Building the iUtility

Deck: 

Market forces are transforming the IOU business model.

Fortnightly Magazine - August 2008
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At a Wall Street briefing earlier this year, EEI’s David K. Owens used the “t” word—“transformation”—to describe the current state of the U.S. electric utility industry.

“What is happening in our industry is the beginning of a transformation,” he said. “And much of this transformation is the result of the need to address the issue of global climate change.”1

A couple of weeks later, FERC Chairman Joseph T. Kelliher weighed in on the same topic. At the opening of a FERC technical conference, Kelliher said, “In my view, the central challenge facing the Commission today is finding the best possible mixture between competition and regulation.”2

Kelliher and Owens both recognize that the industry’s current transformation will require electric utilities to reformulate business plans, and will require government agencies to reinvent their regulatory regimes. But how do we get there from here?

Historically, electric utilities were driven by one concern and one concern only—sell electricity. IOUs have been supported by a regulatory compact between government and industry. Just as utilities must change their business to one which sells energy services and products—not just electricity; government regulation must change to promote the public good of a cleaner environment—not just a healthy energy economy.

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