In his office at CenterPoint Energy, you’ll more often see President and CEO Scott Prochazka without a tie, with his sleeves rolled up—both figuratively and literally—ready to work. “I don’t normally wear a suit,” he said. “I’ve tried to give those up as much as I possibly can.”
The past couple of years arguably were his toughest on the job yet: In late August 2017, Hurricane Harvey began its slow and devastating jog across south and southeastern Texas, testing the company’s resiliency as the second costliest storm on record (after Hurricane Katrina). Just a few months later, in April 2018, CenterPoint Energy announced its merger with Vectren Corporation—an agreement that was completed in just 10 months and resulted in a company that is now the largest local distribution company in the United States by miles of main and the second largest by number of customers, according to Prochazka.
Now, he steps into the role of board chair for the American Gas Association. Prochazka is ready and eager to take on this new role, and he is focused on delivering on innovation and modeling a customer-centric culture as he continues to drive home this message: “Gas is not a path to some other solution; gas is a key part of the solution—for everything from reliable energy to climate change.”
Prochazka’s “ready to work” approach likely comes from his father, Don, a Navy veteran who, after serving in Vietnam, went through college on the GI Bill and worked his way up into human resources after starting as a janitor at Dow Chemical.
The young Prochazka moved frequently as his father’s position took him to various cities and states across the country, plus four years overseas in Australia. So, it makes sense that Prochazka’s first thought when it came to college study and a future career was chemical engineering. “Quite frankly, when you grow up in the chemical industry, you tend to spend a lot of time in small towns, where that industry is a major portion of the local economy. I was clearly influenced by my surroundings,” he said.
The move back to the United States brought the family to Texas, where Prochazka graduated high school. He then attended the University of Texas-Austin, graduated with a degree in chemical engineering and joined his father at Dow. “I got an engineering degree, but I never actually did any engineering,” Prochazka said with a laugh. “I went straight into the commercial world, into a sales job. I knew I was good at math and science, but I really enjoyed developing relationships and understanding the broader business.”
Now married, Prochazka and his young family moved to Dow’s headquarters in central Michigan for several years. There, he took on roles in purchasing, product management, asset management, supply chain management, strategy development and new business development, before deciding to return home to Texas and family. “We started looking south toward opportunities,” he said. “I was really intrigued by the geographic option of coming to Houston, which is an area that I knew and is my wife’s home. I was also attracted by possibilities in the energy sector.”
At that time, in 2001, Texas was preparing to deregulate its retail electricity market, a process that began in January 2002. The more Prochazka considered it, the more the energy mission appealed to him.
“Energy drives almost everything we need, or want, to do. It keeps our homes safe and comfortable, our businesses running and our economy growing,” he said. “While energy itself may be a relatively small portion of our economy, it enables the balance of the economy. Part of the value of energy is knowing it’s there when you need it. It’s the ability to call on energy, whether it’s for comfort or cooking in your home, the need for transportation, for feedstock to run your business or the ability to navigate in darkness—there’s any number of essential activities that involve energy. Without it, you would find yourself stuck.
“We don’t really appreciate reliability because it’s taken for granted and it’s come to be an expected part of the service,” he continued. “We are fortunate in the United States because we’ve done such a good job of managing and growing our energy systems and taking care of them. But if you travel abroad or into more challenged areas, you are very quickly reminded that reliable energy is not something that everybody can access.”
When he was introduced to CenterPoint Energy, he also liked the cultural fit—something that remains true today. “It’s one of collegiality, but it’s also one of accountability. We attract people who are interested in their communities and want to build a career here. People who can relate to and support our core mission. All factors that I thought were attractive as part of our business culture.”
At CenterPoint Energy, just as with his time at Dow, Prochazka dug in. He found himself tapped to lead multiple areas, running the Houston gas business, then the call center and credit/collections, fleet operations and other support service functions, then the utility’s electric business. Next, as chief operating officer, he oversaw all of the business units and several key functions. All of this happened in a relatively short period of time, which Prochazka says gave him a strong understanding of the many interrelated functions that are vital in successfully running a large, complex business. “To me, it really helps drive an enterprise mindset that is so important if you want your whole company to be successful,” he said. In fact, that broad experience helped Prochazka transition into the role of president and CEO when David McClanahan announced that he would step down from these positions at the end of 2013.
As CenterPoint Energy’s new president and CEO, Prochazka had a vision and a strategy from the outset, and they were simple: To “Lead the Nation in Delivering Energy, Service and Value” through a concise, but effective strategy to “Operate, Serve, Grow.”
Simple phrases, but there was deliberateness behind them, as well as behind the values and competencies that Prochazka outlined to continue delivering on the company’s goals and strengthening its culture. “You have to focus on what you accomplish and how you get it done,” he said. “Sometimes, if you’re just goaloriented, you could be successful in the goal but create a lot of damage along the way. Values and competencies help guide our leaders and employees on how we work together. These are key inputs to defining our culture.”
That “what” and “how” includes operating CenterPoint Energy’s assets safely and well, making necessary investments in infrastructure, planning for both future workforce needs and current employees’ needs, and establishing predictable and growing earnings. All of these are needed so the company can continue to serve its customers, its communities and its investors, and to ensure that the vision and strategy are working. In describing the culture at CenterPoint Energy, Prochazka said, “We need to act such that we earn the respect of our customers and our fellow employees each and every day.”
