Hello everyone. Welcome to our second Open Mind Speaker Series webinar. In the spirit of high efficiency and impact, we're going to get started as close to on time as we can. Welcome. We are Open Minds, a nonprofit focused on one of the most defining challenges of our time, meeting the dual challenge that we need more energy, less emissions, and fast. Thank you so much for joining us this morning. A few housekeeping items from me. This session is going to end at 10:15 Central and so we are 45 minutes long. We will have Q&A and so there is a Q&A box that you can see in the toolbar of Zoom. If you use that to send your questions, we will get to questions after about 30 minutes. That will be the time for Q&A, but you can submit them at any time. Once we switch over to questions, I'll read the questions out loud and our guest Jason will answer them. This session is recorded and it will be shared after the call. It will be shared on YouTube and on LinkedIn. So you can follow up and watch it again if you're interested. And while there is no audio and video for anyone outside of the participants, so please know you can just sit back and enjoy. And now I'd like to hand things over to our executive director, David Baldwin, who will get us started.
Hey, thank you, Will, and thanks to the entire Open Minds Network for joining us today. To help frame this discussion, we're honored to be joined by Jason Wells, who's the chairman, president, and CEO of CenterPoint Energy, fortunately, our fantastic utility here in Houston, Texas. Jason has a really unique background serving as a senior officer at both PG&E in California and now leading our effort at CenterPoint based here in Houston. So he's seen a lot of extreme weather events, demand growth, regulatory complexity, and we're really fortunate to have him with us today. This is really a lead-in to our work at OM26 at Stanford on April 14th and 15th where Open Minds will be convening over 100 utility and grid experts to advance our Grid Vision impact project, essentially how to most affordably and strategically electrify America for a strong electricity future. Grid Vision focuses on strengthening and expanding the US power grid to meet rapid load growth while improving connectivity, reliability, affordability, and long-term emissions reduction. So, let's get started. Jason, thanks so much for being here. And I might start just by asking you a little bit about your background both at PG&E and now at CenterPoint.
Well, thanks David for having me. Look, I've spent my entire career in and around the utility industry. I started auditing and consulting with utilities in the southeast. I spent about 14 years at PG&E out in San Francisco. The last five out there as the company's CFO and then for about the last five years now I've been at CenterPoint, a utility that serves about 7 million customers and four different states. I started here as CFO. I spent a year as COO and the last two now as CEO of CenterPoint.
Fantastic. Well, CenterPoint and you have navigated some major reliability challenges when you arrived, Jason, including Winter Storm Uri in February of '21 and then Hurricane Beryl in June of '24. And you personally have great experience in two very different environments with Texas and California. And I know you're in other markets also, but what did those experiences teach you about building a grid that can withstand increasingly extreme weather?
You know, spending my entire career in and around the industry, I've seen the best the industry has to offer, enabling everyday life and the pursuit of possibility through economic growth. At the same time, to the point that you raised, David, I've seen the very tragic consequences of the impact of severe weather, catastrophic asset failures, both here at CenterPoint and PG&E. Those incidents have profoundly shaped me not just as a professional, but as a person. And when I think about the application to the grid, I'm entirely convinced it first starts with culture. Historically, utilities have been very reactive in nature. So much so that just even a few years ago we would see bumps in customer satisfaction when we were responding to storms which would reinforce the notion that we should react to an event as opposed to prevent an outage from occurring, prevent that event from occurring. And so it's fundamentally reshaping again the culture to be more proactive as opposed to reactive. Additionally, the industry has been behind in terms of leveraging technology to get the most risk reduction for every dollar spent and I'm convinced that that's the path forward. I think historically the industry's really relied on visual inspections of its assets. I believe strongly that grid operators need to understand with a rigorous level of detail the condition of their assets using drones, high definition cameras, thermal imagery, satellite imagery, LiDAR sensors on the equipment. We've built a digital twin where we can then test how our grid will stand up to different conditions. Understanding then where we make the design changes that help prevent these catastrophic asset failures and/or severe impacts from weather. Things like burying our electric lines where they could cause a fire or where they pose, you know, trees pose fallen risk, causing extended outages. Also things like putting more self-healing technology, grids that will restore power without manual intervention, intelligent grid switching devices that allow us to reroute automatically power to other customers and really isolate that outage to the smallest impact. And so it really comes, again, starting first with a culture, getting the organization to orient around preventing these things from occurring as opposed to reacting to them, utilizing technology to be very targeted and then redesigning a grid that has been around for a hundred years.
