Energy exec John Mitola piles up powerful challenges
chicagotribune.com
By Melita Marie Garza
Tribune staff reporter
May 23, 2004
A year ago John Mitola's tiny company, which makes devices that help conserve electricity, was sputtering. "After all, why would any utility want to sell less electricity?" Mitola said of the biggest potential customers for Electric City Corp.'s products. The answer came last August, after electric power was knocked out to some 50 million people from Michigan to Maine.
The blackout probably could have been averted with systems that Electric City had struggled to sell. "We finally had a stroke of luck," Mitola said.
Today the Elk Grove Village-based company is negotiating with 10 utilities to develop systems that will allow power to be switched off during peak times. Mitola expects at least two of those deals to close in the next three months.
As a result of Electric City's first big utility contract, signed last year with Commonwealth Edison Co., Mitola said he believes Electric City will be profitable this year. The company has reported a total operating loss of $37.1 million since it went public in 1998.
And if turning around Electric City isn't enough of a challenge, 39-year-old Mitola also is trying to fix the scandal-plagued Illinois State Toll Highway Authority.
He was named its chairman last year by Gov. Rod Blagojevich, whom he befriended when Blagojevich was an up-and-coming lawyer serving in the Illinois legislature and Mitola was an Exelon Corp. executive.
The first chairman to draw no salary for the tollway post, Mitola took the job despite having no background in transportation and no interest in a government career. Mitola, who donated $15,000 to Blagojevich's campaign and served on the governor's transition team, said he simply believed he could help.
"This governor is committed to cost-cutting," said Mitola, who has won plaudits for promising to provide quarterly financial reports that track spending against the agency's budget.
Even longtime toll authority critic Howard Learner, executive director of the Environmental Law & Policy Center, said: "The agency is cleaning up its act and doing better. The litmus test will be what they do about the unaffordable Route 53 and I-355 toll road extensions, which would require a large toll increase."
Learner credited Mitola and new tollway Executive Director Jack Hartman for hiring an experienced management team, providing better training and improving customer service.
Mitola's jobs don't end there. He also serves on the governor's task force investigating the reliability of the state's electric utilities.
Since Blagojevich was elected, Electric City has done no business with the state, Mitola said.
Mitola also served on the finance committee for the recent ill-fated Senate bid of Gery Chico. He got to know Chico when Chico was chief of staff to Mayor Richard Daley.
How does Mitola, whose base pay at Electric City was $233,844 last year, get all his jobs done?
"The guy is tireless," said Robert Manning, a former Exelon Corp., vice president for transmission and distribution, who now is Electric City's chairman. "He works 24 hours a day."
Mitola is known as a prolific e-mailer who sends messages to colleagues and friends late into the night.
He's come a long way from his boyhood on the city's Southwest Side, where he grew up the son of an Italian-American pipe fitter and an Irish-American homemaker and secretary. Neither parent finished high school.
Mitola graduated from De La Salle Institute, then went on to get an engineering degree from the University of Illinois at Urbana-Champaign. He later earned a law degree from DePaul University, attending classes in the evenings while he worked at Exelon. By the time he was 34, Mitola had risen to vice president and general manager of Exelon Thermal, then the company's largest unregulated subsidiary. It cooled downtown buildings using water chilled by electricity.
At Exelon Thermal he raised more than $150 million in financing and managed joint ventures in Boston, Houston, Las Vegas and Toronto. Prior to his job at Exelon, Mitola headed ComEd's new business ventures unit.
Joined Electric City in 2000
With Exelon's decision to divest Exelon Thermal and refocus on its core utility business, Mitola jumped to Electric City in 2000. Six months earlier, some investors interested in restructuring the company had invited Mitola to sit on the board.
The business, started in 1996, sells devices to make businesses and utilities more energy efficient. When Mitola came aboard, however, Electric City "had no strategic investors to bless its business plan and it had no real business plan," Mitola said.
One of his first plans of attack was raising $37 million from strategic investors, including Cinergy Corp., Duke Energy Corp., CIT Group Inc., and Morgan Stanley. Strategic investors are important because they bring more than money to the table. They also bring expertise and advice, and in come cases, as with the Ohio-based energy firm, Cinergy, they can represent potential customers.
"The $37 million has been used to build our business, develop our product and develop our market," said Jeffrey Mistarz, Electric City's chief financial officer.
Today, the 38-employee firm has a market capitalization of $70 million and last year had revenue of $4.6 million.
Belying the company's diminutive size, the firm's customers now include some of the country's largest companies: H.J. Heinz Co., FedEx Corp., and Xcel Energy Inc., the electric utility serving the Denver area, to name a few.
