Text of Letter Sent to Seattle Mayor and City Councilmembers

November 20, 2002

The Honorable Greg Nickels
Mayor, City of Seattle

The Honorable Peter Steinbrueck
President, Seattle City Council

The Honorable Heidi Wills
Seattle City Councilmember
Chair, Energy & Environmental Policy Committee

Re: No Confidence In the Current Seattle City Light Senior Management

Dear Mayor Nickels and Councilmembers Steinbrueck and Wills:

The Municipal League Seattle Issues Committee has been reviewing the performance of Seattle City Light (SCL) for the past 18 months. In March of this year, the League issued its report entitled "Seattle City Light and the Storm", which questioned the recent performance of the utility’s management leading up to and during the 2000-2001 energy crisis, particularly in the areas of risk management, strategic planning, and debt management. The Municipal League report called for an independent, expert audit of the management performance of Seattle City Light.

The City Council then commissioned City Auditor Susan Cohen to direct an independent consultant study of the performance of the utility’s management. This study was conducted by Vantage Consulting, Inc. We have reviewed the Vantage Consulting Report and we applaud the work of the auditor and consultant for the thoroughness, objectivity and reasonable recommendations contained in the report.

In May, the Mayor commissioned a "Blue Ribbon" group, the Mayor’s City Light Review Committee, chaired by Sharon Nelson. Meeting throughout the summer, this committee conducted a thoughtful review focused primarily on the oversight and governance of the utility. The committee recommended creation of an independent advisory board bringing "a level of expertise and in-depth consideration of policy that the elected officials may not have the time or background to provide." This was needed, the committee reasoned, because of "potential conflict between preserving the long-term financial health of City Light and responding to more immediate public policy and political pressures."

Support for Advisory Board: The Municipal League concurs in the proposal of the Mayor’s committee to form an advisory body, which we believe could add real value to the Mayor, City Council and the SCL Superintendent’s policy and operational decisions affecting the utility. The Municipal League also found the section of the report entitled "Attributes of Successful Governance" to be especially strong, and commends the committee for its excellent report.

SCL Management Failings: The Vantage audit report ("VC"), most of which has not been publicly disputed by City Light, concludes that the root causes of the problem are SCL management practices and its poor communications with the City Council. The report contains a number of specifics compelling the conclusion that senior management has failed to run Seattle City Light in a capable manner.

The Municipal League’s synopsis of management failures identified by Vantage Consulting and the League is set forth in the enclosed Appendix to this letter. We believe that the Vantage report and the League’s investigation demonstrate indisputably that Seattle City Light senior management suffers from a lack of competence in utility management and has created a dysfunctional culture that is defensive and resistant to change. The combined weight of these two significant problems is harmful to the citizens of Seattle and necessitates immediate and dramatic change.

Confidence Lost: After careful review of the Task Force and Vantage reports, as well as its own research and findings, the Municipal League Board of Trustees has determined that it has lost confidence in senior management at Seattle City Light (SCL). There has been a continuing failure of management and leadership at City Light--- a failure of vision and wisdom, a failure of planning and analysis, a failure to establish and implement needed risk management plans, a failure to establish a senior management team with experience in markets or the utility business, a failure to communicate options, with supporting analyses, to the Council and stakeholders, a failure to advocate forcefully to decision makers for the best interests of the ratepayers and the utility and, finally, a failure in self-analysis and correction in which public relations tactics have substituted for identification and resolution of significant shortcomings.

Distribution of Blame: The Vantage and City Light Review Committee’s reports fault mayor and council for inadequacy of oversight and direction, and we agree with that judgment. However, the Municipal League concurs in Vantage’s conclusion that "the SCL management must take the lion’s share of the responsibility for the current state of the utility." (VC p.3). Despite their own failings in overseeing and directing SCL, we believe it is now time for elected officials to do their job in holding the superintendent accountable for the management performance of SCL to date as assessed by Vantage. Past failures do not excuse current avoidance of duty.

While elected officials have failed woefully in their duty to hold SCL leadership accountable for unacceptable performance, there are several steps that should now be taken to address the results of past failures.

1) Conduct the Reconfirmation Process: The City Council is required to reconfirm the employment of the Superintendent of City Light once every four years. The required reconfirmation process is currently two years overdue. It is the considered conclusion of the Municipal League, based on an 18 month review of the utility and careful analysis of the Review Committee’s and Auditor’s reports, that performance of senior management at Seattle City Light has been unacceptable. This leads us to have serious questions about the future of present management at SCL.

