December 2010 Vol. 237 No. 12

Features

AGAs Dave Parker Heads Into Retirement On A High Note

David N. Parker is retiring at the end of 2010 after 13 years at the helm of the American Gas Association. He has been called a “player-coach” by people in the organization because of his transparent, encouraging management style. As supply challenges, climate concerns and operating issues have arisen, he has patiently achieved a great deal as president and CEO of the association. One achievement that is likely to be long appreciated by the natural gas utility industry is the increased influence the fuel enjoys today in the halls of government power.

In an interview with Pipeline & Gas Journal, Parker mentioned a good example of AGA’s clout before policymakers. When U.S. Senators Liebermann, Kerry and Graham were crafting a gargantuan cap-and-trade bill that would create a new market for carbon emissions credits and offsets while opening new sources of income for sophisticated financial players, Parker and AGA were providing input. Parker says the industry was able to achieve a breakthrough in the bill’s wording that put natural gas on the same, or very nearly the same, footing as that enjoyed by the electric distributors in terms of points awarded for avoided emissions.

Through Parker’s efforts, natural gas utilities have taken a prominent seat at the U.S. cap-and-trade table. Natural gas is affirmed as green. No less an influential power than Speaker of the House Nancy Pelosi has gone out of her way to mention natural gas as being among the “good” fuel sources in America’s green energy future.

Among other significant achievements at AGA during Parker’s tenure, he lists 1) moving the association’s offices to Capitol Hill, near the seats of power, 2) the decoupling of utility revenues from volumes of gas sold, 3) increased funding to pay for energy consumed by low-income consumers through the Low Income Home Energy Assistance Program (LIHEAP), 4) obtaining greater supply and continuing efficiency gains, 5) improving cooperation on common challenges among otherwise competitive utility associations, 6) securing reauthorization of pipeline safety legislation, 7) establishing a safety culture at the top levels of the gas utility industry, 8) a strong focus on planning for the future of the industry—both short and long term—and 9) strengthening the gas distribution industry’s relationship with state regulators and legislators.

P&GJ: Describe the challenges faced over the 13 years of your tenure at AGA.
Parker: Clearly we have been though a period of volatility and have been impacted by outside events, including the economic downturn and various ways that the folks on Capitol Hill and our regulators have affected the energy business. A lot of people do not understand that AGA is a natural gas distribution association and, because of that misunderstanding, we are probably credited, and often blamed, for some things that have gone on in the industry ranging from the Enron activities way back in the 2000 period, to the high price of gasoline, to some of the pipeline safety concerns that are top of mind today.

To meet these challenges AGA has tried to be a good citizen and extend our hands to the other elements of the natural gas industry, whether it is the producers or the pipes or the gatherers or the marketers. We have tried to work with all these groups on behalf of natural gas. Natural gas is obviously a fine product that our members distribute to some 65 million meters. That means about 180 million Americans use natural gas in their homes and their businesses

We try to exhibit that attitude when we deal with Capitol Hill on key issues. We are customer friendly—we are focused on obtaining more supply, safer pipeline distribution, low-income home energy assistance and achieving greater energy efficiencies. All of these things have been prominent in our efforts over the last decade.

AGA has had some successes in the legislative and regulatory arenas mostly attributable to the leadership from our member company executives who have felt that they are part of an association that can work together and not compete with one another. This emphasis on common issues is really important because in some industry associations you hear some people make accusations that one member or another may be advantaged or disadvantaged because of a competitive issue. We don’t have that at AGA so we have become quite effective in terms of sharing best practices, as well as good ideas, and in terms of people willing to work together on behalf of the greater good, rather than just serving corporate interests.

P&GJ: What do you see as the most fundamental change in your years in the gas business?
Parker: Probably the most fundamental change has been the new drilling technology that is now opening up vast reserves of supply. This has been very good for the natural gas residential and commercial customer because it has put downward pressure on prices which are much lower today than just a few years back, and it has stabilized prices as well. For the American consumer of natural gas that is probably the most important thing that has happened in the last decade.

P&GJ: What was the situation facing you 13 years ago that will not be challenging your successor?
Parker: When I walked into AGA at the end of 1997 the country’s economic outlook was actually quite positive, which is a bit different from the economic climate we’re dealing with today. The association was experiencing some challenging issues for a variety of reasons but what we heard from board members was that they wanted AGA to become much more active in the public policy marketplace—which we have been quite successful in doing. There were some issues coming up at the Federal Energy Regulatory Commission (FERC) that were very important. There were some environmental issues coming up that were extremely important. Pipeline safety legislation was coming up for reauthorization. We were also seeking more revenues for the low-income energy assistance and we had some tax issues out there. My point is that my successor will be dealing with different specifics and a different national outlook, but many of our challenges are long term and are still top of mind for the industry today.

My successor will also benefit from the top quality staff team that we have at AGA. From my first day they were receptive and responsive to my leadership model, including my belief that we needed to be closer to our federal legislators and regulators. So we physically moved AGA out of Rosslyn (in Virginia) and relocated on Capitol Hill. That allowed us to get heavily involved in activities that were taking place at FERC, at the Department of Transportation as well as at the Environmental Protection Agency and in the legislative arena.

We began to change the focus of the association in large part by talking to all of our members and finding out exactly their highest priorities. Then we framed them and focused only on the issues that the bulk of our members felt we should focus on. We developed what I call the business operating plan, which was an outline that allowed our management team to really focus on accomplishing those priority issues. With this operating plan in place, at the end of the year I could show our members what value they were getting for the dues they were paying. As a result of early successes the association had an increase in membership. AGA had about 168 members when I came onboard and that number quickly increased to 200 utility members. As a result of that growth and our internal focusing process we had more resources and more members who were willing to support our issues in the political arena.

