Margot Everett is a director in Guidehouse’s global Energy, Sustainability, and Infrastructure segment. She is an industry leader in developing modern utility pricing solutions, helping clients transform their pricing structures to improve transparency, promote new technologies, and maintain cost-based economic principles. She has nearly 35 years of experience in energy policy and market issues, analytics, and strategy, with expertise in electric and gas rate design, cost allocation, load forecasting and research, and market, credit, and enterprise risk management.
What are the major changes to how utilities should approach rate design over the next decade to deal with challenging industry dynamics?
Similar to competitive businesses, pricing and rate design will become a significant tool for achieving the regulated utility's strategic objectives, whether it is to mitigate competitive pressures or to advance business strategy.
Within the decade, traditional rate structures will be replaced with customer-centric pricing. Emerging rate design will continue to reflect costs and rely more heavily on product differentiation and customer segmentation.
Drivers for pricing innovation encompass three principle factors, addressing customer preferences, enabling technologies, and evolving the customer experience. An example of a new rate option is subscription pricing, which allows a customer to choose to pay a monthly or annual charge and consume up to a prescribed level or gain access to discounted rates, much like phone plans.
This provides customers with control and predictability around their monthly bills and a payment structure that is familiar and customer friendly.
With greater amounts of zero marginal cost electricity and lower cost demand reduction technology, a new era in rate design can better align rate structures with cost structures, all while meeting evolving customer expectations and preferences.
To prepare, utilities and regulators must work together to find suitable pricing solutions and embrace advanced customer data-driven approaches to developing creative and cost-reflective options.
PUF posed a baker's dozen questions about power's future to a similar number of the thought leaders at Guidehouse:
- Dan Hahn — You have a short elevator ride alone with the CEO of a major utility. What would you want to tell him or her?
- Karin Corfee — What major changes have we seen over the last year to the key opportunities and threats utilities are facing? What can utilities do to be better prepared for these changes?
- Erik Larson — Are utilities well-equipped for next generation Energy Cloud business models? What is your view on the industry's readiness? What can utilities do now to be ready?
- Dan Bradley — How will utilities' relationships with their customers change over the next decade? How can utilities get ahead of this?
- Ted Walker — We all hear of "as a service" offerings across many other industries. What does this mean for utilities? What does energy as a service look like?
- Shannon Graham — How are European energy companies positioning themselves in a quickly decarbonizing market? What lessons can be learned from them for U.S. utilities?
- Derek Jones — Approximately one-third of energy use in the U.S. is for transportation. How can utilities tap into this market in a significant way?
- David O'Brien — What are the major regulatory changes you see in the next decade? What is needed from regulators to optimize outcomes for all stakeholders?
- Margot Everett — What are the major changes to how utilities should approach rate design over the next decade to deal with challenging industry dynamics?
- Michelle Fay — What will the utility of the future look like in 2030? How will it be different from today's utility?
- Rick Rodman — How has risk management changed for utilities? What can utilities learn from other industries?
- Jenny Hampton — How can utilities use design thinking to develop game-changing innovations? What lessons can be learned from other industries?
- Danielle Vitoff — What role can utilities take in their customers' quest to decarbonize? How have we seen utilities shifting more decarbonization choices to their clients?