility: Steve Lewis, a current partner at the consulting firm, was once contracted to serve as a power management director, and Laura Scott, one of Lands Energy's founding members, also worked on contract as director of resource operations planning.
Carrasco, from his perch in the executive conference room, a window-lined corner space on the municipal tower's 32nd floor, says he brought Kern on first as a contractor because the agency had just lost the head of the department and was in a tight spot. "I had no choice," he says, leaning forward. "It's not like I can wait for months while I'm looking for somebody. I didn't have anyone to put into that role. There's too much at stake for me to risk that part of the organization not to be properly managed. So again, I brought in people from Lands Energy on a contract basis to fill in a critical role."
Lands Energy certainly isn't the only contractor that does business with City Light. There are dozens of others, consulting firms like CH2M Hill, Parametrix, and Energy Market Innovations, which have each earned more than $500,000 since Carrasco's been in charge, according to a search of the city's contracts database. But no one firm has held as many contracts as Lands Energy, which has had 16 during Carrasco's tenure. (CH2M Hill has held the second most at 11.)
Now that Kern is a City Light employee, he says he's severed his ties with Lands Energy and divested himself of all stock in the company. A mustachioed man with silver hair and bright eyes, Kern now oversees the department where his former firm performed the lion's share of its work. A search of the city's database confirms that all current Lands Energy contracts expired at the end of 2007.
In December, City Light asked the city's Ethics and Elections Commission to consider whether future contracting with Lands Energy presented a conflict. In response, EEC Director Wayne Barnett prescribed a laundry list of suggestions (per the municipal ethics code)—things like Kern not having any involvement in City Light's dealings with his former firm, ensuring that none of his subordinates are involved in the award of any future contracts to the vendor, and requiring that Kern refrain from sharing information that he gains from city employment with his former firm even if he's divested himself of all interest.
Lands Energy's Lewis says they'll cross that bridge when they come to it. "I suspect from their side," he says, "if we submit proposals, at a minimum Steve [Kern] won't be involved," he says.
Carrasco calls Kern an example of a changing energy industry where it's becoming more common to bring people in from the private sector to help public power evolve. But this is not always the norm. In Nashville, for example, their version of City Light has rules that require the agency to fill vacant positions in-house first before looking to the private sector. Nashville Electric Service Chief Operations Officer Allen Bradley says the reason for this is simple: to develop talent so there's a succession of people who can step up when retirements occur.
What's more, Bradley says, Nashville Electric Service has never contracted out a top management position, and has historically stuck to the rules of promoting from within. But there is a caveat: Nashville doesn't generate and broker power like City Light; it purchases it from the federally owned Tennessee Valley Authority. Here, Bradley concedes that such a practice, which falls under the purview of Kern's department in Seattle, could conceivably require expertise that would necessitate outside help.
At City Light, the transition from being an insular environment to one that courts industry hotshots hasn't been easy. In the words of one employee, who asked not to be named: "Jorge's view of the business is if you work at the city, you must not be very good, so we'll have to get someone new."
To this end, Carrasco expresses concerns about the skill set of the employees he inherited, though he couches it a different way. "The culture of this utility is less performance-oriented and more entitlement-oriented," he says. "Yes, I have, on a selective basis, used a contract relationship where we need to fill in a critical need that's time-sensitive."
And he may do it again. The superintendent currently has a request for proposals to outsource the bulk of its energy trading operation, a move that could affect dozens of City Light positions. While he says he understands that people are worried for their jobs, Carrasco says he's equally concerned about "doing this right."
"I would not want to see us go through the same thing that we did back in 2000 [and] 2001 because we didn't adequately prepare [the utility] for the possibility that another energy crisis could happen in the future," he says.
The energy analysts whose jobs are on the line aren't the only anxious employees at City Light. Steve Church, former director of City Light's north electrical services division, says there's been a lot of anger, hurt, and bewilderment at the utility since Carrasco took over. "It's not a pretty picture, not a happy place from anybody I've talked to," says Church. "It's a shame because it used to be. There are a lot of people that really care, put a lot of their time and energy into it. There's an intense loyalty to the utility, and they're trying to stomp that out for some reason."
