North American energy utilities are investing billions to create a smart grid to enhance service for retail electric customers. The smart grid, a disruptive technology, will provide utilities and...
Building the iUtility
Market forces are transforming the IOU business model.
well as energy and financial services—will emerge as the capital attraction winner among future energy producers. Plus, the new regulatory compact will address climate change by transforming the stodgy old electric utility into the new iUtility, which delivers cleaner energy and promotes a healthier environment while sustaining economic growth.
In addition to applying technological innovation to deliver a valuable set of new, customer-centered services, the iUtility might resemble the iPhone in terms of its business model, management structure and corporate culture.
The iUtilty might shed its IOU electricity-only business plan, owning fewer hard assets and operating through service contracts, energy futures, and outsourcing many business processes in response to market demands and opportunities, instead of state and federal regulatory policies.
Such an iUtilty will transform itself into a 21st century power provider with the flexibility to capture not just electricity customers, but broader energy services markets as they emerge. The iUtility will operate more like the iPhone—in unregulated, competitive markets, with market share captured by the swiftest, most technologically innovative, and most responsive providers. The first step toward that future, however, is to renegotiate the regulatory compact to send market signals that encourage more customer-centered, economically efficient and environmentally sustainable services.
1. Thomas R. Kuhn & David K. Owens, Transforming the Electric Utility Industry , Wall Street Briefing, Edison Electric Institute, Feb. 13, 2008.
2. Chairman Joseph Kelliher’s remarks at the opening of the technical conference examining market competition in the electric industry pursuant to Section 1815 of the Energy Policy Act of 2005, available at: http://www.ferc.gov/news/statements-speeches/kelliher/2007/02-27-07-kelliher.pdf.
3. “Experts Agree: Renewable Electricity Standards are a Key Driver of New Renewable Energy Development,” Union of Concerned Scientists, available at: http://www.ucsusa.org/clean_energy/clean_energy_policies/.
4. Rebecca Smith, “Utilities Amp Up Push to Slash Energy Use,” Wall Street Journal , Jan. 9, 2008.
5. NREL highlights leading utility green power programs , April 3, 2007 .
6. National Action Plan for Energy Efficiency, ES-5 , U.S. Department of Energy and U.S. Environmental Protection Agency Leadership Group, July 2006. See also, Amory B. Lovins, Energy End-Use Efficiency , September 2005.
7. For a review of state efficiency planning activities, see National Action Plan for Energy Efficiency , id. at ch. 6.
8. Preliminary Executive Summary and Preliminary Results in Saving Estimates Report , Efficiency Vermont, March 30, 2007.
9. Revis James et al. , “ The Power to Reduce CO 2,” Public Utilities Fortnightly , October 2007.
10. Stephen Maloney, “ When the Price is Right ,” Public Utilities Fortnightly , October 2007; Terry Pratt et al., “ Rating the New Risks: How Trading Hazards Affect Enterprise Risk Management at Utilities ,” Public Utilities Fortnightly , June 2007; and Timothy P. Gardner and James C. Hendrickson, “ Carbon Wargames: U. S. Utilities Gain Strategic Insights by Playing Out a Carbon-Constraint Scenario ,” Public Utilities Fortnightly , December 2007.