“The future is not just a technologically advanced version of today’s world.” I heard that comment on an energy webinar about utility/regulator relationships. The speaker was Val Jensen, a senior fellow at ICF, a strategy and consulting firm. His is a basic statement, but with huge implications for the energy industry.
Here are some nuggets I picked up from various speakers in that web session, with my thoughts included. These are emblematic of a good direction for our energy future.
Ask yourself, if we could build an electric system and business from scratch, would it look like what we have now?
The point is not to think that as a society we are stuck with what we have now. In fact, we cannot allow that thinking to happen if we want to advance.
In the webinar it was noted that the power system is complex and the old revenue model of utilities is obsolete. New ways to earn revenue need to be invented based on service, not volume sold.
There is a symbiosis between utilities and the government.
A former regulator noted that. There is a need for the two kinds of organizations – public service commissions and utilities – to work together. “Regulators don’t do a lot of envisioning,” he said. Businesses must do strategic planning to stay alive and competitive.
Markets are important, but “Market operations have limits,” one said. The regulatory compact is this – in exchange for regulating the company, that company gets a reasonable return. It is time for utilities and regulators to “renew our vows” while looking ahead.
People do not want to buy electricity.
Good point. Utilities feel like people buy electricity because that is what the utility sells. The speakers discussed “disintermediation” – people buy power because it allows them to do something else, like heat their home, cook meals, and play video games.
I covered this on a blog a long time ago, saying that people who buy drill bits don’t want drill bits. They want holes.
Utilities impact people’s lives by the way that they provide easy, dependable, and trustworthy service. Utilities are stewards.
Innovation should come from utilities, not regulators or third parties.
Allow utilities to take more calculated risks rather than third parties taking the chance and migrating in the technology. Demonstrate and deploy, with oversight, is a good label.
Experts in the field ought to be those who explore new technologies, not those in hearing rooms. Use the boots on the ground interacting with technology and customers every day.
We need to move into a more transparent relationship with regulators.
Some time ago I had a public service commission person say to me that utilities create complex rates because utilities have engineers and finance people who like complex things. There is really no reason for complex rates. Make it simple.
An example: Santee Cooper has been around for decades, yet it had to do an experimental rate with Century Aluminum after a dispute. This even went to a confidential board session. Why? Why, after years of service does this happen? Of course, Santee Cooper has zero regulator oversight to hinder unusual issues.
Performance-based Ratemaking is the future.
This idea “Suffers from profound misunderstanding of what it is,” said a panelist. Is it just metrics? Well, utility industry is already heavily performance-based. It is more than outage figures and kilowatt-hours sold. It gets complicated, because the companies and regulators must figure out to create a performance measurement system.
Accountability is key. Said one panelist, “I don’t have a problem having utilities having to decarbonize, do economic development…” The issue is whether it is done efficiently for the money involved. That will take real debate and deep understanding on all parts.
Technology is becoming more connected, more powerful, and smaller.
We have not yet seen change in the power industry. That is how fast technology is moving. We have a huge network that requires a lot of money to upgrade.
Delivering what customers want is essential. Decentralized, decarbonized power, for instance. New efficiency features in the home or business, for instance. A hardened grid to withstand increasingly severe weather, for instance.
Above all, the future must be managed by smart regulators, smart policymakers, and smart utilities all working together. Customers ought to demand all of those.