PCCA President Tommy Muse Small-Town Values, Big-Time Success The Official Publication of the Power & Communication Contractors Association 4th Quarter 2012 • 2013 Utility Construction Forecast • 2012 PCCA Mid-Year Highlights • Year-End Product Showcase
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4th Quarter 2012 Officer Directors Official Publication of the Power & Communication Contractors Association Board of Directors Craig Amerine Amerine Utilities Construction, Inc. David Aubrey Okay Construction Robert Breeden ElectriCom, Inc. Tony Briggs Vermeer Manufacturing Ed Campbell Henkels & McCoy, Inc. John Fluharty Mears Group, Inc. Mark Frosaker MasTec North America, Inc. Matthew Gabrielse Gabe’s Construction Co., Inc. John Hale John Deere Jerrod Henschel Michels Corporation Kevin Mason ElectriCom, Inc. Robert Orr Sherman & Reilly, Inc. Larry Pribyl MP Nexlevel, LLC Rob Pribyl MP Nexlevel, LLC Heath Sellenriek Sellenriek Construction Jameson Ringger NESCO, LLC Lindsley Thulin Michels Corporation Ron Tagliapietra Michels Corporation Matt Trawick Trawick Construction Co., Inc. Publication Staff Publisher Timothy Wagner Associate Publisher Cheryl Stratos Editor Michael Ancell Membership Stacy Bowdring Advertsing Victoria Elie Meetings Mackenzie Fluharty 1908 Mt. Vernon Avenue, 2nd Floor Alexandria, Virginia 22301 (800) 542-PCCA • www.pccaweb.org ©2012 Power & Communication Contractors Association President Tommy Muse Aubrey Silvey Enterprises, Inc. President-Elect Glen Amerine Amerine Utilities Construction, Inc. 1st Vice President Steve Sellenriek Sellenriek Construction 2nd Vice President Timothy D. Killoren CCI Systems, Inc. Treasurer Todd Myers Kenneth G. Myers Construction Secretary James Dillahunty Henkels & McCoy, Inc. Profiles in Courage: The 2013 Overhead & Underground Utility Construction Outlook 13 By Mark Bridgers and Nate Scott U.S. utility infrastructure is our greatest challenge and opportunity. Utility leadership and entrepreneurs will need the courage to face these challenges and exploit the opportunities. This article explores the overhead and underground utility industry segments and the ways industry leaders can pass this test of courage in 2013. PCCA President Tommy Muse: Small-Town Values, Big-Time Success 21 PCCA President Tommy Muse is the president and chief executive officer of Aubrey Silvey Enterprises, a corporation with sales in excess of $100 million, more than 2,000 substation projects completed, and four major lines of service: construction, engineering, manufacturing, and computer networking. Turn to page 21 to learn more about Tommy and the growth of his company. PCCA Enjoys Southern Hospitality at Savannah Mid-Year 27 The more than 150 PCCA members, family, and friends who convened at the 2012 Mid-Year Meeting for top-flight education, important business, and prime networking were also treated to engaging tours, fantastic river views, amazing local cuisine, and the wonderfully fun times that are a part of every PCCA event. RDUP News 7 Safety Watch | By Phillip Metcalf 33 Safety News 34 News Briefs 37 PCCA 2013 Convention Preview 42 Year-End Product Showcase 48 Industry Calendar 55 Advertiser Index 65 Last Word | By Steve Spears and Craig Amerine 66
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PCCA Journal|4th Quarter 2012 7 RDUP News RDUP News continued on page 8 October 11 Announcement Alabama South Alabama Electric Cooperative: $17,800,000. Build and improve 144 miles of distribution line and make other system improvements. Arkansas (Funding also covers communities in Louisiana, Missouri, Oklahoma, and Texas.) Arkansas Electric Cooperative Corporation: $245,000,000. Funds will be used to acquire Hot Spring Generating Facility, a 660 MW natural gas-fired, combined-cycle electric generating plant. California Kirkwood Meadows Public Utility District: $50,000,000. Build or improve 40 miles of distribution and transmission line and make other system improvements. Colorado Eagle Valley Clean Energy, LLC: $40,000,000. Funds will be used to partially finance a renewable generating plant with a capacity of 11.5 MW. The plant will utilize wood biomass for fuel. Hawaii Green Energy Team, LLC: $72,883,000. Funds will be used to partially finance a renewable generating plant with a capacity of 7.5 MW. The plant will utilize wood biomass for fuel. Iowa Southern Iowa Electric Cooperative, Inc.: $10,000,000. Build and improve 106 miles of distribution line and make other system improvements. The loan guarantee includes $135,000 in smart grid projects and $2,043,387 for storm damage projects. Maryland SMECO Solar, LLC: $14,565,000. Funds will be used to finance the construction of the Herbert Farm Solar Project, a USDA Announces Funding to Improve Rural Electric Services In three announcements in September and October, Agriculture Secretary Tom Vilsack announced more than $2.2 billion in funding to finance improved efficiency and modernization of rural electric generation and transmission systems. Provided by USDA Rural Development’s Rural Utilities Service, the funding helps electric utilities upgrade, expand, maintain, and replace rural America’s electric infrastructure. The following is a list of rural utilities that will receive USDA funding, which is contingent upon the recipient meeting the terms of the loan agreement. 5.5 MW renewable solar-powered generating facility. Southern Maryland Electric Cooperative, Inc.: $87,160,000. Build 37 miles of transmission line and make other system improvements. Minnesota and Iowa Federated Rural Electric Association: $6,700,000. Build and improve 76 miles of distribution line and make other system improvements. Mississippi South Mississippi Electric Power Association: $480,000,000. Funds will be used to finance a 15 percent share of the Kemper County Integrated Gasification Combined Cycle project. South Mississippi Electric Power Association: $90,863,000. Build seven miles of transmission line and four new substations and make communications upgrades. Missouri and Oklahoma KAMO Electric Cooperative, Inc.: $154,600,000. Funds will be used to finance 116 miles of new transmission line and two substations and make other system improvements. Nebraska KBR Rural Public Power District: $13,314,000. Build and improve 129 miles of distribution line and nine miles of transmission line and make other system improvements. New Mexico Otero County Electric Cooperative, Inc: $30,886,000. Build and improve 200 miles of distribution line and 10 miles of transmission line and make other system improvements. Central Valley Electric Cooperative, Inc.: $44,973,000. Build and improve 589 miles of distribution line and 30 miles of transmission line and make other system improvements. New York Delaware County Electric Cooperative, Inc.: $5,000,000. Build and improve 53 miles of distribution line and two substations and make other system improvements.