Jason, you talk about a change in culture, even driving that before all the implementation of new technology to prevent outages. But one thing I noticed when you became CEO is my phone started telling me how healthy my grid was at every section. What's the role of communications and how have you implemented that and what are then the results at CenterPoint?
Yeah. No one tells the story better than the company. Unfortunately, what we experienced at Hurricane Beryl is a couple years ago, we did not communicate effectively with our customers. We did not let them know the conditions they should expect, the length of the outage, and understandably, our community was incredibly frustrated. We made a commitment to our customers that we would never undercommunicate again. And I think part of rebuilding trust is delivering on a say-do ratio of one. We laid out an ambitious plan to invest in our grid. We communicate with our customers about those investments. We let them know when we're going into their neighborhood that they can expect a planned outage to make these reliability and resiliency investments. We communicate the day of. We communicate afterwards. And it really starts to reflect this proactive nature of an investment in the grid. I'm super proud. Over the course of the last year, we saved our customers 100 million outage minutes year-over-year on a weather adjusted basis, which averages about 35 minutes per household or business here in the Houston region. And the exciting thing is we're just getting started with some of this resiliency work.
Jason, many of us are familiar with sort of how the general economic model works for utilities, but you normally don't get rewarded for doing things that make your grid more resilient or more efficient. But how did you all justify the investments in grid hardening and reliability when a lot of the market models don't necessarily incentivize that?
You know, I try to simplify our business model in one where if we have happy customers, we generally will have happy regulators and legislators. And if we have happy regulators and legislators, generally the financial model works for our investors who fund these investments, but it starts first with that customer experience. But for us, I also think when we look back at like the cost of not making these investments on a societal basis, it's pretty profound. The GDP of the greater Houston region is approaching $2 billion a day. Every day that we're without power here from a severe weather event is really costing not just our local economy, I'd argue kind of the broader Texas, national, and in some cases the global economy just given the importance of the petrochemical complex that we've got in our backyard. And so making these investments with an eye towards the economic activity that it's supporting I think helps rationalize these investments. The other thing that we have is Houston's been growing exponentially for years. And so as we socialize these fixed costs over an ever widening and increasing customer base, we've been able to keep our rates flat for our customers since 2014.
Wow. Despite significantly investing in improved outcomes. That's awesome. That's awesome. Jason, before we leave this whole reliability question, what are your models and what does your crystal ball say about the frequency of challenging weather events? Our mission at Open Minds is both keeping energy affordable and available, but also the longer term impacts of climate change, but do you anticipate more weather events or is that something that you really model?
We do. We've got in-house meteorology, as I mentioned, we've got a digital twin of our system. We're constantly trying to predict what we'll be up against. I find it interesting here in Harris County, which is the primary county for the greater Houston region, it is ranked as the county most susceptible to severe weather risk of any county in the US by a factor of 25% more than the next county which would be in Florida. And that's really a factor of we basically are presented with almost every weather risk other than earthquakes. And so as we look to prepare for our grid, obviously the weather is becoming more severe, but more importantly, I think we're seeing sort of a density of investment in cities that creates a higher cost to these events when they occur. And I think that's largely where we orient our models. Where is there going to be the most sizable impact and how do we get in front of that risk in a very targeted meaningful way?
