[BETA] Fortnightly

A no-holds-barred interview with the electric industry’s chief architect of wholesale electric market design.

Regulatory mandates and smart grid technologies are creating an opportunity for utilities to adopt a new approach to customer service—an approach that balances a range of strategic and operational imperatives, toward the promise of higher customer satisfaction, greater efficiency, and enhanced revenue.

In the information age, big growth doesn’t come from putting steel in the ground; it comes from innovating and creating value. But if electricity customers care only about reliability and price, how can utilities create real value that didn’t exist before?

The industry is learning some painful lessons about public communication. Hype has given way to hysteria over smart grid rollouts, and forced many companies to re-think their strategies. Capturing the benefits of new technology requires a straightforward approach to selling the benefits — and facing the costs.

Smart metering and beyond-the-meter technologies are challenging the utility monopoly model. Now, regulated utilities must re-think their customer relationships as a revitalized retail sector provides growth opportunities.

Investor-owned utility executives have long understood the benefits of prepaid metering, but technical and regulatory roadblocks have prevented wide-scale implementation. Now, however, two IOUs—Arizona Public Service and DTE—are planning prepaid metering programs that could be offered to all customers. Smart metering technology might pave the way for prepaid to become a standard service.

Achieving the smart grid’s potential requires a revolution in electricity pricing. Smart metering and smart rates might yield surprising and beneficial changes in the U.S. utility industry. But capturing those benefits will require an intelligent and careful approach to implementing dynamic pricing.

State and federal incentives provide the carrot for utilities to invest in grid intelligence. But regulatory and technological incentives are not enough without customer participation. Smart-grid policies will succeed only by focusing on customer needs and benefits.

Smart metering is entering the public consciousness. But gaining support from consumers is tricky business, as evidenced by the recent backlash in California. Customers will accept dynamic pricing and demand-response capabilities only if regulators and utilities take a soft-sell approach.

As many states move toward re-regulation, we speak to commissioners in Illinois, Missouri, Pennsylvania, Texas, and Virginia to learn how policies are evolving—and how far the regulatory shakeup will go