PCCA Journal|4th Quarter 2012 8 RDUP News Continued from page 7 North Dakota and Minnesota Minnkota Power Cooperative, Inc.: $308,700,000. Build 260 miles of transmission line. North Dakota and Montana Mountrail-Williams Electric Cooperative: $54,000,000. Build and improve 520 miles of distribution line and make other system improvements. Ohio Firelands Electric Cooperative, Inc.: $4,800,000. Build and improve 43 miles of distribution line and make other system improvements. Midwest Electric Cooperative, Inc.: $9,000,000. Build and improve 115 miles of distribution line and make other system improvements. Texas San Patrico Electric Cooperative, Inc.: $16,853,000. Build and improve 202 miles of distribution line and make other system improvements. Texas and Louisiana East Texas Electric Cooperative, Inc.: $151,000,000. Funds will be used to finance a 50 MW renewable generating plant. The plant will use wood biomass for fuel. Washington Orcas Power and Light Cooperative: $38,402,000. Build and improve 109 miles of distribution line and make other system improvements. Wyoming and Nebraska Wyrulec Company: $4,887,000. Build and improve 85 miles of distribution line and make other system improvements. October 4 Announcement Alabama Cullman Electric Cooperative: $29,190,000. Build and improve 461 miles of distribution line and make other system improvements. Arkansas South Central Arkansas Electric Cooperative, Inc.: $10,800,000. Build and improve 141 miles of distribution line and make other system improvements. Georgia Jefferson Energy Cooperative: $30,000,000. Build and improve 467 miles of distribution line and make other system improvements. Iowa Central Iowa Power Cooperative: $40,121,000. Build and imBethea-Half-Proveit.indd 1 12/20/07 2:57:04 PM
PCCA Journal|4th Quarter 2012 9 prove 115 miles of distribution line and make other system improvements. Kansas Western Cooperative Electric Association, Inc.: $7,238,000. Build and improve 6 miles of distribution line and make other system improvements. New Mexico Mora-San Miguel Electric Cooperative, Inc.: $8,374,000. Build and improve 122 miles of distribution line and make other system improvements. North Dakota Dakota Valley Electric Cooperative, Inc.: $24,100,000. Build and improve 404 miles of distribution line and make other system improvements. Ohio The Frontier Power Company: $6,400,000. Build and improve 113 miles of distribution line and make other system improvements. Texas Wood County Electric Cooperative, Inc.: $32,000,000. Build and improve 222 miles of distribution line and make other system improvements. Virginia and North Carolina Mecklenburg Electric Cooperative: $18,931,000. Build and improve 166 miles of distribution line and make other system improvements. September 20 Announcement Georgia Middle Georgia Electric Membership Corporation: $6,300,000. Build and improve 141 miles of distribution line and make other system improvements. Kansas The Victory Electric Cooperative Association, Inc.: $37,000,000. Build and improve 143 miles of distribution line and 142 miles of transmission line and make other system improvements. Twin Valley Electric Cooperative, Inc.: $7,200,000. Build and improve 56 miles of distribution line and make other system improvements. Minnesota and Iowa Nobles Cooperative Electric: $6,700,000. Build and improve 63 miles of distribution line and make other system improvements. Missouri Se-Ma-No Electric Cooperative: $2,000,000. Build and improve 67 miles of distribution line and make other system improvements. Sac Osage Electric Cooperative, Inc.: $9,000,000. Build and improve 70 miles of distribution line and make other system improvements. To keep great utility equipment working great, Scott Powerline backs every unit we provide with unparalleled 24/7 technical service and support. That includes emergency get-you-backup-and-running service. Wherever the job. With Scott Powerline, you’ll never be on your own. See all our product lines and services, including our best-in-industry RPO program, online! Also ask about our customized accessorizing to fill specific job needs. All the top manufacturers plus 24/7 service. Anywhere. Monroe, LA – 877-388-9269 • McDonough, GA – 877-396-1500 scottpowerline.com Rentals • Leasing • Service • Sales RDUP News continued on page 10
PCCA Journal|4th Quarter 2012 10 EECI10208-S01-01 BRON logo is a registered trademark of RWF Industries • Static or Vibratory • 84” (213 cm) Plow Depth • Left/Right Offset ADD-ONUTILITY PLOWS GET UNDERWAY RDUP News Continued from page 9 USDA Announces Broadbandand Telecom Funding Agriculture Under Secretary for Rural Development Dallas Tonsager on October 19 announced funding to expand access to broadband and telecommunications services in rural America. Tonsager noted that in the recently completed fiscal year, USDA Rural Development has funded over $170 million in rural telecommunications projects nationwide to expand rural access to educational, health care, business, and social services. Three Rivers Electric Cooperative: $5,334,000. Build and improve 20 miles of distribution line and make other system improvements. Missouri and Iowa Grundy Electric Cooperative, Inc.: $5,000,000. Build and improve 18 miles of distribution line, and make other system improvements. Missouri, Iowa, and Oklahoma Associated Electric Cooperative, Inc.: $24,628,000. Build new substations, one new switching station, and a spare transformer. Nebraska The Midwest Electric Corporation: $6,466,000. Build and improve 175 miles of distribution line and 22 lines of transmission line and make other system improvements. Texas United Electric Cooperative Service, Inc.: $50,000,000. Build and improve 1,097 miles of distribution line and make other system improvements. Virginia Prince George Electric Cooperative: $8,418,000. Build and improve 85 miles of distribution line and make other system improvements.
PCCA Journal|4th Quarter 2012 11 Broadband Loan North Dakota Consolidated Enterprises, Inc.: $68,897,967. Construct fiber-to-the-home (FTTH) facilities primarily in the outer city limits of Dickinson and the adjacent rural areas in Stark County. Community Connect Grants Indiana Q-Wireless, LLC: $782,000. Provide broadband services to all residences, businesses, and critical community facilities within and around Mauckport, Ind., through the construction of a wireless middle-mile and access network. Kentucky Inter Mountain Cable, Inc.: $1,059,704. Provide broadband services to residents, businesses, and critical community facilities within the community of McCombs, Ky., through a Hybrid Fiber-Coax Network. By connecting this network with their other networks, Inter Mountain Cable will provide a full range of broadband services. Louisiana MTPCS, LLC: $144,670. Upgrade MTPCS’ cellular telephone network in order to provide broadband services to residents, businesses, and critical community facilities in Evans, La. MTPCS, LLC: $144,670. Upgrade MTPCS’ cellular telephone network in order to provide broadband services to residents, businesses, and critical community facilities in Mora, La. Virginia Scott County Telephone Co-Operative: $1,500,000. Construction of a Fiber to the Premises network. Washington The Confederated Tribes of the Colville Indian Reservation: $1,303,794. Provide broadband services to the rural community of Keller through an optical fiber fed wireless access network. USDA Rural Development is funding these projects through several loan and grant programs administered by the Rural Utilities Service (RUS), including broadband and telecommunications loans and the Community Connect grant program. The following is a list of organizations that will receive funding, which is contingent upon the recipient meeting the terms of the loan or grant agreement.
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PCCA Journal|4th Quarter 2012 13 The improvement of U.S. economic condition is a function of a chain of interrelated perception and action. Improving perceptions create willingness to invest, investment creates demand for goods and services, demand creates shortages of supply and rising prices, shortages and rising prices create a sense of urgency, a sense of urgency creates a compounding effect of improving perceptions, and the cycle starts again. This cycle hinges upon perception and investment, or said another way, a willingness to take risk. In the case of the utility industry, this willingness to take risk falls upon utility leadership and entrepreneurs—if they demonstrate the courage necessary to tread this path. In the following pages, we explore the overhead and underground utility industry segments and the ways that utility leadership and entrepreneurs can pass this test of courage in 2013. U.S. utility infrastructure is our greatest challenge and opportunity. Utility leadership and entrepreneurs will need the courage to face these challenges and exploit the opportunities. The courage to make infrastructure investment by utility leadership, along with entrepreneurial ingenuity, is required to navigate our volatile utility environment. The volatility is due to vast new finds of shale gas and oil, growth in natural gas as both a fuel for power generation and support for intermittent renewable power, and communications bandwidth to better connect individuals and organizations as well as control infrastructure. In Exhibit 1, forecasted growth is volatile and unbalanced. During 2013, the 19 percent growth is almost entirely related to one segment, electric and gas transmission or distribution. Beyond 2012, growth slows dramatically reflecting the overall slow economic expansion. 2013 Utility Outlook Courage can be defined as the mastery of fear, not the absence of it. What do utility leaders and entrepreneurs have to fear? Aging infrastructure, political turmoil, inflation, unemployment, financial collapse, state and municipal budget woes, the deficit, the debt, and the list goes on. Mastery of these fears is the responsibility, no, the necessity of these leaders—if they demonstrate the courage necessary to tread this path. Since the beginning of the economic crisis in late 2008, there has been a focus on the poor economy and the many challenges facing the utility industry, including regulation, slow economic growth, funding issues, and the like. At the same time, the domestic oil and gas industry has undergone a revolution and is bringing together the power and communication utilities in unique ways. Some of the transformations initiated by increased shale oil and gas supply include the most dramatic drop in U.S. oil imports in 45 years; reduction in the percentage of coal-fired power generation to a level not seen since World War II; reduction in CO2 emission to pre-1992 levels, support of intermittent renewable power sources like wind and solar, and generating manufacturing investment and resurgence in the face of the worst economic downturn and slowest economic recovery experienced since the Great Depression; and the list goes on. The most dynamic Profiles in Courage: The 2013 Overhead & Underground Utility Construction Outlook By Mark Bridgers and Nate Scott Continued on page 14 Exhibit 1 Electric/Gas T&D and Telecom Construction Put in Place Historical Figures and Forecasts Millions of current dollars
PCCA Journal|4th Quarter 2012 14 of the utility markets is gas transmission and distribution. Gas Transmission & Distribution The explosive growth of U.S. gas and oil production is fueled by hydraulic fracturing techniques and making wide-ranging impact. For the first time since World War II, less than 40 percent of U.S. power in 2012 will be generated by coal, with the bulk being replaced by natural gas. The shift from coal is primarily driven by increasing regulation of coal plants and secondarily by the very low prices of natural gas (Exhibit 2) since 2009. The exploration and production of natural gas and oil as well as its use as a power generation fuel will demand more pipeline construction in the future. Spending growth in gas T&D is driven today by a combination of transmission pipeline integrity, distribution pipeline safety, asset replacement, and exploration and production activity (Exhibit 3). The majority of the 2013 growth depicted in Exhibit 3 is related to underground pipeline as opposed to overhead line construction. Low natural gas prices and rising demand are revealing U.S. bottlenecks in transmission and distribution assets. An Interstate Natural Gas Association of America 2011 study forecasts $205 billion in spending over the next 25 years to address these bottlenecks. Our experience shows that when utilities replace pipeline infrastructure, a 3- to 5-times increase in spending occurs (Case Study 1). Approximately 75 gas utilities and pipeline companies of what we consider substantial size are operating in the U.S. We are personally aware of three firms that are already exhibiting the type of growth rates described in Case Study 1 and are also aware of more than ten firms with expectations of this type of growth in spending between 2013 and 2016. If one-third of the approximately 75 large utilities and pipeline companies 2013 Utility Outlook Continued from page 13 Case Study 1: Large Gas Utility A U.S. gas distribution and transmission utility announced a system upgrade addressing aging pipeline infrastructure, safety, and reliability concerns. Annual replacement spending in 2010 was less than $100 million. The utility’s 2011 spending rose to $200 million, followed by a further rise in 2012 to nearly $500 million, and in 2013 an expenditure of $1 billion is likely. This work is paid for through the rate base, yet customer bills remain steady as the price of natural gas has fallen dramatically, offsetting the increasing asset charge. Exhibit 2 Henry Hub Price Natural Gas 1999-2012 (mcf) Source: St. Louis Federal Reserve database, compiled by Continuum Advisory Group. Exhibit 3 Electric/Gas T&D Construction Put in Place Historical Figures and Forecasts Millions of current dollars
PCCA Journal|4th Quarter 2012 15 FIND IT ALL UNDERGROUND Pipe & Cable AND Magnetic Locating Order/Info Hotline: 800-999-8280 Order/Info Online: www.schonstedt.com REPLACES MAC 51BX address safety, integrity, and replacement of their assets, the spending will far outpace the capacity of the industry to undertake the work. We expect natural gas prices to remain below $6 mcf for the long-term, which will improve power generation demand. Pipeline construction growth rates beyond 2015 will be impacted by this demand factor. This late development is primarily due to the large amount of natural gas power plant capacity that was constructed in the late 1990s and early 2000s that is already fed by existing pipelines. This fleet boasts a large amount of unused capacity, and the flat electrical demand in the U.S. driven by the weak economy has allowed most utilities to avoid significant pipeline construction to support increased gas-fired power generation. As the U.S. economy recovers, electric demand will rise and the supply and transmission issues that appeared in the late 2000s will resurface, creating more gas demand and ultimately pipeline construction demand. Electric Transmission & Distribution Spending growth in electric transmission and distribution today is modest and driven by a combination of smart grid efforts and electric reliability (Exhibit 3). Electric distribution and transmission construction growth rates were both slowed and in the case of distribution, shrank after the economic and financial crisis in 2008 and the subsequent flattening of power demand. This infrastructure, however, holds great opportunity for upgrade through the application of communications technology, smart grid techniques and equipment, and protection from storm damage. An acceleration of spending and growth in this sub-segment will occur once power demand increases, housing starts return to normal, and faster economic growth resumes. We anticipate the impact of this spending growth in 2015 and beyond. The Edison Electric Institute Annual Property & Plant Capital Investment Survey demonstrates a peaking of electric transmission spending in 2013 and very low growth rates of distribution spending for the foreseeable future, excluding storm-related damage. Our forecast expectations are similar, with transmission spending peaking in 2012/2013 followed by slowing growth that will again accelerate in growth in 2015 and beyond. On the distribution front, the 2011 Irene and 2012 Sandy Continued on page 16
PCCA Journal|4th Quarter 2012 16 storm damage in the Northeast has attracted much attention to the severity of the damage and the perception that the utilities were slow to respond. We have analyzed the speed of restoration for selected major storms since 1996, and a welldeveloped trend is evident showing increasing storm severity resulting in a larger number of customers out of service and consequently longer response time (Exhibit 4). While it cannot be proven from this analysis, we believe that utilities on average are performing admirably given the increasing severity of the storm damage to which they are subject. In the period from 1996 through 2003, for the selected storms, only two storms put more than 1 million customers out. Between 2004 and 2012, five storms have put more than 1 million customers out, and another four storms nearly put 1 million customers out. Simply dividing the outage days by the number of customers out generates a ratio defining the speed at which customers are put back into service. This recovery rate on a per-customer basis is 20 percent faster in the 2004-2012 period than it is in the 1996-2003 period. Associated Press writer Jonathan Fahey performed a similar analysis on 16 different utilities or state impacts from stormresponse performance and came to a similar conclusion.1 Regulatory activity on the electric side is also a driver of construction spending, just not nearly as fast or as far as it is on the gas pipeline side. As one example, Ameren Illinois must invest $360 million in transmission, distribution, and smart grid system upgrades over a 10-year period.2 Rate case activity has been on a long-term upward trend since 2000, and this activity will yield increasing distribution construction spending activity over the next decade.3 The 2012/2013 peaking of transmission spending is in part due to uncertainty around renewable power sources demand for transmission lines. The prospect for renewal of the wind energy production tax credit is improved after the recent election but still uncertain. In October, the Federal Energy Regulatory Commission (FERC) began enforcing order 1000, removing the right-of-first-refusal for incumbent generators to build transmission projects, which should allow for increased spending to tie in alternative energy production, specifically wind, into the grid. Critics of FERC order 1000 argue that changes in the electrical energy market since it was proposed have lowered the need for long distance transmission projects. They specifically point out that the shift to natural gas and the dramatic drop in photovoltaic (PV) pricing provides the opportunity to meet environmental and supply goals with more local solutions.4 Despite the concerns noted by the critics, the drivers of overall transmission spending include many factors beyond renewables such as reliability, capacity, and efficiency. Though the final impact is unknown, FERC order 1000 will be a driver of a resurgence in transmission spending in 2015 and beyond. The volatility in the electric and gas transmission and distribution construction market is in part driven by regulatory impacts and controversy over a host of different issues. It is in this type of volatile market that the “safest” course is 2013 Utility Outlook Continued from page 15 Exhibit 4 Increasing Outage Severity & Duration Source: Compiled by Continuum from various research papers, articles and published reports.
PCCA Journal|4th Quarter 2012 17 perceived to be standing still and reacting to what occurs. Courageous utility leaders and entrepreneurs will chart a course forward and find a way to take advantage of the exceptionally low financing costs that exist today and imbed this lower cost structure into their assets, generating higher returns over the 20- to 50-year life of these assets. Communications Communications spending has historically been the most volatile of all utility segments. In late 2011, we published a forecast that anticipated 2011 to generate 5 percent growth, 2012 to show 10 percent growth, and then a leveling of growth through 2014 where 2015 demonstrated a shrinking market. Today, the underlying long-term fundamentals of this market still revolve around unrelenting and increasing bandwidth demand, but this long-term growth expectation will be interrupted. We now know that 2011 was not as robust as originally expected, and 2012 is also showing slower growth than originally anticipated. We also expect Continued on page 18 800.435.9340 • mightymole.com Put tHOSE vac clEan-uP cHOrES “in tHE tank.” McLaughlin’s patented in-tank washdown system saves you time. It removes tough debris, eliminates the need for tank liners, allows faster dumping — and it keeps the operator clean and dry. Founded in 1921, McLaughlin continues to provide innovative solutions to the construction industry: • Exclusive three-stage cyclonic filtration system • Patented cam-over hydraulic rear door • Patented in-tank washdown system All backed by the industry‘s leading dealer network through our partnership with Vermeer Corporation. McLaughlin vacuums are exclusively available at your local Vermeer dealer. MCLAUGHLIN and the MCLAUGHLIN LOGO are trademarks of McLaughlin Group, Inc. Vermeer and the Vermeer logo are trademarks of Vermeer Manufacturing Company in the U.S. and/or other countries. © 2012 McLaughlin Group, Inc. All rights reserved. Call today for a FREE demo. Exhibit 5 Communications Construction Put in Place Historical Figures and Forecasts Millions of current dollars
PCCA Journal|4th Quarter 2012 18 that 2013 will lead into a period of slowing and even shrinking spending in this sector, which will again show improving spending growth rates in 2015 and beyond (Exhibit 5). Long-term communication spending is becoming a larger part of overall information technology (IT) spending. One downside is that this shift will reinforce one type of volatility of the communications infrastructure market as IT spending is closely linked to the overall business cycle. In contrast, another type of volatility can be decreased as communication spending becomes less tied to spending on mobile networks that tended to move through cycles driven by overbuilding. The demand for increased bandwidth is driven by more than the needs of smart phones. The interconnected nature of modern IT devices creates a baseline of consistent demand growth for the communications industry that will serve as a ridged bottom that should mitigate the historic and extreme reductions in spending in this sector. Examples include: • Use of tablets, televisions, smart meters, and smart infrastructure are just a few of the many devices that require an ever-increasing amount of bandwidth. • Growth in cloud computing is expected to increase the portion of total IT spending tied to communication spending. From 2011 to 2017, the number of cloud computing subscriptions is forecast to grow from 300 million to 1.2 billion (Exhibit 6).5 This shift is reinforced by statistics describing telecommunications-related IT spending. Globally $3.6 trillion dollars will be spent on IT in 2012. The largest component of this spending is telecommunications related, accounting for 48 percent of the total ($1.69 trillion).6 • Forecasting heavy bandwidth usage will increase demand from 390GB per month in 2011 to 440GB per month in 2015.7 • Forecasting light bandwidth users will increase from 18GB per month to 45GB per month during the same period.8 One area not immediately driving high spending growth is the continuing build-out of 4G LTE networks.9 This spending will not create a boom in overall spending, as much of the funds that were allocated to upgrade and expand the 3G networks are being moved over to support 4G. As a result, overall spending is relatively flat and should remain that way for some time.10 Rural and small telecom firms are in a holding pattern for spending. The Federal Communications Commission (FCC) voted in September to “reconsider its longstanding limits on how many frequencies any one cellphone service provider can hold.”11 This comes at the same time that the FCC is encouraging television broadcasters to give up spectrum licenses for auction to wireless carriers. The availability of new spectrum combined with the possibility that large carriers (specifically AT&T and Verizon) could buy up large portions of the best frequencies, could severely limit the ability of small carriers to grow and further consolidate the industry. Overall Conclusions In the utility sector, utility leadership and entrepreneurs face a host of challenges and opportunities. These leaders will have to muster the courage to take on the risks associated with infrastructure investment and beginning the cycle of investment, demand, shortages, rising prices, sense of urgency, improving perceptions, and starting again with investment. These decisions are fraught with risk but will set the stage for the safe, reliable, and high-quality infrastructure upon which American competitiveness will be built over the next generation. Geoff Colvin, Fortune senior editor and speaker, might have described this situation the best when he said, “Marathoners and Tour de France racers will tell you that a race’s hardest parts, the uphill stages, are where the lead changes hands...when the road levels off and the world seems full of promise once more, your position in the competitive pack will depend on how skillfully you manage right now.” Today we are in the race’s hardest parts, and what stands before us is a stark choice. An absence of leadership and courage will likely create a downward spiral of U.S. competitiveness as our infrastructure become older, less safe, and less effective versus our global competitors. A willingness to lead and take risk can start an upward cycle of perception and action. Improving perceptions create willingness to 2013 Utility Outlook Continued from page 17 Exhibit 6 Worldwide Forecast of Personal Cloud Storage Subscription Millions of Users Source: Rebello, Jagdish, “Subscriptions to Cloud Storage Services to Reach Half-Billion Level This Year” IHS, September 6, 2012.
PCCA Journal|4th Quarter 2012 19 invest, investment creates demand for goods and services, demand creates shortages of supply and rising prices, shortages and rising prices create a sense of urgency, a sense of urgency creates a compounding effect of improving perceptions, and the cycle starts again. It is up to the utility leadership and design/construction entrepreneurs to exercise the wisdom, skill, compassion, innovation, and courage to capitalize on these opportunities. Will you tread this path? Mark Bridgers and Nate Scott are consultants with Continuum Advisory Group, which provides management consulting, training, and investment banking services to the worldwide utility and infrastructure construction industry. They can be reached at (919) 345-0403 or mbridgers@continuumag.com and followed on twitter at @MarkBridgers. For more information on Continuum, visit www.continuumag.com. Notes 1. Fahey, Jonathan, “Power Outage Time After Sandy Not Extraordinary,” Associated Press, November 16, 2012. 2. Bielski, Cass, “Regulation,” Electric Perspectives, July/August 2012, pg. 46. 3. Ibid. Figure 1, pg. 46. 4. Edelston, Bruce, “Overhauling the nation’s electricity grid,”The Hill. November 1, 2012. 5. Rebello, Jagdish, “Subscriptions to Cloud Storage Services to Reach Half-Billion Level This Year,” IHS, September 6, 2012. Downloaded on 10/08/12 from http:// www.isuppli.com/Mobile-and-Wireless-Communications/News/Pages/ Subscriptions-to-Cloud-Storage-Services-to-Reach-Half-Billion-Level-This-Year. aspx. 6. Krebs, Portia, “IT Spending Stays Strong in 2012,” US Telecom.org, July 11, 2012. Downloaded on 10/08/12 from http://www.ustelecom.org/blog/it-spendingstays-strong-2012. 7. iGR Press Release,“WiFi Bandwidth Use in the U.S. Home Forecast to More Than Double in the Next Four Years,”November 11, 2011. Downloaded on 10/08/12 from http:// finance.yahoo.com/news/WiFi-Bandwidth-Use-U-S-Home-iw-4051717045.html. 8. Ibid. 9. In March 2008, the International Telecommunications Union-Radio communications sector specified a set of requirements for 4G standards, named the International Mobile Telecommunications Advanced (IMT-Advanced) specification, setting peak-speed requirements for 4G service at 100 megabit per second for high-mobility communication (such as from trains and cars) and 1 gigabit per second for low-mobility communication (such as pedestrians and stationary users). 10. Johnson, Simon, “Analysis: No boom for telecom equipment firms in 4G revolution,” Telecom Engine, July 17, 2012. Downloaded on 10/08/12 from http://www. telecomengine.com/article/analysis-no-boom-telecom-equipment-firms-4grevolution. 11. Sasso, Brendon, “FCC reconsiders caps on cell carriers,”The Hill, September 28, 2012. Downloaded on 10/08/12 from http://thehill.com/blogs/hillicon-valley/ technology/259255-fcc-reconsiders-caps-on-cell-carriers. Portable Fiber Optic Cable Placement THE GMP BREEZE CABLE BLOWING MACHINE Stand-alone, portable FTTx machine 0.1 to 0.315 in. (2.5 to 8.0 mm) cable dia. Speeds up to 164 ft./min.(50 m/min.) into pre-installed micro duct Optional blown fiber conversion available .043 to .063 in. (1.1 to 1.6 mm) Compatible with micro duct O.D. from 5.0 to 12.0 mm AC powered (also requires compressed air) +1.215.357.5500 • GMPtools.com MADE IN USA Society of Cable� Telecommunication � Engineers Helps Protect Against Electrical Hazards ALL-DIELECTRIC / SELF-SUPPORT (ADSS) FIBER OPTIC CABLE PLACEMENT SYSTEM Our Complete ADSS System includes... In Line Blocks with Split Side Frames and Hooks Starting Blocks with Safety Gates and Steel Side Frames Ball Bearing Swivel Rope Connector Pulling Grip Storage Reel with Rope Pay Out Stand Trailer-Mounted, Constant-Load, Hydraulic Winch +1.215.357.5500 • GMPtools.com MADE IN USA Society of Cable� Telecommunication � Engineers GM6198AD4C_Layout 1 9/18/12 6:07 PM Page 1
PCCA Journal|4th Quarter 2012 21 Following his first day on the job for Aubrey Silvey Enterprises, Inc., Tommy Muse wasn’t 100 percent sold on the construction industry. “When I joined the company in July 1972 after returning home from the U.S. Army, there were a total of seven employees and one quit before lunch on the first day,” he recalled. “I did not know exactly what I was getting myself into, but I thought I would hold out for the first week and evaluate the program after that. I look back and have no regrets.” Now 40 years later, Tommy Muse is the president and chief executive officer of Aubrey Silvey Enterprises, a corporation with sales in excess of $100 million, hundreds of employees, and more than 2,000 substation projects completed. And earlier this year, Tommy was sworn in as the president of the Power & Communication Contractors Association. Aubrey Silvey Enterprises was incorporated in January 1971 for the purpose of constructing electrical substations for utilities, municipalities, and electric cooperatives in the Southeastern United States. In those early days, Tommy was a field supervisor, and his crew’s work was about half substation related and half airport lighting, plus some underground work for the railroad and the telephone company. The airport work consisted of building approach lighting systems and down range radar tracking systems. “Our biggest challenge in the early years was financing,” Tommy said. “We had a line of credit at the bank which we were able to support, but they held a tight rein on us as well as the bonding company. I remember one incident when we asked for an extension of our line of credit for an additional $1 million. After a short conversation with one of the banks lower echelons, we were given an initial ‘I don’t really see a problem.’ After one week, the bank summoned us to Atlanta for a meeting and told us we would not be given the extra million-dollar line of credit and we had 60 days to find us another bank. That was my first lesson in finding out how most banks are fair-weather friends. Thank God we were able to find an asset-based lending institution, and we made it through the dark valley.” Focusing on Substation Work Tommy said he knew he was in the business for good in 1980 when the company evaluated the business and elected to get out of the FAA business and concentrate on the substation market. “We were struggling with both markets and PCCA President Tommy Muse: Small-Town Values, Big-Time Success Continued on page 22 Aubrey Silvey & Tommy Muse
