Reducing Risk, Incenting Innovation
Rep. Tom Sloan was elected to his 12th term in the Kansas House of Representatives. He serves on DOE, FCC, and EPA advisory committees and has hosted FERC Commissioners in Kansas. He focuses on energy, telecommunications, and water policy interactions in Kansas and nationally.
In the July 2018 Public Utilities Fortnightly, I postulated that to increase deployment of new technologies, PUC Staff and Commissioners need assurance that customers will not financially suffer if the technology does not perform to expectations. The commentary proposed an insurance program that could assuage PUC concerns.
In response to that article, I was asked to explore other options to establish a Performance Assurance Insurance Program. Following is a condensed presentation of alternative forms of potential new technology insurance programs.
Technological innovation creates the risk that the leading firm could be supplanted if or when the disruptive technology changes the nature of the market. In the electric industry, this phenomenon will be especially relevant as new market entrants segment the traditional utility's customer base, have different cost and profit points, and are nimbler at entering and leaving a market niche.
While not a great analogy, the development of wireless communications devices foretold a shift in telecommunications companies' business and economic models. Capital investment shifts were necessary, operational norms changed, and employee training was revised to meet rising and changing customer expectations.