This general malaise was clear in an employee survey released last fall that gave City Light management dismal marks for communication and leadership. More than half the employees said the agency is headed in the wrong direction, and most of its midlevel managers said that change had not been managed effectively.
Church, a City Light employee since 1968 who retired in 2006, says he was forced out. "Some replacement of old wood like myself would've made sense," he says. "But to wipe the place out, that was crazy. It's certainly unprecedented. I've lived through a lot of regimes at City Light. Nobody did what these guys did."
Former superintendent Zarker declined to be interviewed, but the final four years of his tenure saw 22 management employees leave the utility, in addition to 159 retirements. Since Carrasco took the reins, 36 managers have left and a total of 213 employees have retired, according to figures provided by City Light. While the utility, which employs 1,700 people, had an overall vacancy rate of 14 percent in 2006, Carrasco has whittled it down to 5 percent, and says the massive management overhaul was not about cleaning house but about finding the right people for the job (a consultant's report released before Zarker's ouster criticized the utility for a lack of technical experience in the higher ranks).
Furthermore, Carrasco points out that of the 26 top administration officials he's hired, 11 have come from within, and that 170 of the 383 positions filled in 2007 were promotions. He also says that employee morale wasn't stellar when he joined City Light, an assertion supported by a 2004 employee survey.
With Carrasco's appointment, the hope was that faith in executive leadership and communication would improve. However, City Light staffers say they're afraid to speak out about management shortcomings for fear of losing their jobs. Many employees interviewed for this story were reluctant to tell their stories, even without attribution. Some claim they have already been threatened for speaking out in the past, or have been the subject of a public reprimand similar to the mysterious Andy Cor, whose identity remains unknown.
Irvin, the employee accused of snitching during the infamous Andy Cor meeting, says the survey taught Carrasco "that employees think the same of him that he thinks of them." Irvin is well-known around the utility for being outspoken—he was reprimanded in 2007 for being "disrespectful and potentially slanderous" in remarks made to a reporter about Carrasco —and is also known for his involvement in an unsuccessful 1990 effort to repeal the city's domestic partner benefits ordinance.
He may be on the fringe with that opinion, but Irvin isn't alone in experiencing Carrasco's temper.
Carrasco has "definitely been hostile to some employees, particularly long-serving employees who have spoken out in the past," says Denise Krownbell, a senior environmental analyst who's worked for the utility since 2000. "You'd expect a superintendent not to lose his cool, but he has—in a public forum—several times."
One such incident occurred during an all-hands meeting in 2006, when an employee asked about the utility's reorganization, dubbed a "transformation" by the new leadership. The superintendent tried to keep his cool, but eventually blew up, says Krownbell, a shop steward for Local 17, which represents professional and technical engineers. "He was just short of yelling," she adds. "People were like, 'What just happened?' They were hesitant to ask any questions after that."
Asked about this and other meetings where he reportedly lost his temper, Carrasco says: "I can't speak to what people perceive. I can tell you that none of those instances represented anger."
Carrasco's bulldog reputation didn't start at City Light. Before coming to Seattle, he was fired from municipal posts in Austin; Scottsdale, Ariz.; and Oakland, Calif. Like Seattle, in these situations, he came in, guns blazing, instituted sweeping changes, and ultimately ended up crosswise with his employees and local politicians.
As city manger in Austin, he reportedly resigned under pressure in 1987 after he pushed out or fired several high-level managers, pursued a major reorganization of city departments, and eventually made a fresh crop of newly elected City Council members nervous that he was trying to undermine their budget authority.
Though Carrasco was fired from the Scottsdale city manager post on the wave of a new council majority, he wins praise from former mayor and then–council member Sam Campana. "I hated to lose him," she says. "He made hard cuts but put into place fiscal controls that have served us well."
A sweeping reorganization Carrasco instituted as general manger of the East Bay Municipal Utility District in Oakland caused an employee rebellion that resulted in the unionization of middle management—and eventually his ouster. Carrasco's restructuring has since been undone, says former utility district board member Stuart Flashman, who adds that "people questioned how necessary and effective it was."
