FERC owns more than one enforcement tool. Besides civil penalties, it can require compliance plans or disgorgement of unjust profits, or condition, suspend, or revoke market-based rate authority,...
The Widening Technological Divide
Increased business and regulatory challenges have utilities lagging in investments to meet energy demand a decade from now.
a modernized electricity system will require the electricity sector to rally around a consistent and compelling message, and to proactively inform its constituency accordingly.
4. Increasing Business Challenges. The electricity sector also is experiencing a number of business challenges that compound its difficulties. These are, in many cases, derivative of the impediments outlined above, and include:
- Growing cost pressures on fuel, labor, and construction, as well as inflation and the cost of capital.
- Limited and uncertain ability to pass these cost increases on to the consumer.
- Reliability and security of energy supply, which increasingly are threatened by under-investment. The general inability to gain either confident longer-term purchase contracts at prices commensurate with supply costs, and/or shorter write-off periods, further discourages both innovation and capital expansion.
- Capital expansion, which at the same time will be critical to earnings growth. This may involve contentious rate cases within the current service-value structure, thus causing distress for utilities, regulators, and consumers alike who generally have enjoyed an extended period of rate stability.
- Mergers and acquisitions, which can only, at best, temporarily compensate for limited electricity sales and earnings growth potential within the current electricity business model and value proposition.
Over the past decade, the restructuring of the electricity sector has served to accentuate these underlying business and infrastructure impediments. The following offering provides a pathway to resolving these impediments.
Business as Usual vs. A Transformed Sector
A modernized electricity sector would provide widespread benefits for the economy and society. The following table summarizes the payoff from deploying the technology needed for an electricity sector capable of meeting the growing demands of the 21st century. In this enhanced scenario for 2015, productivity growth rates are higher and the economy expands more rapidly, while electricity consumption, intensity (kilowatt-hours per dollar GDP), and carbon emissions are reduced relative to business as usual.
A technically transformed infrastructure would, for example, enable up to a 2.5 percent/year worker productivity growth rate, substantially above the 2.0 percent rate projected for business as usual. Higher productivity rates can be sustained because a more reliable digital power delivery infrastructure would enable workers to perform existing and new functions more accurately and efficiently. This accelerated productivity growth has been demonstrated and established selectively in the economy, but its potential could be expanded dramatically through a smart power supply system. In effect, improved power reliability and quality would enable the digital economy to expand at a broader and faster rate—an essential factor for successful U.S. competition in a global economy.
The digital revolution is the third major economic transformation in the last 100 years, and each increasingly has depended on electricity. Each also has created substantial new levels of wealth, as well as winners and losers at the scale of individuals, corporations, and nations—all depending on the effectiveness with which the innovative technology underpinning the economic transformation is exploited. In this new electricity business environment, it is the quality of customer connectivity and responsiveness that increasingly will differentiate the winners from the losers. The most precious business asset becomes the customer access portal. In every electricity