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The Holyoke G&E Makes Some Powerful Statements

Current EventsIt was a spirit of entrepreneurship that made Holyoke into one of New England’s most vibrant industrial centers more than a century ago. Today, that spirit lives on in a place where one might not expect to find it — at the city’s 107-year-old municipal utility. The Holyoke Gas & Electric Department has initiated a number of bold steps in recent years, from purchase of the Holyoke Water Power Co., to startup and rapid expansion of its fiber-optic network, to ongoing work to build its portfolio of renewable energy. The sum of these and other ambitious steps has made the municipal utility a primary driver of economic development in the city — and BusinessWest’s Top Entrepreneur for 2009.

Jim Lavelle says 2009 was “a good water year.”

By that, the manager of the Holyoke Gas & Electric Department meant that the water levels in the Connecticut River, helped by steady rains through much of the first half of the year, were high enough to yield a significant increase in the amount of electricity produced at HG&E’s hydro power facility, one of the few in the country operated by a municipal utility.

But they weren’t too high.

“There is a law of diminishing return,” Lavelle explained. “If the water’s too high, you reach a point where production stops increasing. This year, the levels were just right.”

A number of things have been going just right for the HG&E and its various departments in recent years. They range from the successful acquisition of the various assets of the Holyoke Water Power Co. from Northeast Utilities more than a decade ago, to the launching of a fiber-optic division that provides voice and Internet service to homes and businesses in Holyoke and now well beyond, to the acquisition of land on Mount Tom for the exploration of a windpower operation and other initiatives to grow the utility’s renewable-energy portfolio.

Add it all up, and it makes for a decidedly different kind of honoree for BusinessWest’s Top Entrepreneur Award, first presented in 1996 to recognize the region’s long history of entrepreneurship and those who are carrying on that tradition.

This is not an individual manager (although Lavelle’s strong leadership since he arrived in Holyoke 10 years ago has been a strong factor). Nor is it a private company. This is a utility, one with an entrepreneurial spirit, and one that has become a driving force in Holyoke’s economic-development activities.

Indeed, it was the G&E’s ability to provide a large, reliable supply of inexpensive and ‘green’ (hydro) power that convinced a group of partners from academia and corporate America — the list includes MIT, UMass, Boston University, and Cisco — to select Holyoke as the site for a high-performance computing center in what was undoubtedly the brightest moment in an otherwise down year business-wise.

Lavelle stated repeatedly that the utility’s recent string of success stories — and its selection as Entrepreneur of the Year — are the byproduct of strong leadership from managers and large doses of teamwork. That, and a very businesslike and environmentally conscious, or ‘green,’ approach to the utility’s 107-year-old mission: “to provide reliable electricity at a competitive cost to the ratepayers of Holyoke, while providing great customer service.”

In short, the utility is not merely providing reliable and comparatively inexpensive power, said Lavelle, but it is working continuously to lower its carbon footprint in the process.

Fran Hoey, chair of Holyoke’s Municipal Light Board, used the word ‘innovative’ repeatedly as he talked about the many initiatives Lavelle and his team have undertaken over the past decade or so, and that’s a quality he says is needed in what has become an ultra-competitive and very challenging industry — and if the HG&E is going to continue to be a driving force in economic development.

“Innovation has to be part of it, and a big part of it,” he explained. “The energy market operates within a changing market, probably more so now than at any time in the past, in terms of both the regulatory requirements and the financial drivers. We need to be able to successfully navigate these challenges, while at the same time exploit the opportunities that they present.

“To sustain our position as market leaders, we really need to develop and promote an innovation-oriented culture, and that’s what our team has done,” he continued. “In this business, the status quo won’t cut it.”

BusinessWest kicks off this year as it has the previous 13, with the naming of its Top Entrepreneur, and a detailed look at why this choice is worthy of such an honor.

Dam Straight

BusinessWest has gone outside the box in its selection of previous Entrepreneurs of the Year, such as with the choice of Springfield Technical Community College President Andrew Scibelli for his work to create the Technology Park and Enterprise Center in the former Digital Equipment Corp. complex across Federal Street from the main campus.

A similar pick was Craig Melin, president of Cooley Dickinson Hospital in Northampton, chosen for leadership in efforts with everything from improving efficiency and patient satisfaction to initiating green-energy measures such as a biomass plant.

