AEE Applauds Illinois Commerce Commission for Initiating Review of Cloud-Based Solution Investments by Utilities
The Commission noted that regulation has not kept up with innovation, creating a disincentive for utility investment in more cost-effective cloud-based solutions
WASHINGTON, D.C., Dec. 12, 2017 — Today, national business group Advanced Energy Economy (AEE) applauded the Illinois Commerce Commission (ICC) for initiating a proposed rulemaking on the regulatory accounting treatment of cloud-based solutions utilities use to manage delivery, management and customer service for energy services. The ICC’s unanimous vote (Dec. 6) and rule-making announcement (Dec. 7) came after considering stakeholder input on its Notice of Inquiry process* that began in April.
“We applaud the Illinois Commerce Commission for taking action to open a formal rule-making for the purpose of allowing utilities to make investments in service-based solutions to serve their customers in the most cost-effective way,” said Lisa Frantzis, senior vice president, 21st Century Electricity System, Advanced Energy Economy. “This is a huge step forward in making sure market rules allow for investment in the latest technology and to spur innovation in the ways utilities offer secure, clean, affordable energy.”
“The world of software is changing, and new software delivery methods can have real benefits for customers, including improved cost effectiveness and better functionality,” said Richard Caperton, Director of National Policy and Regulatory Affairs for Oracle's Utilities Global Business Unit. “I’m excited to see regulation in Illinois catching up with the IT revolution.”
In its order, the ICC acknowledged that there was “a consensus among stakeholders that the regulatory accounting rules have not kept pace with technological innovation” and this along with the “disparity between on-premise and cloud computing systems create a disincentive for utilities to invest in new technology.”
The ICC went on to say, “There must be a level playing field between on-premise and cloud computing systems, especially because these systems serve the same functions.” The Commission recommended specifically “that the [Commission] Staff initiate a rulemaking to level the playing field between on-premise and cloud-based computing systems by clarifying the regulatory accounting rules to provide comparable accounting treatment of on-premise and cloud-based computing systems.”
AEE has worked on this issue for more than a year and weighed in during the NOI process, including a letter of support for the rulemaking process signed by leaders at major companies including Amazon Web Services, CPower, Energy Savvy, EnergyHub, First Fuel, GE, Itron, