Episode Transcript
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Speaker 1 (00:04):
And welcome in. This is the CEOs You Should Know podcast.
Jo I'm your host Johnny Hartwell, let's say hello to
chairman and CEO of Essential Utilities, Chris Franklin. Thank you
for joining me.
Speaker 2 (00:14):
Tonny, thanks for having me.
Speaker 1 (00:15):
So tell us everything we should know about your company.
Speaker 3 (00:17):
Well, listen, we are a very old established company in
Pennsylvania and beyond right, our water utility goes by the
name Aqua across Pennsylvania and the nine states where we
operate is one hundred and almost one hundred and forty
years old, and we combined the in twenty twenty with
People's Natural Gas, and People's is also.
Speaker 2 (00:40):
About one hundred and forty years old.
Speaker 3 (00:42):
So two companies, one water, one natural gas, combining with
really strong rich histories in the state of Pennsylvania, both
headquartered here all that time. And so when we think
about why these two companies make sense together, right, one
is serving a product water to its customers, and we're
(01:03):
providing that from reservoirs and rivers and lakes and that
sort of thing, and we're delivering it to a customer's home.
Speaker 2 (01:12):
And the same with natural gas.
Speaker 3 (01:14):
We're taking natural products and we're moving it to customers,
homes and businesses where they live and work. Now, obviously
the difference if we make a mistake and water, people
get sick. If we make a mistake in natural gas,
people get hurt, and so we're very aware of that.
But the fact of the matter is these two companies
are underground pipe.
Speaker 2 (01:33):
Companies, so they make a lot of sense together.
Speaker 3 (01:36):
And what we've been able to do over the last
five years is really put these companies together, leverage those
back offices, leverage things like HR and IT, and really
strengthen that backbone of the of the company so that
we can we can spend most of our time delivering great,
reliable service and safe service to our customers.
Speaker 2 (01:58):
And by the way, we're spending a lot of capital.
Speaker 3 (02:01):
In Pennsylvania, nearly a billion a year spent the company
spending in total, most of that here in Pennsylvania to
replace pipe, make things safer. And so this is a
terrific community partner everywhere we are here in Pennsylvania.
Speaker 1 (02:18):
So what is your history with the company and as CEO.
Speaker 3 (02:23):
I've been CEO since twenty fifteen, so you know, just
about a decade now, but I've been with the company
for thirty two years, and so it's been a great run.
When I joined the company back in the nineteen nineties,
it was a small company. Today, our market cap, you know,
our shares times the share price, is about eleven billion,
(02:46):
and when I joined the company back in the early nineties,
it was about one hundred million. So tremendous growth over
the years, tremendous growth in our employee base and the
services we can provide the communities.
Speaker 1 (02:59):
And so what was what do you contribute that growth to?
Speaker 3 (03:03):
Well, listen, we've always been thought of ourselves as a
solution for municipal issues, and most of our growth has
come from buying municipal or other water systems that are
even either struggling financially struggling to meet compliance, and we
come in and we make the updates and the and
the changes and and you know, make them more compliant,
(03:27):
more financially responsible, or operational. And those turnarounds are important
because it serves the communities, it betters their water and
gas supplies, and by the way, it builds shareholder value.
Speaker 2 (03:43):
So it all kind of works together.
Speaker 3 (03:45):
And so we've methodically, over the years bought those companies.
Speaker 2 (03:48):
So most of the growth was through acquisition.
Speaker 1 (03:52):
Well, Since becoming CEO, obviously the company has grown quite
a bit. So what has been your main focus? What
do you contribute? What have what have you contributed to
the success?
Speaker 2 (04:02):
Yeah?
Speaker 3 (04:03):
I came up through a sort of a root of
a lot of different jobs and my most recent job
before I was CEO was chief operating officer And so
what I still and I say, you know, we have
a great reputation for this, but we want to operate
this company as perfectly as possible, right, we want no mistakes.
(04:26):
And the safety record that we've been able to build
over the years with our employees has just been absolutely phenomenal,
and I think our employee team has a has such
a great reputation for focusing on that and being engaged
in that safety. The other thing is just absolutely reliable service.
(04:48):
People don't want to have to think about their utilities.
They want to turn on the water or turn on
their stove, and they don't want to think about does
it does it never work, or does it ever not work? Right,
So we need four nines in service. We need to
be up operational and providing service, you know, nine to
nine point nine to nine percent of the time, and
(05:09):
that's what we do.
Speaker 1 (05:10):
Well, natural gas has had a huge economic impact here
in Pennsylvania. So what is the future of natural gas?
Speaker 3 (05:17):
Yeah, you know, I think there's been some misunderstandings about
natural gas. And you know, as we move away from
you know, things like coal and in some cases oil,
and we move to a better, more environmentally conscious approach,
natural gas is the natural answer.
Speaker 2 (05:34):
Now.
Speaker 3 (05:35):
You know, we love and we buy a lot of
our power from real renewable sources wind and solar. But
when we think about dispatchable, right, dispatchable on demand power,
you have to depend on things like nuclear and natural gas.
And we will for a very very long time in
this country depend on natural gas. And fortunately here in
(05:58):
the Pittsburgh region we are it's plentiful sitting on top
of Marcellus Shale and Johnny to give you a sense,
back in the mid two thousands, our customers on an
annual basis, our average customer on an annual basis, paid
about eighteen hundred dollars a year for their natural gas.
And after directional drilling was invented and we were able
(06:21):
to get at that more effectively, not us directly because
we don't frack, but companies that sell us the commodity
price has come down dramatically, and today, even after our
most recent increase in rates, our customers now pay about
eleven hundred dollars on average a year, so still about
(06:42):
seven hundred dollars less than they did over a decade ago,
which is tremendous because you know that helps with economic
vitality in the region.
Speaker 1 (06:51):
All right, So what has been your biggest challenge since
you've took over as CEO.
Speaker 3 (06:58):
Well, you know, there's there's always in a utility because
it's the nature of.
Speaker 2 (07:04):
A utility.
Speaker 3 (07:05):
We touched so many customers, so many people's lives, send
things break and we fix them. So that on a
daily basis to just making sure that we were reliable
is challenging and of itself, but I think you know,
more generally, how we grow, right, Our investors expect us
(07:26):
to grow year in year out with steady growth. They
don't expect grand slams, but they do expect seeing those
doubles and triples and the occasional home run, and.
Speaker 2 (07:35):
So growing is a challenge.
Speaker 3 (07:37):
When we bought when we bought People's Natural Gas, the
idea in twenty twenty was that we would begin to
build that platform as well buying other gas utilities. That's
been harder to do because the market since that time
with ESG and certainly the previous administration in Washington, the
(07:59):
focus on natural gas was not as positive and so
it's been difficult in the market to get the same
valuation for natural gas as we do for water. And
so we continue to grow our water platform, but we're
investing heavily in our gas platform, but we haven't been
able to grow through acquisition, so that's been among our challenges.
Speaker 1 (08:20):
Do you think Pennsylvanians, maybe the average Pennsylvanian, do you
think they understand the economic impact that natural gas has
not for not for just the local Pittsburgh community, the
Pennsylvania community, but the world community. Do you think the
average person understands that?
Speaker 2 (08:37):
Yeah, I don't. I really don't.
Speaker 3 (08:39):
Although I think the average American, especially in the regions
where natural gas is so prevalent and inexpensive, is beginning
to be more and more educated around those issues. And
I find that even investor meetings, you know, I will
tell you even in Europe a couple of years ago,
it was very difficult to talk about natural gas. But
(09:01):
then when you see the events unfold with Germany and
the pipeline to Russia, and in all of the issues
in the cost of natural gas in Europe, there is
a much greater understanding and appreciation, for that matter, of
the role of natural gas and its role in our economy.
So I think people will become more and more educated.
(09:23):
And I'll tell you this too in cities that have
talked about not allowing natural gas, or at least not
allowing the growth of it, and people start to say, Okay,
I have a natural gas stove and oven I have,
I might have a dryer among my other appliants, my heater.
Speaker 2 (09:41):
And when you say what does it cost to.
Speaker 3 (09:44):
Move on the average home from natural gas to electric,
it's a big cost. I'll call it ten thousand dollars.
It could be more, but in that range. And then
on average, which is more expensive my electric bill or
my natural gas bill, And traditionally that's always been your
electric bill, So that switch is a challenge. And I
(10:06):
don't see a mass exodus from natural gas to electric
at this point from a standard customer, either commercial or
residential or industrial. And so I do think that education
is coming.
Speaker 1 (10:19):
We only have a couple of minutes left, So let's
touch on how your company participates in community involvement. Can
you tell me more.
Speaker 3 (10:27):
Yeah, we have a foundation and listen, it comes from
the basis of we all live and work in the
communities where we serve natural gas and water, and so
naturally we're connected to those communities. We can't lift our
pipes if things go wrong and go someplace else. We
are anchored to these communities. We are part of the
(10:47):
fabric of these communities. And so therefore we take a
piece of the dollars we make every year and we
reinvested in the community.
Speaker 2 (10:56):
And I'll say just in the last.
Speaker 3 (10:58):
Five years since we've been together, these two companies in Pennsylvania,
we spent twenty million dollars in the community. And that's
not including what we do with vendors and local contractors
and that sort of thing where we employ a lot
of people. But that's just giving back to some of
the community organizations that are making such a big difference
(11:20):
for our communities and the people in need. And so
we've also had got apprenticeships that we put in place
so the people who have traditionally not worked for companies
like Peoples and Aqua get the opportunity to train and
become part of our company, and we hope to grow
in some of the neighborhoods maybe that haven't traditionally been
employed by our company. So we're really making some nice
(11:44):
strides in all levels with the communities where we serve,
and of course we're all over the stadiums and we
want to be as welcoming to people as we possibly
can in those community. We're big fans of other sports
teams here in Pennsylvania and we try to show that.
Speaker 1 (12:00):
Chris Franklin, chairman and CEO of Essential Utilities and definitely
a CEO you should know. Chris, thank you for your time.
Appreciate it.
Speaker 2 (12:07):
Thank you, Johnny, appreciate it.
Speaker 1 (12:09):
This has been the CEOs you Should Know podcast showcasing
businesses that are driving our regional economy. Part of iHeartMedia's
commitment to the communities we serve. I'm Johnny Heartwell, thank
you so much for listening.