By Carolyn Gray Anderson
Debra Reed, chairman of the board of directors and chief executive officer of Sempra Energy, joined Dean Judy Olian as the first guest in the 2016–17 Dean’s Distinguished Speaker Series. Launching immediately into an explanation of the role of executive management in creating value for a company, Reed ranked “drive change” as the number one key to successful strategy development.
Reed, one of just 21 female chief executive officers of Fortune 500 companies, has been recognized every year since 2011 as one of Fortune magazine’s “Most Powerful Women in Business.” She joined SoCal Gas in 1978 and became the company’s first female officer a decade later. From 2006 to 2010, she was president and CEO of San Diego Gas & Electric (SDG&E) and SoCal Gas, Sempra Energy’s regulated California utilities. Thirty-eight years since she began her career, she presides over a company with $41.1 billion in assets, operating revenues of more than $10 billion and 17,000 employees who serve 32 million consumers with energy services in the U.S., Mexico, Chile and Peru.
In October 2016 Fortune published Reed’s “4 Things Every Woman Should Know to Get to the C-Suite,” which are: 1) bid farewell to your comfort zone; 2) cultivate a mentor; 3) embrace diversity; and 4) make your mark. In her conversation with Olian and an audience that included Anderson MBAs and many other UCLA students and faculty, Reed said, “I cannot stress enough the value of using all sides of the brain, getting out of the silos.” Her advice is to combine the analytical and the intuitive, and to build a team of people different from yourself.
In her nearly four decades affiliated with the utility, Reed has had as many as 20 different “careers.” She never wanted to join a company she couldn’t imagine not working for for her entire career. “Sempra gives employees cross-functional opportunities,” she said. “The emphasis is on experiencing different things there.”
Olian respected Reed’s leadership confidence by not steering clear of sensitive topics, like the current political climate or crisis management. Californians will remember the state of emergency declared in 2016 as a massive gas leak, which began in October 2015 at a Sempra-owned storage facility in the upscale San Fernando Valley community of Porter Ranch, caused 8,000 families to temporarily relocate.
Reed addressed the subject by describing the CEO’s role “to be sure the proper people are engaged with all stakeholders,” including the board, regulators, rate payers. “A crisis is not just the event — it’s not just an engineering flaw,” she said, it’s also the wide-reaching effect on a community and the company’s employees. The company must take a cross-functional approach to be prepared to deal with a crisis in the moment. “Communication is critical,” Reed said. “A crisis gets out of hand because of a lack of communication.”
Far from side-stepping the question of whether a shift in government priorities might encroach on her company’s ability to pursue business in the renewable energy space, Reed stood firm in her belief that innovation there is inevitable — and desirable. “You always want to look at getting into business for the long term,” she said. Renewables are hands-down the best solution in many places, like California, where wind and solar might be cost competitive with natural gas as well as appealing to rate payers and shareholders.
J.R. DeShazo, director of the Luskin Center for Innovation, asked where Reed thinks the greatest innovations lie for utilities — which he described as “sort of natural monopolies within regulated spaces.” Reed readily offered cheap, space-efficient energy storage within batteries as one area ripe for development. At present, she said, wind farms may function to charge batteries, but the capacity is disproportionately low compared to costs and the sheer acreage required.
Joshua Bivins (’17) asked Reed about the viability of distributed energy generation and microgrids. Citing Sempra’s independent microgrid located in the desert town of Borrego Springs, Reed said costs are currently high. In Reed’s words, “regulation chokes the possibility” that individuals might own a piece of a remote grid not attached to their own house. She said that would be the greatest stride for centralized distribution, to make the resource neighborhood- or community-based, and not limited to the roofs of individual homes.
Chanel Parson (B.A. ’04, FEMBA ’19) works for a utility herself. She asked how Reed believes utilities can still be agile in the face of regulatory delays and lag time. Reed said business is often conducted outside the utility, beyond the regulated area. Google, for example, doesn’t wait for regulators to greenlight use of its technology, it implements it somewhere else.
Reed called Sempra a “top green company” that embraces corporate social responsibility in its rejection of coal, its interest in moving toward “smart cities” with zero carbon emissions and its use of billions of gallons of reclaimed water in place of fresh to power its plants. Reed says that she was attracted to SoCal Gas right out of college because of the company’s openness to diversity, including enlisting more diverse suppliers — against objections this might cost more — and demonstrating its cost effectiveness.
She said, “The tone at the top should be focused on ethical behaviors. Executive leadership should drive change, make change a good thing for employees and customers.”