November 2002 Volume 92, Issue 4

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Two recent investigations of Seattle City Light (SCL) have criticized its senior management’s dubious performance.

The first investigations, carried out by the Municipal League in March 2002, questioned SCL’s strategic planning as well as its management of risk and debt. The League narrowed its inquiry to the period after SCL’s 1996 decision to participate actively in the electrical power markets, particularly in light of SCL’s $1.7 billion debt and recent 58% rate increase. This increase exceeded those of Tacoma City Light and Puget Sound Energy.

The facts reported by the League led to a second report conducted by the Seattle City Auditor. Here are some of the criticisms:

• SCL senior management is largely responsible for the deterioration of the utility’s financial situation, which has left ratepayers saddled with heavy debt and higher rates.
• SCL senior management lacked "the most important background element--electricity utility experience."
• The high number of SCL employees per customer seemed very high,
• SCL failed to reduce costs and the number of employees more in response to the financial crisis.
• SCL’s culture lacked the "can-do" attitude and approach the level of a "fatal flaw" because of:
   

1. a defensive response to issues;
2. a limited or less than enthusiastic response to improvement initiatives;
3. a tendency to dismiss criticism and attack its source, even when such criticism appears to have at least some merit; and
4. a bent towards explaining away past problems as opposed to learning from them.

The report also found that Mayor Greg Nickels and Seattle City Council, as overseers, did not hold SCL accountable for creating and sustaining effective management systems. They include strategic and financial planning and risk management.

The auditor’s report stated that the responsibility for solving these problems should be worked out within the existing governance structure, but also recommended an independent Office of Utility Oversight, whose employees would not be subject to removal by the Council or the Mayor.

The fate of SCL senior management is now up to Mayor Nickels, who hires or fires the SCL superintendent, and the City Council, which could hold reconfirmation hearings to determine whether Superintendent Zarker should be confirmed for a new term.

The City Auditor’s report, complied by Vantage Consulting, and SCL Superintendent Gary Zarker’s response can be reached on-line through the Municipal League web site.

• Click here for the League's City Light Report, which contains links to the other reports mentioned above.

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