While Flashman notes that Carrasco was able to implement a water-supply management plan, he calls his tenure in Oakland a "mixed bag." But Frank Mellon, who currently sits on the utility district's board and was part of the group that fired him, says that Carrasco "had a fairly autocratic style. I heard stories from individuals where he would dress down managers in front of other managers. What you're dealing with is someone who keeps on moving through the system on the basis of being a charming fellow. Steal away the charm and I challenge you to get an interview with him where he doesn't get short with you."
Despite this reputation for being hell on wheels, Carrasco can be charming, engaging, and even soft-spoken at times. One recent morning, he arrived early for an appearance at City Light's North Service Center, so he kicked the tires on the loading docks before the line crews went out and sat in on a safety meeting of the crew chiefs. Carrasco, though visibly overdressed in a suit and trench coat in a room full of flannel-and-jeans types, seemed at ease, more pussycat than pit bull. He smiled broadly, wished everyone a happy New Year, thanked them for a job well done, and patiently began by answering a question about city bureaucracy.
The purpose of this visit was to discuss the results of the employee survey with warehouse staff, which ranked management low in a couple of key areas: "teams working well together" (29 out of 100) and "effective communication between workgroups" (0 out of 100).
Carrasco calmly stated that he was there to understand what went wrong, and to create an atmosphere and an opportunity for people to speak their minds. And they did, mostly discussing a longtime feud between tool-room and warehouse workers. One man bluntly asked why they're the last to know when restructuring occurs within the agency.
Indicating that he'd heard the complaint before and chewing intently on his reading glasses, Carrasco replied: "We need to have a protocol for how changes are done and a standard procedure for communicating them," a talking point he repeated twice more during the conversation.
Belying a sometimes calm veneer, Carrasco emits the earnestness of someone who's bracing for a fight, insisting he's determined to do what he can to improve morale. Part of this is conducting more meetings such as the one with the warehouse workers in the coming months. But Joe Simpson, business representative for Local 77, which counts about 500 high-voltage electrical workers among its membership, says it's a whitewash.
"They've been making those attempts to patch things up," he says. "But they're just going through the motions. They're not doing anything."
Simpson says things took a turn for the worse when Carrasco and his management team took over. "They're not used to dealing in a strong union environment," he says. "They pretty much do what they want to do, and we fight later. They very seldom let us in. I don't deal with [Carrasco] directly. I deal with the people below him. But I have some serious concerns about the way his staff under his direction deals with the unions."
Carrasco may have lost the confidence of the unions, but he's still got the full backing of Nickels, who nominated Carrasco to replace Zarker in 2003 after a citizen selection committee recommended him as one of three finalists for the job. Carrasco went on to win the unanimous approval of the City Council.
Nickels says Carrasco, then president of Voorhees, N.J.–based American Water Services, came to the job with the following key characteristics: extensive financial and management experience, leadership skills, and outsider status. "We needed to define what City Light was going forward, not just the legacy from past generations," Nickels says from his seventh-floor City Hall office, oldies playing on a radio behind his desk. "I think he's done that well by bringing in a new management team."
Additionally, Nickels praises the superintendent's ability to keep rates down and get City Light's long-term debt back under control. The measure of this, the debt-to-equity ratio (which climbed to nearly 90 percent under Zarker's reign), is now at a healthy 69 percent—on track, says Nickels, to reach a 60 percent target by 2010.
As for the low marks on the employee survey, Nickels spokesperson Marty McOmber says Carrasco has done a good job "asking the tough questions, sharing the results publicly, and being accountable.
"It's an organization that's undergone significant cultural change. This is going to cause disruptions," McOmber says.
The mayor adds that he's interested in seeing Carrasco set a course for the future that could involve innovations like decentralized distribution and even broadband transmission along fiber-optic cables. While Nickels says he's concerned about risk management, he doesn't fault Carrasco for the delay. "It's an educational challenge," he says, adding that the intricacies of the proposal make it hard to get the council up to speed. "We have made progress, but it is an area of concern."
Though Carrasco says he's drafted a risk management plan, the City Council has yet to see or approve it, a process that could take weeks and maybe even months. In an August memo to council member Jean Godden, who at the time was chairing the council's Energy and Technology Committee, Tony Kilduff, the council's central staff member responsible for City Light and a former employee of the utility, wrote: "Since a risk metric is a complex construct, my review of it could take several weeks and it may be prudent to have input from an outside expert. Once council is assured that the risk metric is appropriate and accurately captures the risks City Light faces, it will need to engage the utility in a discussion of the limits that should be set for the metric and the protocols to be followed if the limits are approached or breached. This is often a lengthy process."
