This discussion is presented in conjunction with the closing keynote at the Association for Environmental Studies and Sciences 2014 Conference.
Cost-effective and profitable energy efficiency technologies and services, and renewable energy generation alternatives are available today to end GHG emissions from the electric utility sector entirely. Traditional cost-of-service regulation rewards capital investments more than the provision of value, punishes innovation and efficiency, and treats customers as “ratepayers” with few choices and little clout. Today’s electric utilities are not well prepared to make the business model changes required to become truly sustainable. Three key strategies map a path forward.
First, cost-of-service regulation, with its focus on narrowly regulated profitability, should be replaced with performance-based regulation (PBR). PBR sets standards based on policy goals and provides earnings penalties for failure to meet targets and the opportunity for extra earnings for exceeding objectives. Second, the focus of the electricity business must shift from rates and the delivery of kilowatt-hours to satisfying customer desire for valuable services and options. A wider range of services and technologies should be available to all customers. Third, regulators and policy makers should unbundle electric service into component services and open competitive elements up to third party technology and service providers. Third parties can bring much-needed innovative and entrepreneurial spirit to the sector.
Is the regulatory system up to the task of overseeing the transformation of the industry they regulate? Are these approaches transferable among different states, regions, and countries?
It’s somewhat staggering that a broad swathe of utility observers, analysts and even participants are seriously concerned that one of the country’s historically most stable economic sectors and structures might… Read more »
Excellent points, Carl. I am struck by the salience gap between the magnitude of the issues and the seriousness of the responses among many utilities. There are signs that regulators… Read more »
Seriously, Mr. Rabago, the argument that “Today’s electric utilities are not well prepared to make the business model changes required to become truly sustainable” needs to be called out for the fallacy that it… Read more »
Utilities as a whole (there are exceptions) have not embraced transformative technologies because of the hurdles associated with cost recovery and stock performance. There has been disincentive in electricity markets… Read more »
It is definitely time for regulators to “cape up” and start addressing the utility transformation issues. It will take time and will be quite complex. Tickled to be in NY,… Read more »
The statement that “Cost-effective and profitable energy efficiency technologies and services, and renewable energy generation alternatives are available today to end GHG emissions from the electric utility sector entirely.” is… Read more »
Of course, I had no intent to mislead. Thank you for your helpful comments. My point was that the technologies exist today – we need no major new inventions, though… Read more »
Mr. Rabago”s reply that we need not wait for new inventions to get started with renewable energy raises additional questions. Have we not years ago started to implement renewable energy?… Read more »
Thanks, Mr. Specter –
I really like the idea of goals/principles as a starting point. And your 6 are a great place to start!
Your point that we have what we need to jump in is well taken, but as a Virginia resident, a regulated state, I do not see the State Corporation Commission… Read more »
It is past time for the Virginia State Corporation Commission to “cape up” and provide leadership to the utilities in dealing with these issues. The state legislature gave authority for… Read more »
Karl, Thanks for the information. I did not know that the legislature have given the SCC the authority to make those changes. I did submit comments to the proposed plan… Read more »
Great minds! I am really glad that you acted on your beliefs by submitting comments. The NREL is strong and should receive careful attention. For my part, I submitted formal… Read more »
Thank you Karl for submitting. They sure are stubbornly holding on! I have no idea where that middle piece came from … although I know the NREL report. I have… Read more »
This is a great discussion, but I wanted to add the market pressures undermining the status quo …. . a recent Wall Street Journal article reported over 40,000 on-site renewable… Read more »
We can always count on my old friend, Scott Sklar, to remind us of the strategic and pragmatic issues. I read a few big issues from this comment. First, a… Read more »
This is a great, and needed, discussion and I’m glad you raised it, Karl. I remember working on energy policy as a young Hill staffer twenty years ago – thinking… Read more »
I, for one, think this discussion is less than useless, it is frightening in the sense that it advocates possible demolition of the very foundation of our national prosperity. The… Read more »
I must admit that I find these comments immensely depressing. What is the path to sustainable energy that does not risk the “possible demolition of the very foundation of our… Read more »
Karl, In a single sentence; natural gas fuelled power generation, the free market, enlightened regulations, all managed responsibly, without political corruption. I suppose that is a bit much to ask… Read more »
I have to take issue with some of these statements. I want to comment on them because these issues are at the foundation of the topic. I think the meta… Read more »
Karl, It is obvious that we have a different outlook on the world and Our Energy Policy. Maybe we need to check some of the underlying facts that support our… Read more »
I was inundated with Rumsfeldian “transformation” for 3 years in the Pentagon and it is one of the most misused of words and most abused justifications for change. Exactly what… Read more »