The next decade will bring serious disruption to the utility industry. But with cooperation from regulators and legislators, utility companies will be able to shift their business models to...
Envision the Utility of Tomorrow
on computers, appliances, and other energy-hungry, technology-based devices.
A key element of the challenges awaiting utilities will be maintaining reliability in the supply of power. Reliability perhaps was a given in the pre-deregulation days, when monopoly utilities were responsible for maintaining supply, transmission, and distribution systems within their own service territories. But deregulation ushered in a whole new era, as was graphically and emphatically illustrated by the great blackout in the Northeast and Upper Midwest in August 2003, and by disastrous occurrences in California electricity markets a few years back.
Whether or not these events can be fully ascribed to deregulation, it is clear that opening the grid to interstate commerce, and diffusing lines of responsibility, against a backdrop of major utility mergers will make reliability a prime issue going forward.
An Accenture survey of consumers affected by the August blackout found in February that more than 70 percent had doubts about the stability of the nation's electricity supply. Nearly 60 percent did not believe enough had been done to secure the grid after the blackout. Half of those surveyed expected another blackout within the next six months, or weren't sure, and 27 percent thought the electricity supply would be less reliable in the future.
Mandatory reliability standards could very well be a part of the future for utilities, whether imposed and enforced by government or the industry.
As was suggested earlier for the industry's future, utilities can approach the reliability issue with fear and uncertainty, or they can get out in front of it and help direct the response-their own, and that of government. If political leaders want to be reassured that the decisions they make will keep the lights on, the industry can help by providing facts and a clear explanation of the options.
Utilities also may need to keep in better touch with their customers. The Accenture survey found that 60 percent of utility customers believed their utility company and the government had not done enough to inform them of the blackout's causes, and that 85 percent said their utility company should provide more information on the electrical system and supply.
Interestingly, 43 percent of consumers said they would be willing to pay up to 5 percent more in electricity rates if it would help improve the reliability of the electricity system, while another 9 percent said they would pay 6 to 10 percent more. Fewer than half (44 percent) of respondents said they would not be willing to pay any increase.
To help improve reliability, a fact of life for the utility of the future could well be participation in a regional transmission organization (RTO).
Information Technology as a Driver
The utility of the future will rely more and more on information technology to complete its mission and compete in the marketplace. But high-performing utilities will go a step beyond. Increasingly, they will move IT officers from the back room to the boardroom, and incorporate them in long-term business strategy. They will recognize that there is competitive advantage in IT.
Evolving technology demands an organizational response. The technology