All of that was put to the test during Hurricane Harvey, as the storm caused more than a million outages on CenterPoint Energy’s electric grid. In the Houston area, CenterPoint Energy’s electric operations crews—aided by mutual assistance resources—worked through incredibly challenging conditions and record flooding (52 inches in southeast Texas) to restore power to its customers.
On the natural gas side, by contrast, the outages numbered only in the thousands. However, flooding did cause damage at endpoints, which required service discontinuation, followed by repair and/or replacement, which the utility accomplished systematically in the weeks immediately following the storm. “[And] with the exception of a very small number of facilities, everyone’s gas supply was available and working all the way through the storm,” Prochazka said. “That helps create a positive view of the gas industry and of our ability to weather storms. By and large, we had a very positive reaction regarding the way the gas system performed during the storm.”
While Harvey was front and center during those months, hard work was also going on behind the scenes, leading up to spring 2018, when a definitive agreement was reached to merge CenterPoint Energy and Vectren, which served more than 1 million natural gas customers in Indiana and Ohio, among other businesses. The merger added utility operations in those two states to CenterPoint Energy’s six states, growing its overall rate base by 45 percent. “Vectren was a well-run company with high-quality utility operations. This merger allowed us to increase our utility earnings, create more geographic and jurisdictional diversity, as well as increase the portion of earnings linked to utility fundamentals,” said Prochazka.
In line with CenterPoint Energy’s vision and strategy, the merger also gives customers the benefit of more efficient operations, melding together a portfolio of best practices from both sides. That includes Vectren’s work in safety management systems and CenterPoint Energy’s investments in automated meter reading systems and advanced leak detection technology. “There are a number of ways in which our customers benefit from this larger utility,” Prochazka said.
Innovation is also a key part of CenterPoint Energy’s future success. Prochazka defines innovation as the “intersection of identifying a problem and finding a solution.” It’s a key part of the culture of the combined company, encouraging the creativity of employees to envision new ways of doing things. “It doesn’t have to be a new business or a new product. It can be very small things that have meaningful impact on what we do,” he said.
CenterPoint Energy internally promotes a three-word mindset—“Reject, Find, Drive”—to help make it happen. “Reject the idea that the status quo is simply the best or the only way to do it. Find new ways to solve a problem or to get something done,” said Prochazka. “Finally, drive the idea to action. You’ve got to do all three to complete the process of innovation.
“We want people to envision an idea and test it quickly to find out if it works or not. If it doesn’t work, can you tweak it, or do you have to shelve it? We’ve just got to be a company that can be comfortable with both operating $30-plus billion of assets consistently every day in a very reliable fashion and at the same time challenging ourselves to think about how we can do things better.”
Prochazka’s forward lean on innovation is also clear in the projects he has taken on as a member of AGA’s board, which he joined in 2013. He has participated in the association’s industry-leading safety peer review process, which allows members to take a deep dive into each other’s safety programs and provide honest feedback. “This is an industry that is extremely passionate about safety and making sure what we do every day is done in a safe fashion. I’ve been very proud of that,” he said.
He also was involved in the 2018 AGA study, Implications of Policy-Driven Residential Electrification, which evaluated several policy scenarios related to the electrification of space and water heating. The study found significant costs to consumers, the electric sector and the economy, while the return in reduced emissions was relatively minor.
The study hits home with Prochazka, since he has long been a supporter of the proactive work conducted industrywide to reduce methane emissions through pipeline replacement and through broader efforts such as renewable natural gas and biogas. As AGA chair, he “absolutely” plans to keep driving home the message: Gas is not a path to another solution; gas is a key part of the solution.
“As an industry, we have an obligation, we have a duty and we even have a passion to help our communities improve their environment through reductions in our carbon footprint,” he said. “For years, we’ve been taking steps to reduce our emissions, and we continue to build on that successful track record by taking additional steps to further enhance the integrity and safety of our pipeline systems.”
Prochazka highlights the many environmental benefits of natural gas—something that he would like to see more widely understood. “Natural gas enables electric generation to become cleaner as it replaces coal-fired electricity and provides essential backup generation for intermittent renewable sources like solar and wind,” he said. “In the transportation sector, compressed natural gas offers a much cleaner fuel than gasoline and diesel. While we depend on natural gas more than ever before, we have also made our homes and businesses far more efficient, consuming less energy with a smaller environmental impact.”
Looking ahead, he is optimistic about the potential of new materials and technologies to further improve the efficiency and sustainability of systems that deliver gas for direct use, including the addition of renewable products such as RNG and hydrogen. “Taken together, ongoing investments in infrastructure replacement, energy efficiency, low-carbon fuels and newer technologies like carbon capture will allow our gas systems to continue reducing their carbon footprint,” he said. “Gas is not a ‘necessary evil.’ It is an essential enabler for a cleaner planet, where energy remains reliable, affordable and safe. We’ve got to find a way to get that message across.”
Mission-Focused
Outside of his day job as president and CEO of CenterPoint Energy, Prochazka and his wife, Mary Ellen, are proud supporters of the community and active members at University Baptist Church. In Houston, Prochazka has volunteered his time working with the homeless, helping with disaster recovery and teaching Junior Achievement programs. In addition, he serves on numerous community and philanthropic boards. Come retirement (“That’s off in the future,” he said), he hopes to follow in the footsteps of his children, Matthew, Kyle, Rachel and Sam, and spend some time overseas in mission work.
“We spend a fair amount of time with our church and community activities, and I enjoy that. I find that to be part of my recharge formula,” he said.