"I was arrogant enough to walk in and think I'd turn the place around in no time," said Mitola. "There were many times along the way when I wondered: `what was I doing?'
"Given the economic climate, customers weren't buying the equipment to the degree they needed, and we wanted, because of the limits on capital investment," Mitola said.
"Before the blackout it was a hard sell," Mitola said.
Task force recommendation
Then the U.S.-Canadian task force that investigated the blackout's origin outlined the reason why utilities--Electric City's biggest potential customers--should invest in such systems.
"The only way the blackout could have been averted would have been to drop at least 1,500 to 2,500 megawatts of [electricity] load around Cleveland and Akron," the task force said in its report.
"It's the kind of thing that we could try to explain might happen," Mitola said. "But the majority of utility executives would have said that such a thing was impossible and would have given you 200 reasons why it would be impossible."
Now utilities are looking for ways to ease the strain on their transmission systems. And Electric City is offering them a way to do so by selling them computerized systems that let utilities, with a flick of a switch, reduce power used by participating companies.
"No utility executive wants to preside over another Aug. 14," Mitola said. "No regulator wants to be down on record as someone who ignored this issue."
Only one utility, Chicago-based ComEd, a unit of Exelon, Mitola's former employer, signed a contract before the blackout. Electric City is creating a remote-controlled system that will allow ComEd to switch off up to 50 megawatts of power during periods of peak demand.
The system is expected to cost roughly $17 million to $20 million and would incorporate many independent business customers, such as Heinz, which has agreed to curtail power when requested.
Heinz has signed an agreement to install energy-saving equipment in its 500,000 square foot Northbrook plant, where it makes seasonings and soup products. In exchange for allowing ComEd to control its power during times of peak demand, participants such as Heinz get the technology installed free and get 5 percent savings off the lighting portion of their electricity bill.
If Heinz is asked to cut electric load during a high demand time, the Electric City technology allows the plant to continue operating and keep the lights on at an appropriate level.
"It's an infinite return on their zero investment," Mitola said.
Customers can also purchase the equipment outright and set their own level of savings.
Electric City is developing a similar project for Xcel Energy and has a memorandum of understanding with Enersource Corp., an electric utility serving a large portion of Ontario, Canada.
This month Electric City closed a deal with The Home Depot Inc., which agreed to install the energy-saving devices in its Chicago and Denver stores and be part of ComEd and Xcel's curtailment programs.
The ComEd, Xcel and Enersource projects could give Electric City up to 350 megawatts of electricity demand that it could curtail. The company's goal is to reach 700 megawatts in the next few years.
Mitola intends to make money through generating a critical mass of "negawatts"--that is, electricity it can subtract--or unload from the transmission system by trading it into the nation's evolving electricity markets.
Last week , Electric City asked federal regulators to make one of these markets, the New England Independent System Operator, change its rules to allow demand response systems to get off the ground.
The New England organization set a one-year limit for such a system, a time limit that kills off the opportunity to line up financing needed to build such a system, Mitola said.
"It is an example of how aggressive we have to be with utilities and their organizations to try to make a difference in the markets," Mitola said.
ComEd's about-face
Indeed, ComEd's involvement represents an about-face for the company, which brushed off the Italian inventor of the technology when he came to Chicago on a trade junket in the early 1990s.
"They learned shortly before the meeting that he only spoke Italian," Mitola said "There was a mad scramble to find someone in the company who could translate for him and they finally found a transmission engineer named Carlo Arpino."
ComEd didn't think much of the electricity-saving device at the time, so Carlo referred the inventor to a friend of his, Joseph Marino, who owned a switch gear manufacturing company.
Marino invested in the idea, and in 1998, two years after it was founded, the company went public.
In 2002, Electric City signed a $250,000 contract to install its energy-efficiency devices at the James R. Thompson Center in the Loop. The project was designed to reduce the energy the building uses for lighting by about 25 percent.
In his spare time, Mitola plays T-ball and soccer with his two children, Luke, 6, and Ally, 4. He also works with his wife, Marcy, on the renovation of their 1880s-era Norwood Park home. And he has energy left to join her for tae kwon do, the Korean martial art.
It's the one area of his life he wishes he had more time to practice.
"She kicks my butt," Mitola said.
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John Mitola
POSITIONS:
- CEO, Electric City Corp.
- Chairman, Illinois Toll Highway Authority
- Member, Governor's Task Force on the Condition and Future of the Illinois Energy Infrastructure
AGE: 39
READING: "Natural Capitalism" by Paul Hawken, Amory Lovins and L. Hunter Lovins; Little, Brown & Co., 1999 |