PCCA Journal|4th Quarter 2012 22 decided our best hope for the future would be in the substation business,” he said. “Up until then, we had been skipping around, doing what was available. We finally drew a line in the sand and went with substation work. We’ve been there ever since.” From seven employees and one crew, Silvey’s Substation Construction Division now has approximately 260 employees, 15 completely equipped substation crews, and six specialty crews. Silvey has been a major force in providing substation construction services to public and private utilities, municipalities, co-generation companies, and industrial customers. The company facilities have grown similarly. “The company was started on Mr. Silvey’s dining room table, and after about two years his wife said, ‘That’s enough. I want my dining table back.’ So we moved into a 1,200-square-foot metal building that we constructed on Mr. Silvey’s farm,” Tommy said. “Later the company was able to purchase the office/ warehouse, and we continued to operate the business from there until we built our present office in 1981 and have added to it several times.” The current facility consists of a 9,200-square-foot brick office building, a 6,400-square-foot warehouse with two offices, a 2,000-square-foot maintenance shop with four full-time mechanics on duty, a 2,000-square-foot equipment storage building, and a 2,000-square-foot staging warehouse. The company owns more than 150 pieces of rolling stock construction equipment specifically designed for utility and power construction. Expanding Capabilities While narrowing the company’s focus on substations back in 1980 led Tommy toward realizing he was in this for the long haul, it is the expanding of Silvey’s business focus that Tommy enjoys most today. “The thing I like most about the business is that we have expanded to other markets other than just construction,” he said. “This includes the engineering and design of substations, manufacturing electrical connectors, building wind farms, relay testing and startup, hot oil processing of transformers and breakers, computer services, and our most recent venture, the gutter business, which is totally unrelated to any of our other businesses.” While Silvey’s primary work is substation-related business, the wind farm business has also been a large part of its operation for the past five years. The company’s very first wind project—in Hawaii—was a memorable one. “This was a new venture for us, halfway around the world, with a new client, a new general manager who we hadn’t built a job with, and a short timetable with a severe penalty,” he said. “If it was a substation, I could have finished it myself. There were a lot of restless nights.” The good news is that they built it on time, within budget, and without any penalties, and a new market was launched for Aubrey Silvey Enterprises. Tommy said that despite uncertainty surrounding the extension of the federal wind energy Production Tax Credit, the company has wind jobs going on and is chasing three or four others not affected by the PTC. Silvey’s primary geographic area is in the Southeast, but they have gone as far south as Trinidad and St. Thomas and they ship connectors and substation material out of the country through agents. They also just booked a job in Africa with an agent. Aside from the one in Hawaii, the wind projects have primarily been in Idaho and Oregon. Silvey’s Affiliated Companies • Associated Substation Engineering, Inc. is a recognized leader and principal provider for the engineering, design, and material packaging of electrical high-voltage substations to the power industry. • SEFCOR is a supplier of quality power connectors to the electric power industry. • Testing Services Group offers several different field services, including start-up services, preventative maintenance, switchgear start-up, and many others. • Silvey Information Systems, Inc. provides information technology needs to customers throughout the Southeast, including network design and maintenance, wide area wireless networking, local area wireless networking, custom software, hardware solutions, and website design and maintenance. • Roof Drainage Equipment Systems, Inc. manufactures and distributes gutter coil, gutter system components, wand accessories. Tommy Muse Continued from page 21
PCCA Journal|4th Quarter 2012 23 “Our People Are Who We Are” The company website is straightforward: “Silvey is a people company. Our people are who we are and they strive to provide you, our customer, with ‘peace of mind’ services for all of your projects.” And it’s not just lip service. Silvey is an employee stock ownership company (ESOP), and the employee-owners strive for the highest of quality workmanship with close attention to details and honesty and integrity at the heart of every decision. “All of our officers, managers, and co-workers are key personnel in our company,” Tommy said. “Without them Aubrey Silvey Enterprises would not exist in our present form. We have 370 key people and don’t want to lose anyone.” Initially 35 percent of the company was ESOP, and they went 100 percent in 2000. Each employee has a block of stock based on their salary and years with the company. The longer they stay, the more they get. When they leave the company, they can roll it into an IRA without paying taxes on it. “The ESOP program has worked quite well, especially with the older workers,” Tommy said. “It helps us attract good people and keep good people in the company.” Tommy also acknowledges some key people for his success in the business. “Aubrey Silvey and J.T. Becker were my two mentors, and I give both of them credit for where I am today,” he said. “They taught me the business, how to work hard, and how to get along with my fellow worker and depend