So I didn't think there was a tougher environmental job than being an executive at PG&E but you just told me that maybe running CenterPoint is challenging or maybe more challenging. Don't tell my realtor that please. But that's awesome. Great training ground. You mentioned the growth that we're seeing now in electricity demand and a spectacular record of not having rate increases for 12 years. That's got to be top decile in the US. But what are you seeing in demand growth from data centers and other sources in your market area in the Houston area? And how do you keep energy prices steady like you've been able to do?
Yeah, it's just an incredibly exciting time that we haven't seen in our industry since the post-World War II boom years. Here we are forecasting a 50% increase in peak demand by 2029. So think about this. A grid that we've taken over 100 years to build will increase it by 50% within this decade and see a path to doubling it before the middle of next. So within the next 10 years and it's pretty extraordinary. It's across the board. Houston's got a ton of investment in life sciences. We've got advanced manufacturing. Clearly, the oil and gas industry is an anchor for this industrial growth. We're also seeing data center activity. At the end of the day, I think that this load growth is the path to affordability. There's a lot of misinformation out there at a time when nationally look at utility rates rising. It's about the same time we've started to as a country talk about the need for data centers. Unfortunately, I think it's correlation without causation. I think a lot of the rising utility rates have really been the implementation of policy that have been 10 years in the making, retiring old generation facilities that have largely been paid for and bringing on new generating assets. I don't really think we're seeing yet at least on a macro basis cost increases from data centers even though that is what is often reported in the news. For us, that's what we've seen and one of the clear paths to keeping those affordable rates is we've been growing the system here and again that allows us to share the fixed costs over an ever widening base keeping those energy costs flat for the 12 years and so our path forward is to continue to enable this economic growth in all of these industries and I think it is the, we'll continue to keep our rates affordable as we connect these new large loads.
So growth can be your friend from a rate perspective if you do it smartly and strategically. It sounds like and I'll ask a bit of a controversial question now, but what's the role of renewables and clean energy sources and sort of that balance of growth and needing it now versus also needing to keep rates low as well? How do renewables fit into the stack, if you will?
I think that's what's really enabled this incredible Texas economic miracle. At CenterPoint, we're basically the wires business. So, we're not in the generation side, but clearly we've got to match, we're supplying or matching demand to the supply side with our wires. As we look at the supply side, it has been incredible. As a state we've connected about 45 gigawatts of new installed generation largely solar and batteries over the last five years. To put that in context, that's just slightly smaller than the peak demand on the California grid. We've built that as a state in five years because we could move at pace and at scale in an affordable way with solar and batteries. And what we've seen is the grid has really held up. We almost hit a record peak on the Texas grid last summer and prices remained modest on an energy standpoint that entire day in the mid $30 a megawatt hour. And I think that's again a reflection of the fact how powerful the combination of this incremental solar and battery combination on our grid, how powerful it can be.
That's awesome, Jason. Well, I'm going to pivot a little bit to our Grid Vision work that we'll be sharing at Stanford in a few weeks and you've been a great coach and CenterPoint's been a great partner on this, but we've really split that plan into two phases. Optimizing the grid we currently have while also building the future grid that we need with more lines and more wires and more pipes, etc. But where do you see the biggest challenges ahead across the US to meet load growth? What are the bottlenecks and how do we need to get over those bottlenecks?
Look, I think it's just moving at the pace of business. As I mentioned, it's taken us about a hundred years to build this grid and we'll double it within 10. Culturally, we haven't been oriented around moving fast. Oftentimes in construction they talk about measure twice, cut once. I think for utilities the equivalent would be measure four times and cut once. We're really a risk adverse industry understandably so because of the importance of what we provide communities. But making sure that we have a team that sort of approaches this large load growth from a commercial and customer orientation. These large loads they can connect anywhere. So we're competing to attract them to Houston in this example. That means we have to move at the speed of which they want to move their business. We've got to be able to have access to the materials, the partnership to flex our labor to build that construction. Fortunately, we've got those in place, which is why I think we've been having a track record of enabling large load growth for decades here in Houston. I think back to your question, I think those areas in the country that have historically not been growing are going to be more challenged with supply chain slots. They're going to be more challenged in trying to find just in time labor to come and address a unique project as opposed to a portfolio of projects, and I think it's again an advantage being in Houston where we have seen this growth year after year for decades.