Those examples show that entrepreneurship is not confined to successful private business operations, and the HG&E provides more evidence.

And this story is similar to those at STCC and CDH in many different ways. They start with leadership, but are punctuated by teamwork and an entrepreneurial spirit that flows from the top through the entire organization, and the HG&E is no exception.

Lavelle was working as an administrator at United Technologies in its Space and Sea Division when he decided to become a candidate for the manager’s position at the G&E in 2000. He eventually triumphed over a number of other contenders, including the city’s former mayor, Daniel Szostkiewicz.

Upon arriving, Lavelle quickly determined that he had a number of challenges on his to-do list, ranging from blueprinting a growth strategy for the then-fledgling fiber-optic operation to finding new revenue streams, to developing a plan for coping with the sea changes that were taking place in the energy business.

“There were a lot of questions to be answered,” he said. “First off, we were trying to figure out how to meet growing electric demand and whether we should pursue acquisition of the hydroelectric project from Northeast Utilities. There was also the matter of what we were going to do with the telecommunications system, which at that time was just a network attached to municipal buildings in Holyoke, and how we could maximize that asset. And then we had to figure out how to fix the steam department, which had been losing money for years.”

One of his first orders of business was to assemble and task a team of managers that now includes Brian Beauregard, superintendent of the Electric Division; Timothy Shannon, superintendent of the Gas Division; Robert Gaboury, Telecommunications Operations manager; Paul Ducheney, superintendent of Electric Production; Jim Jackowski, business liaison; and Brian Richards, comptroller.

Together, and with Lavelle’s lead, they’ve injected a decidedly entrepreneurial spirit into all five of the utility’s operations — gas, electric, steam, fiber-optic, and customer service — while using the utility’s mission as a guide.

Certainly the boldest, and in many ways most controversial, gambit was the purchase of the many assets of the Holyoke Water Power Co. from Northeast Utilities, which had been, through a rather unusual set of circumstances, a direct competitor to the HG&E.

“It was totally unique … there were two sets of wires that went down a lot of streets,” said Beauregard, noting that he could recall just one other city (Cleveland) which had two utilities vying for the same business. “And it wasn’t just concentrated in downtown Holyoke; there was a line that went down by the mall and into Westfield. Northeast Utilities had about 17 or 18 miles of distribution lines and a lot of customers.

“We were literally competing head to head,” he continued. “Somebody from Northeast Utilities would go in with a proposal, and then someone from the Holyoke Gas & Electric would come in with a proposal. Whoever had the best proposal would get to serve the customer, and both sides were very aggressive.”

Amped Up

So when NU eventually agreed to sell the various assets of the water power operation to HG&E for $17.55 million in 1999 — it rebuffed an earlier attempt five years earlier and kept its operating license — the transaction provided the municipal utility with not only a solid source of energy, and renewable energy, but it also resolved what Lavelle called “legacy issues” and helped the utility streamline its operations.

The acquisition also helped set a tone within the department, Lavelle continued, one marked by creative problem-solving, innovative thinking, and entrepreneurship. And this method of doing business was employed in several departments.

Indeed, with its fiber-optic business, the HG&E took a decidedly different route from most competing in that arena. Most focus on residential customers and, on the commercial side, what Gaboury calls “low-hanging fruit.”

Instead, the utility focused on larger, enterprise customers on the commercial side of the ledger, starting in Holyoke, but quickly expanding into downtown Springfield, where the HG&E has wired three buildings — Monarch Place, Tower Square, and the TD Bank tower.

Growth has been relatively slow but steady, and at a pace that the utility can handle, said Gaboury, adding that the telecommunications component has provided the HG&E with a solid business-growth opportunity, and the city with another hard asset in its drive to spur more economic development.

The same can be said of the utility’s efforts with regard to renewable energy, said Lavelle, noting that it is working to become a leader in that realm. Thanks to the ‘good water year’ in 2009, the HG&E was able to meet roughly 75% of its energy needs through hydro, while in a normal year that number would be closer to half or 60%.

Overall, the department is committed to expanding its portfolio of renewable energy, he said, and, in the process, providing the city with an important economic-development asset. Elaborating, he said it is the right, responsible thing to do, but it also makes good business sense.