Thus we urge that in early January the Council openly deliberate whether to confirm the reappointment of the current Superintendent by undertaking a formal reconfirmation process. This process must offer ample opportunity for public comment through public hearings. This process and timing will give ratepayers and interested groups adequate opportunity to review the Mayor’s Review Committee and Vantage reports and make their views known. The hearings should focus on the Superintendent’s stewardship and management of the utility during the period prior to the issuance of the Vantage report. The council should actively solicit views, based on the Vantage performance audit, from a broad range of interested and affected stakeholders, including the media, the Citizens’ Rate Advisory Board, the League of Women Voters, District and Community Councils, the environmental community, labor, the Chamber of Commerce, the Economic Development Council, and many other groups. In the interest of fairness, the Council needs to ensure that the Superintendent has ample opportunity to provide his input and perspective.

2) Quick Action Needed: In addition to moving as quickly as possible to restore the health of the utility, we believe there is another important reason for the elected officials to take immediate action to hold the SCL management accountable for past performance problems. The Municipal League is concerned about the current public distrust in and contempt for government as clearly evidenced in recent elections. We believe a failure to hold SCL leadership accountable, in the face of a well-documented pattern of serious management and cultural problems, will fuel already severe public anger and cynicism.

3) Avoid Delay: The time for the Council to decide whether to reconfirm the Superintendent is long overdue. The current suggestion of having the City Council review the ongoing performance of City Light senior management as part of a reconfirmation process is unacceptable. Prolonging the reconfirmation process in order to train the senior management team in how to perform its duties is not in the public interest. After years on the job, it is time to hold management accountable for its performance to date.

The public reconfirmation process needs to be completed at an early date because the utility faces major challenges in terms of strategic planning, risk management, cost reduction, emerging issues related to regional power planning, the re-licensing of Boundary Dam, and potential national legislation. All these require the undivided attention of a Superintendent who is not distracted by questions about past failures and future tenure.

4) Following Reconfirmation Decision: Should the Council decide that that it cannot reconfirm the current superintendent, he should be replaced immediately by an interim superintendent well versed in utility management in the Northwest. A national search could then be conducted to select a new permanent superintendent for Seattle City Light.

5) Interim Solutions: The City Council should work with senior management to implement the many short-term, inexpensive, urgently needed corrective actions suggested by the reports as soon as possible. Such corrective action should not, however, detract from nor preclude the Council’s long overdue duty to conduct reconfirmation hearings in the immediate future.

In the meantime, though, the Council should not commit to costly permanent expenditures for additional City Light staff that could prove to be unnecessary with new SCL leadership.

We do not, however, support the Vantage proposal for an independent office of utility oversight because we believe that could confuse the important lines of accountability and impede the decision-making process. Instead, we would call for additional staff expertise as needed for the Council, the budget office and the Mayor’s office. Appropriate expertise in those offices could more effectively assist decision-makers in providing informed oversight.

6) Improvements needed in Mayor and Council Performance: We believe that in the past few years several mayors and city councils have been seriously negligent in their oversight of Seattle City Light. Remedies to this negligence must be aggressively pursued.

• We call on the current Mayor to exert strong leadership to ensure careful and expert oversight on the part of his own administrative staff and the Budget Office, which may include adding additional staff as recommended in the Review Committee’s report.
• The City Council, for its part, must take corrective action regarding SCL leadership by conducting an immediate reconfirmation process and acting expeditiously to implement whatever consequent action it may decide is necessary. In addition, it should hire additional staff expertise of its own.
• It is also necessary for the Council to be more assertive in demanding key information and improved performance from SCL. The Council’s lack of sufficient pertinent information and its failure to demand a higher performance from SCL have led to very costly results for Seattle’s ratepayers, who must hold the Council as well as SCL leadership accountable. While Council bears a share of the blame for current problems at SCL, it must not become paralyzed by its own past shortcoming. It must move ahead quickly and decisively with reconfirmation and with changing its own behavior.

None of the above actions will be easy, but we believe that they are necessary to restore the health of Seattle City Light, and, of even greater importance, to restore the public’s faith in the trustworthiness and effectiveness of government. It is absolutely paramount that this public utility be run by able management and diligently governed.

Sincerely,

Tom Albro, Chair
Municipal League of KC

Bruce Carter, Chair
Seattle City Light Committee

Cc: Gary Zarker, Susan Cohen