on them for help.” “Aubrey has been like an older brother to me,” he continued. “He taught me the business, how to estimate jobs, how to construct them. A real influence on my life. He took me under his wing and showed me the ropes.” Tommy worked on Becker’s crew when he started with the company. “He was the hardest working man I ever knew, and the fairest. When he told you something, you could take it to the bank.” Before being drafted, Tommy had worked briefly for Richards and Associates. Aubrey Silvey worked there as well. “One of our mentors in our business was Mr. Roy Richards the founder of Southwire Company located in Carrollton, Ga.” Tommy said. “Although it was a remote relationship, we always admired what Southwire had done for Carroll County and surrounding counties. He was a dedicated, hands-on type person with strong morals and values that he instilled in his people. He was a real influence on me and on Mr. Silvey.” Small-Town Values One of the first things you notice on the Silvey website is a block of text that reads, “A comprehensive company with small-town values,” and Tommy Muse exudes those values, especially when discussing his family and his upbringing. “My family background was pretty simple,” he said. “I was raised in rural America by a good Christian Mom and Dad and attended public schools because that was where the bus stopped that came by my house.” He attended West Georgia College in Carrollton, transferred to Southern Tech, and graduated in 1970. During college, he married his childhood girlfriend, Brenda, and 45 years later they are still happily married. They have one son, Tommy Jr., who manages Silvey’s engineering company, Associated Substation Engineering, Inc., and is married to Cindy Musselwhite Muse. Tommy Jr. and Cindy have two sons, Logan and Tyler. “Brenda is my wife and my best friend,” Tommy said. “We grew up together, have been through some valleys, hung in there, and climbed back up the mountain together. I credit her for where I am today.” “Tommy Jr. grew up in the business,” his father recalled. “He worked for me when he was 13 or 14, and he was a darned good substation worker. I was rougher on him than Continued on page 24 Tommy & Brenda Muse All the Muses: Tommy, Brenda, Tommy Jr., Cindy, Logan & Tyler
PCCA Journal|4th Quarter 2012 24 anyone, demanding a lot. It’s been very nice to be able to work with him. My son and his family are my closest supporters.” Tommy still lives on the family farm, and his son is just across the road. “My family has influenced my work because they have supported me in all phases of my career,” he said. “I worked on the road for 15 years and missed a lot of seeing my son grow up, which I will always be sorry of. They would do some of my chores around the house so I could spend my time away from work dedicated to them. I don’t think I had to cut grass for the entire 15 years.” Another group that Tommy enjoys is his church family. “I have been attending the same church since I was a child,” he said. “It is a small country church where I have been the organist for the past 50 years.” He also works in the Carroll County Mentor program, which takes in kids who are not as fortunate as others and encourages them to stay in school and make something of their lives. Some of Tommy’s other hobbies are bird hunting, spending time with his grandkids, working on the farm, and collecting old cars. A member of the Antique Automobile Club of America, he ranks his 1967 Chevelle Super Sport Big Block and 1931 Model A Sport Coupe as the pride of his collection. He and Brenda also enjoy time on the lake. “It seems like our vacations and meetings are all planned around water (e.g., the recent PCCA Mid-Year in Savannah, Ga., and the upcoming Convention in Naples, Fla.),” he said. “One would think we would get enough of the lake since we have two behind our house.” PCCA and a Carrollton Connection Tommy attended his first PCCA Convention in 1988 at the Desert Inn in Las Vegas, Nev., when Steve Bauchman was president, and the Mid-Year in Savannah was his 27th PCCA meeting. “Mr. Silvey invited me to attend the meeting in Las Vegas and told me that I should be proud of the association because many of our competitors were members and we could learn from one another and from the different programs that PCCA provided.” Over the years, Tommy became more involved in the association and was elected to the Board of Directors. “Ron Tagliapietra approached me several years ago and asked if I would become more active in the leadership role, and I committed to him that I would.” He held true to that commitment, and after moving up through the officer ranks, he became PCCA president in December 2011, a few months early due to the untimely death of his predecessor and friend Larry Libla. Remarkably, he is now the third PCCA president to hail from the small town of Carrollton, following Roy Richards in 1952-53 and Frank Rose in 1961-62. “Herb Fluharty, Ron, Steve Spears, Kevin Mason, and Larry Libla were very influential to me as I came up through the ranks on the board,” Tommy said. “I watched them conduct the meetings and thought they all did a very professional job with their tenure. The accomplishment I am most proud of while serving on the PCCA board is being able to recruit Tim Wagner and his company to run our group as a professional organization.” As a top goal for his presidency, Tommy is eager to see the association move forward with its efforts to have telecom job classifications on U.S. Department of Labor wage surveys more closely reflect actual jobs on telecom projects. He also said, “I would like people to remember me as the type president who was a friend to all and got others to participate with the issues at hand.” Everybody at PCCA who knows Tommy Muse knows that he is exactly type of man—one with a warm smile and a kind word for everyone he meets and one who gets involved and tackles the issues that matter most to him, his family, his company, and his industry. Tommy Muse Continued from page 23
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