“The impact on our carbon footprint is minimized by the hydro power we produce,” he explained. “The average electric distribution company’s carbon footprint is about 1,100 pounds of carbon dioxide per megawatt hour, and ours is about half that, and a in a very good water year, it will be about one-tenth.”

Add an attractive price to this large source of renewable energy, and Holyoke now has a real asset, he continued.

“In virtually any other territory, if you want to get green energy, you pay a premium for it,” he said. “Here, we sell it off the shelf, and for less than what others charge for standard power.”

Watt’s Ahead?

Lavelle said it’s no coincidence that the sum of the utility’s many expansion initiatives in recent years have made Holyoke a more-attractive site for locating or expanding a business; this was all part of the utility’s strategic plan.

The city still has one of the highest commercial tax rates in the region (currently $35.15), but that disadvantage is offset in many ways by the reliable, inexpensive power the G&E can provide to all its customers, and even lower rates for large users, as well as high-speed Internet service.

This combination of competitive advantages, and also the fact that a large percentage of the power produced is green (hydro), quickly made Holyoke the focus of attention for those exploring the prospects for building a high-performance computing center somewhere in southern New England.

While MIT and Harvard would no doubt like to have such a facility in their backyard in Cambridge, utility costs there are currently at least twice what they are in Holyoke, said Lavelle, and the power in Cambridge isn’t green.

“This combination of inexpensive power and renewable power is becoming very attractive to developers,” he explained. “There’s no doubt that this was a huge factor in the high-performance computing center coming to Holyoke, and there will be other businesses and government agencies that will want to follow suit.”

The challenge moving forward, said Lavelle, is to scale up the utility’s green-power initiatives to ensure that the competitive edge that the city now has with regard to economic development will be there for years and decades to come.

It is this need that motivated the utility to purchase 270 acres on Mount Tom for exploration of windpower alternatives that would enhance green power supplies and enable the city to attract more businesses and institutions with a mindset to ‘go green.’

“As part of our ongoing efforts to plan for our power needs and to develop plants to satisfy our power needs, we generally start by looking in our own backyard at what assets we have and how we can extract value from those assets,” Lavelle explained. “We’re doing it with hydro — we’re looking at how we can reduce our cost and reduce our carbon footprint — and we’re also looking at Mount Tom and its viability for windpower.

Studies of that site are ongoing, he continued, adding that there are many factors that will determine if and how the utility moves forward with such a facility, including the ability to lower costs and further reduce the carbon footprint. Ultimately, though, the utility will need a larger portfolio of competitively priced renewable energy if, as Lavelle and others expect, the high-performance computing center prompts increased interest in Holyoke.

The Mount Tom acquisition was yet another bold initiative in a decade of many for the HG&E, which, through Lavelle’s leadership, had adopted an entreprenurial mindset through all its various operations. And, as Hoey noted, such a strategic approach is necessary if the utility is to effectively compete in this altered, highly competitive landscape.

Looking at the HG&E’s body of work during his 12-year tenure, and especially during Lavelle’s stint as manager, Hoey said there has been what he called a “passion” driving the various programs and expansion efforts.

“Acquiring the assets of the Holyoke Water Power Co. was a pretty bold and controversial move, but as we look back at it, it’s been a great win for the city,” he said. “Building out the fiber-optic network required vision and a certain amount of initiative, and now we’re evaluating the expansion of our renewable portfolio through small-scale hydro and community-scale wind. These initiatives are really paying off — for the G&E, but especially for Holyoke and the region.”

Power Plays

As HG&E’s managers talked with BusinessWest late last month, one of them noted that the ninth anniversary of the utility’s acquisition of the dam and hydro facility (Dec. 14) had passed rather quietly, without much fanfare within the department.

Perhaps, but the impact of that bold initiative, and many of the G&E’s other moves in recent years, certainly won’t be overlooked any time soon.

The utility is making great strides in all its various divisions, taking many bold steps with regard to producing inexpensive, green power, and playing a key role in helping Holyoke return to the vibrancy that made it one of the state’s leading industrial centers.

As Hoye said, it was an entrepreneu
ial spirit that built Holyoke form an agrarian community into the home of dozens of paper and textile mills. And that spirit lives on today, at the city’s utility.

George O’Brien can be reached

at[email protected]

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