Ted Craver
Chairman, President & CEO, Edison International
Energy: Past, Present & Future
By Dean Jansen
Theodore F. “Ted” Craver, Jr.’s professional roots coincide with the coming-of-age of America’s conservation shift in the late 20th century: The country’s lack of self-sufficiency in meeting its energy needs became an economic and political Achilles’ heel. Craver, then an economist for Security Pacific Bank in downtown L.A., recalls the wave of panic caused by the 1973 oil embargo, when Arab oil-producing countries drastically cut production, which drove the price of a barrel of oil up by 400 percent within the year.
At the time, Gov. Ronald Reagan was already exploring energy autonomy for California. “There was a lot of marbling involved in what Reagan was trying to solve [in California] and what the country was facing,” says Craver. That spirit of self-sufficiency carried over into several aspects the Reagan presidency. “In the old days, they didn’t call it environmentalism, but the concept was exactly the same—how [to] make the most efficient use of your resources and not squander them,” points out Craver.
Craver was elected chairman and CEO of Edison International in August 2008. Discussing his company’s role in celebrating the Reagan Centennial this year, Craver says Edison International has provided a grant toward the refurbishment of the Governor of California Gallery at the Reagan Memorial Library in Simi Valley.
Flash back to 1996. On the very day that Craver joined Edison International -- Southern California Edison’s parent company -- as treasurer, Gov. Pete Wilson signed legislation that deregulated California’s electric utilities. “The notion behind deregulation was to let market forces determine what the price for electricity should be,” explains Craver. “The difficulties we experienced with the deregulation experiment here in California was less about deregulation per se and more about the flawed rules surrounding it. That made it wildly chaotic.”
For instance, utility companies were required to divest significant numbers of their power plants, and then only allowed to replace that missing power needed to serve their customers by purchases in the spot power market. What utilities could charge their customers for electricity was frozen, yet the price of electricity they were buying was fluctuating every day. “If you could buy some power two years out, and some power five years out, to reduce the amount of power we were buying overnight, you would reduce your risk, much like an investment portfolio,” Craver explains, drawing a parallel to the financial sector. A fledgling power market and opportunistic power marketers (Enron Corp. had a prominent role in the scandal) forced Edison and other California electric utilities to pay high rates that they could not recoup due to consumer price freeze that was in place. The 2000-01 crisis forced Pacific Gas & Electric into bankruptcy, while Edison “endured huge financial stress, bleeding over $1 billion in cash a month at the height of the crisis” according to Craver.
Today, he is decidedly optimistic about the pace of innovation taking place and feels it will translate to increased autonomy not only for the state, but for the country in terms of the global economy. “We expect the electric market will change more in the next ten years than it has in the last hundred,” he predicts, driven by “huge public policy shifts in environmental protection and energy security occurring at a time of enormous technological advancement.”
Craver points to developments such as “smart grid” networks that use digital technology to more efficiently monitor and control the complex electric system. Technology will also allow utilities to base customer rates not just on how much electricity they use, but also when they use it. (Peak times of demand would merit a higher rate than low-demand times during any given day, thereby helping to balance the supply-and-demand equation.) “You can’t really store electricity effectively,” he explains. “So when someone turns on the switch, it’s calling for electrons in that instant and the system doesn’t have them stored up someplace to release them; they have to be manufactured right then in the moment. To maintain a reliable system, you can’t have fluctuations in the flow of electricity. It’s a highly engineered, real-time system.”
The priority today is energy technologies known as renewables (solar, wind, biomass, geothermal and hydro), which are subject to the whims of Mother Nature, Craver points out. “You can’t fully predict or control renewables like solar and wind,” he says. On the other hand, “With nuclear, coal, and natural gas, we control the fuel source that’s going into the machine, and therefore, the electrons coming out, which allows us to modulate how much electricity is being produced to match the variations of demand. When you have both sides of the supply-demand equation moving, it requires the grid to be much more robust--hence, smart grid.”
Near the end of CSQ’s visit to Edison’s corporate headquarters in Rosemead, Craver proudly points to a framed picture of an electric car behind his desk. The newest innovation? Not quite. The black-and-white photograph depicts an archaic vehicle circa 1915, and spoke of an even earlier collaboration of Henry Ford and Thomas Edison that was discussed but ultimately abandoned, when electricity was being explored as a promising new form of transportation. Almost 100 years later, it seems that electricity’s day as a transportation fuel may have finally come.