That's great. Well, speaking of growth, I want to pivot. You recently toured China's electricity system with a group of folks, other folks from Open Minds as well, a very distinguished group that went over there and what were your takeaways both from the Chinese grid and then the implications back to us back home in the US?
Yeah, it was an incredibly fascinating experience. We were having the debate here is China the first electric superpower and we got the idea well why don't we go see it firsthand so we visited four different cities in China looking at it from the lens of suppliers to producers to consumers of electricity and walking away I think it's probably China's probably the first modern electric superpower. As I've reflected on that trip it is incredible the capacity they've built in a short period of time with sort of a national policy orientation to that build. But I do reflect on how much our country built post-World War II boom years where we commercialized nuclear reactors. We modernized hydro systems. We built a grid that sustained kind of that manufactured and industrial base. So I would argue we maybe we did it first but China's now a modern electric superpower that we need to take away from. I think that national policy orientation has been an advantage. Maybe a couple of other points I was surprised at the level of excess capacity and I think that can cut both ways. We would tour an electric vehicle manufacturing facility, state-of-the-art advanced manufacturing, unbelievable facilities, but there'd be five buildings next to it that would be completely empty. Same thing. Solar manufacturing, residential buildings, that can either be an incredible tailwind if they can economically find a way to fill that capacity or it can be a huge headwind for their economy. And I'm still sort of reflecting on which direction I think it'll head after that trip. And the other thing that I would say is from an innovation standpoint, I think we still have in our country a very unique system that rewards risk, venture capital, financially, legally, culturally. And I think that allows us to really innovate probably at a pace that I didn't necessarily see over there. Now I think the difference is what we saw was when there was an innovation that needed to be scaled. I think China scales it at a pace faster than the US just giving their again national policy orientation and their focus over the last several decades on manufacturing capacity. Just an incredibly fascinating trip. Bringing it back to us, I think the more that we can have a national policy focus, I think the more we'll be able to compete on keeping our grid growing at the pace that we need to support industry. And I would say that Texas reflects that. Our governor here, Governor Abbott, often says the state needs to move at the pace of business. That translates into the work the legislature does, the state agencies. We've shortened transmission planning windows. We've adopted a higher voltage standard for transmission design. These are the tools that will help us advance the grid faster. It really shows that when there is sort of top to bottom alignment in a clear objective of growing a grid to support this economic development. It can happen at scale and at pace needed to compete worldwide.
Well, Jason, you mentioned having a plan and I think you're spot on that Texas has had a plan and has been pretty bold about connecting some new low-cost loads into our system that have kept us very affordable and kept up with demand. One of the things that Open Minds, we've tried to learn from CenterPoint, learn from ERCOT, learn from Texas, and then create a plan for the country. And we've been doing that with our 50 or 60 utility partners and grid experts across the country, but also interfacing with the federal government on that too to get their feedback as we go. But have you seen a good credible plan for the country to optimize this demand growth and to build something that's strategic for our future or are we trying to do something that might be additive to the conversation and to our progress?
I think it's additive. I think it's needed. I think that there are a lot of new companies trying to solve these challenges. But I think it's multi-, there's many dimensions to this and the more that Open Minds can help orient around kind of a national direction I think the better off we'll be. I mean I think this idea of getting more out of the capacity that we have, creating more connectivity in our regions with transmission, doing more kind of on the demand management side, I think that it's very doable with a cohesive strategy and I really applaud Open Minds for the work they're doing to try to bring that all together.
