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CEO FORUM: Dealing with Disruption

Leaders adapt to strategic shifts in the utility landscape.

Fortnightly Magazine - June 2010

haven’t—approved much of it so far. As the average price goes up—which it will as we deploy new capital—more of these programs will be effective for the end-use customer.

 

Boston, PJM:  Efficiency makes a lot of sense for the nation. Attic insulation is the cheapest source of carbon reductions. You just have to measure and verify that the actions are actually being taken. It’s hard to measure megawatts that aren’t being used.

In a slow economy, we’re seeing demand-side resources compete very well against supply-side resources. [In its most recent capacity auction, PJM reported in mid-May that 6.5 percent of total resources procured were comprised of demand response and energy efficiency.] Measurement and verification is always an issue. We’re working hard with our stakeholders and demand-side aggregators to verify that we’re getting the megawatts that are claimed when people bid in the market. We did a test last fall and we actually got 118 percent of the amount of demand response that we asked for on that day. That wasn’t a perfect test because it wasn’t on the hottest day of the year, but it is a good indication that demand resources are real.

As the economy recovers, it might be harder to make everyone who’s under contract keep their commitments. When the economy is booming, it’s harder to take curtailments when you’re running three shifts. But the contracts are for three years and the penalties are substantial. If people don’t play, they have to pay.

 

Spence, PPL:  In Pennsylvania Act 129, the legislature last year required a 3-percent reduction in energy usage by 2013, and 4 percent in peak load. That will drive the demand-side management part of the equation for the next three years or so.

Conservation and DSM will play a significant part. My guess is that as an industry we’ve got to think about market demand in terms of a steady state, with no real growth in potential usage through 2020, based on the economy, new technologies, state-mandated initiatives and people changing their lifestyles. We might well be in a situation where we don’t see a lot of load growth over the next 10 years. There’s so much focus these days on energy efficiency and customer education that more people are aware of what they’re paying and how much they’re using, and they’ll take that into account as they use the electricity product going forward. Certainly it’s a changed set of circumstances.

 

Customers & Smart Grid

Fortnightly: What’s your company’s overall strategy for engaging customers as you work to implement changes in distribution technologies and rate structures?

 

Ratcliffe, Southern Company:  At the heart of anything we do with customers is a desire to make sure they understand exactly what we’re trying to do, which is to make their lives better by allowing them to use our product as efficiently as they can. When it comes to technology, we first make sure the technology works well, and second that customers understand how it works. We communicate with them frequently, to make sure customers understand that

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