Hartford Business Journal

www.HartfordBusiness.com August 22, 2016 • Hartford Business Journal 21 BIZ BOOKS Tips for avoiding tunnel-vision management "T he Power of Noticing: What the Best Leaders See" by Max Bazer- man (Simon & Schuster, $16). At work, most people, and in particular executives, focus on what's in their inbox and develop tunnel vision. They forget that their box doesn't contain all there is to be seen. They forget that information in the inboxes of others will impact their ability to do their jobs. They forget that colleagues can help solve their problems. Noticing and questioning fit hand-in- glove. By asking questions, especially ones involved in testing hypotheses, people make better-informed decisions. Bazer- man points out the 1986 space shuttle Chal- lenger disaster could have been avoided if the NASA engineers had asked a simple question: "What effect would low ambient temperature at launch have on an O-ring's ability to properly seal?" The lack of noticing also appears in what Bazerman calls "motivated blind- ness." When people don't want to deal with information, they ignore it. Rather than confronting the issue, they understate the problem. Much of this blindness stems from the organization's culture. Case on point: After the numerous fatali- ties caused by the ignition-switch issue came to light, General Motors was forced to confront the safety issue. Internal docu- ments showed that GM had a dictionary of "words not to use" when describing poten- tial problems and bad news. By downplaying the seriousness of potential problems, peo- ple didn't notice them. Problem minimiza- tion cost GM billions in recall costs and legal settlements — and reputation. The road to not noticing may also be paved with good intentions that lead to unforeseen consequences. Homeownership was something touted by both sides of the political aisle. Weakening mortgage-quali- fication standards to allow more people to own homes (and pay property taxes) was generally workable as long as housing values continued to rise. No one asked the question: "What happens if housing prices decline?" That's exactly what happened when the economy began tanking in 2007. People lost jobs and couldn't afford to pay their mortgages, while others decided against buying homes. Too many homes and not enough demand created a downward spiral in housing prices. Even those who could afford to pay found their mortgage balance far exceeded their home's value; many walked away. The financial cri- sis deepened because institutional and private investors who bought mortgage- backed securities suffered losses. What do these situations have in com- mon? No one thought to think about 'what might happen if … .' Noticing also involves "The dog that didn't bark." What didn't happen often goes unno- ticed. This leads to errors of omission. People notice the harm of action, while ignor- ing the harm of inaction. Not doing something always has a price. From a business view, this often plays out when it comes to cost and price management. Example: Walmart's suppliers "must agree to accept any finan- cial or criminal liability resulting from the sale of their products." Blitz USA, once a large manufacturer of gas cans, had a contract with Walmart. To minimize gas can explosions, it proposed adding an arrestor that would prevent a flame from flowing into the can. Its cost was estimated at about $1 per can. Walmart rejected the design change on the basis of the price increase. To keep its contract with Walmart, Blitz didn't add a com- mon-sense safety feature. It ultimately went bank- rupt because of product- liability suits. Bazerman's message: "Organizational systems affect what their employees will pay attention to — and what they will overlook." If leaders want to increase noticing across the board, they need to encourage people to ask questions that drive to the why of what's happening and test assumptions about what could happen. n Jim Pawlak is a nationally syndicated book reviewer. Jim Pawlak EXPERTS CORNER A new approach to net metering By Paul R. Michaud S ince 2004, more than 20,000 Connecticut homes have added solar panels, creating the equivalent of a 154-megawatt power plant spread across the entire state. This $696 million investment has not happened by acci- dent. The state's high electricity prices and low-cost solar financing from the Connecticut Green Bank have been a recipe for the home- solar boom. As in many states, Connecticut home- owners have also ben- efited from steadily declining solar panel manufacturing costs, as well as a state "net metering" law. Net metering allows homeowners to receive the full retail rate for the energy that their solar panels generate, while any excess generation at the end of the year is reimbursed to the homeowners by utilities at the wholesale rate. Net metering has been a boon for solar, enabling third party power-purchase agree- ments and removing technical barriers. But there is growing tension between the solar industry and the electric utilities. Now that solar power production has proliferated in many states, including Con- necticut, electric utilities are pressuring state legislatures and regulators to eliminate or weaken net metering. The electric utilities argue that paying full retail rates for solar generation doesn't completely offset the fixed costs necessary to maintain solar customers on the electric grid, and that net metering sub- sidizes solar panel customers at the expense of customers who do not have solar panels. The electric utilities call this cross-subsidization. Hawaii ended net metering, but "grandfa- thered" existing solar customers. Nevada took the matter several steps further, ending net metering for new customers while slashing the price utilities must pay to existing net-metering customers. It made home solar uneconomical and drove solar installers from the state. If something similar happened in Connecticut, it would be similarly devastating to existing solar homeowners and the solar industry. So what's the net-metering end game? A compromise may lie somewhere in the middle. Some electric utilities have devel- oped an approach to calculating the value of solar, a method they have named "Value of Solar" (VOS) cost avoidance. This method involves the development of a VOS tariff, a cents-per-kilowatt hour rate that accounts for the benefits solar provides to the electric grid, such as avoided transmission, avoided distribution, avoided energy/fuel and avoided environmental costs, less any costs incurred by the local utility company to con- nect a solar homeowner to the grid. Another aspect to VOS is for solar home- owners to have both a utility meter and a solar output meter. The electric utilities would charge their standard service rates for a solar homeowner's electricity consump- tion, but would pay that solar homeowner the determined VOS rate for the solar generation. This is referred to as the "buy-all, sell-all" approach. There are concerns about taxes and ownership that will need to be resolved if VOS is to catch on. One concern is that solar homeown- ers selling solar generation to the electric utility may have to pay taxes on the revenue. Another concern is that the buy-all, sell-all approach may make solar homeowners ineligible for a 30 per- cent federal investment tax credit. In addition, there are questions about whether a two-meter model would still allow third-party solar companies to own rooftop systems, or whether homeowners would be required to own them outright. If those hur- dles can be overcome, VOS could be a win for all parties. The electric utilities would recover their fixed costs, solar homeowners would receive a fair price for their solar generation, non-solar homeowners would no longer be subsidizing homeowners with solar, and the system would encourage efficiency and conservation. n Paul R. Michaud is an attorney with Murtha Cullina and executive director of the Renew- able Energy & Efficiency Business Associ- ation. He represents clients in renewable energy and energy-efficiency projects. Paul R. Michaud ▶ ▶ If leaders want to increase noticing across the board, they need to encourage people to ask questions that drive to the why of what's happening and test assumptions about what could happen. ▶ ▶ Now that solar power production has proliferated in many states, including Connecticut, electric utilities are pressuring state legislatures and regulators to eliminate or weaken net metering.

• Cover