Disruptive technologies and resource shifts are changing the utility business model. Market factors are driving companies toward four possible paths.

The industry’s slow-and-steady pace of mergers seems to be picking up speed, as larger and well-positioned players overtake smaller and weaker targets. Realizing the greatest value from consolidation requires companies to assess their strengths and weaknesses and focus on performance improvement—both before and after a deal gets done.

The opposing challenges of higher gas prices and rising environmental concerns have put utility regulators in a difficult position: How can they bring rate stability while minimizing environmental impacts? At the same time, they are grappling with trends in consolidation, competition, transmission planning, and distribution service quality. Each state brings a different view of the changing utility landscape. For insight, Fortnightly brought together regulators from several states to discuss their plans and priorities for today and the future.

The utility regulatory process is prone to controversy, given the inherently adversarial roles and varied viewpoints among the utilities, regulators, and other stakeholders. Oft-heard pleas of "why can't you just see this issue my way" or "can't we all just get along" underscore the deep-seated frustrations of utility leaders and regulators in trying to find a common ground for addressing crucial issues surrounding the formulation of business strategies, establishment of responsible financial goals, and setting of operational performance standards for the regulated gas and electric distribution utility segments of the energy industry.

It seems that "outsourcing" has become a dirty word among utility executives. But though left unsaid in polite conversation, the word is still on everybody's mind. They might even be doing it. They just aren't talking about it.

Few companies achieve sustainable high performance. Markets change but companies fail to adapt, and investors are unforgiving. Utilities, and new entrants, learned this lesson during the first competitive market cycle of the late 1990s and early 2000s, when few companies sustained a high-performance leadership.

Perspective

Many of the obstacles and strategic issues that utilities face today are all too familiar. This time they must be solved with a different business model.

In the 1970s, the industry struggled under the burden of a huge capital expenditure program to improve reliability that came on top of spending needed just to keep up with customer demand. Inflation reared its ugly head. Interest rates began to rise.

Perspective

Exelon Chairman, President, and CEO John W. Rowe, on the proposed merger that would create the largest utility in the United States.

There are utility chief executive officers (CEOs) and then there is utility chief executive officer, or the captain of all captains.

Business & Money

Utilities will gain from new regs for research tax credits.

The 1990s ushered in the era of deregulation, bringing the disposition of generation assets by utilities, the decline or end of rate cases, and the reluctance of state commissions to approve large capital expenditures for transmission and distribution (T&D). Unfortunately, time has shown that this reduced level of spending was not enough to maintain existing T&D assets, let alone add new capacity.

Technology Corridor

A 10-year horizon.

What does the current landscape look like for distributed energy resources (DER)? What applications and business models are being pursued by leading companies, and where can we expect to find DER in the next 10 years-in 2015?