Council member Nick Licata says it's not sufficient for Carrasco to simply supply the proposal in time for his reconfirmation. Risk management was at the "core of the previous superintendent's problems," Licata says, and "[Carrasco] has not kept an adequate timetable. We need to look at that. He needs to explain why he hasn't pursued it as diligently as he should have."
To that end, Bill Gaines, who in 2006 left the power supply officer post now held by Kern, says risk management plans are difficult to implement in part because of the complexity of the initiative and the change in culture it requires. Part of this involves erecting a firewall between "front" and "back" offices of the department to ensure that the people making the sales aren't the same ones counting the money. This change was finally achieved last fall, nearly four years after the City Council first asked Carrasco to do it. But other upgrades are still outstanding, such as the all-important risk metric, which establishes guidelines that govern long-term power sales and short-term trades, the bedrock upon which risk management policy is built.
"In some ways I regret leaving," Gaines says. "I feel like I was in the middle of something that didn't get finished." Gaines is now the superintendent at Tacoma Power, Tacoma's equivalent to City Light. As for Carrasco's other former power supply officers, John Prescott, now at PNGC Power in Portland, declined to be interviewed, while Wayman Robinett, now at Puget Sound Energy, did not return calls seeking comment. While Gaines says he left because of the opportunity in Tacoma, some observers suggest that the stability problems in that position are part Carrasco, part long-simmering turf battle within the department.
Randy Hardy, who served as City Light's superintendent from 1984 to 1991 and now runs a local energy consulting firm, says the importance of the power management function "can't be overstated. It's probably the single most important function in the utility."
While Hardy applauds the superintendent for getting City Light back on track financially, he says, "Having four power managers in four years is a concern. Hopefully, you've got the right guy now and he'll stick around. The utility needs that."
Council members vow to give Carrasco a good once-over when he comes up for reconfirmation, but the conventional wisdom is that they'll ultimately let him stay on. "It would be pretty hard not to confirm him given that City Light is in a phenomenally better position financially than it was [at the end of Zarker's tenure]," says council member Sally Clark.
That said, Clark says she and the other council members still have concerns about the results of the employee survey and what it says about Carrasco's management style. Clark wonders: "Can you have the financial performance continue to improve when the perception of the line staff and midlevel management is so out of whack, or does the perception of the management affect the bottom line at some point?"
Clark says she hopes people stay passionate about working at City Light. A good reputation is going to become even more critical for the utility as it braces for the baby boomer brain drain: In five years, nearly half of the utility's employees will be eligible for retirement.
And there are other challenges. City Light's 106-year-old infrastructure is old. Some of the power poles and transformers that support transmission lines are in danger of collapse after decades of neglect. And there are growing concerns about the load capacity downtown, particularly because of the explosion of growth in South Lake Union.
Yet Clark still maintains that risk management is the City Light variable that scares her the most.
"I have to trust what I pick up from [Carrasco] and whatever information I find elsewhere," she says. "He's certainly argued that he's bringing in the right people to understand the market. I wish I knew. Part of the whole world of risk management is that you have to read the tea leaves."
While there's hope that newly elected council member Bruce Harrell, the chairman of the committee charged with overseeing City Light, will one day grasp the nuances necessary to hold Carrasco accountable, it's going to take him some time to get up to speed. Nonetheless, Harrell is likely to be sympathetic to those employees who gave Carrasco a failing grade on the survey: His father started at City Light as a lineman and retired 30 years later as director of internal audits, and Harrell says he still remembers his mom taking him out to watch his dad climb the power poles.
"I don't rubber-stamp anything," he says. "I don't think anything is taboo in evaluating such a position."
For his part, Carrasco says he's not going anywhere anytime soon. "I have no agenda here other than making this organization better," he says. "I'm not running for office. I'm not doing anything other than trying to help this utility become stronger. And while people at times may not agree on something that we're doing, we have nothing but the intentions of the utility and our customers in mind."