P&GJ: Regarding declines in gas demand, decoupling in local rates is a big success for gas distributors?
Parker: Yes. One key focus of AGA has been working with rate commissions in terms of getting decoupling and our industry is now decoupled in 39 states affecting 48 million residential customers. Real credit for this positive development goes to key association members who pushed the decoupling concept. The idea is to decouple—separate—volumetric rates from distribution charges, which makes natural gas bills less dependent on the amount of natural gas consumed and allows natural gas distribution companies to aggressively promote energy efficiency.

Decoupling is also partly responsible for the declining-use-per-customer trend we are seeing among natural gas residential and commercial customers. We used that declining-use-per-customer issue as one of the selling points to take to members of Congress when they were in the midst of the climate debate. I spoke to the three senators, Sens. Kerry, Graham and Lieberman, who were writing the climate bill and pointed out that natural gas customers were leading the nation in terms of reducing their gas use over the years, which led to commensurate reductions in greenhouse gas emissions.

Those reductions can be attributed to tougher building and appliance standards, to more efficient natural gas end-use appliances and to customers turning down the thermostat. The end result is that, compared to 40 years ago, there are 70% more homes using natural gas, yet gas use per household and greenhouse gas emissions have decreased by 40%.

Over time we will see more innovative changes to traditional rate structures, and they will encourage more customers to use natural gas in increasingly efficient ways. Our position is that increased natural gas use serves our environmental, our energy efficiency and—given its domestic abundance—our national security objectives. We have worked very hard to advocate that position before those who write energy legislation and we have had some notable success.

So decoupling has been a big positive, as has our ability to bring more gas into the system, which today has made natural gas an energy to be reckoned with. Frankly, I think a lot of the credit has to go to the individuals who have stepped up for a variety of reasons to talk about attributes of natural gas. I give T. Boone Pickens a lot of credit for talking about putting heavy-duty natural gas vehicles on the road. Encouraging natural gas use in new markets is not only an economic issue but a national security issue.

You also have the producers, led principally by the large independents, who have stepped up to talk about all the great attributes of natural gas.

P&GJ: Are there other successes you want to mention?
Parker: AGA has established a safety culture at the top levels of the industry as evidenced by our recently concluded Executive Leadership Safety Summit—the fourth of its kind—which focuses on the state of the natural gas industry in all aspects of safety.

Summit participants learn about experiences from other companies in areas of employee safety, utility contractor safety, pipeline safety and customer safety. By listening to guest speakers and engaging in roundtable discussions, participants gain ideas and strategies to enhance their company’s performance in all areas of safety. AGA encourages senior executives to attend this event and to bring their safety directors as well.

Also, the association has developed a long-term strategic planning initiative to prepare for the future—Vision 2020. This has led to the creation of a growth task force and a scenario planning initiative.

Finally, in the past few years, AGA has also expanded its relationships with the state-level regulatory community by strengthening its ties to the National Association of Regulatory Utility Commissioners and the National Association of Pipeline Safety Representatives. In fact, AGA often serves as an honest broker between the two associations, helping them educate the other on their different priorities with respect to issues such as pipeline safety.

P&GJ: Anything else you would like to put on the record?
Parker: As I move on to the next chapter of my life, I will look back at my relationships, both personal and with natural gas industry colleagues, as probably the finest people that I have met collectively in any one sector over my career. I have genuinely enjoyed working with them. They are really committed to doing the best job of serving the American people and the American economy.

Colleague Discusses Dave Parker’s Impact At AGA

Lori Traweek, senior vice president and COO, of AGA, described Dave Parker’s legacy to P&GJ recently.

Dave is always characterized as a player coach. And I have been thinking about what that means. A coach traditionally leads a team and from a cultural standpoint, that is Dave’s gift. Through the years he has encouraged a self image of the AGA staff as a team, and with his leadership we have become a winning team for the industry. Dave’s mantra has always been that “nothing grows unless it is shared.” He has always stressed the importance of the fact that we’re all working together toward one common goal. I think that was the significant cultural change, or at least one of them, that he brought to the organization.

What is Dave’s most memorable innovation at AGA? There are so many, but clearly the move into D.C. and into an open work space has had an incredibly positive influence on AGA’s success. When you compare where we were in Rosslyn to where we are on Capitol Hill it’s easy to see that the move helped to nurture the team environment that Dave sought for the organization.

In Rosslyn we were on four floors. You had to take an elevator or the stairs to get from one group to another. Even within one floor, you had to punch in a code on a door to get from one department to another. There were doors between communications and operations. Then there were more doors between operations and finance. You found yourself weighing the need to physically go talk to someone. That was the environment in Rosslyn.

Then we moved here into the AGA headquarters in Washington, DC at the foot of the Capitol where Dave’s mantra was “we need to increase our visibility and become a much more effective advocacy organization.” We moved into open offices on one floor, and except for a few individuals who have offices for confidentiality reasons, we—Dave included—all work in an open space that allows for consistent interaction and communication. People are encouraged to talk, to meet, to exchange ideas. And to work together as a team.

From a cultural standpoint, that move from Rosslyn into space at the foot of the Capitol, the visibility and access of having so many members of the Senate, the House, and our regulators meet with us here in our space, made a big difference in how the AGA staff viewed themselves. But even more significant was the change Dave encouraged in the internal culture of AGA, striving for a team environment where everybody is working together. The results have been phenomenal.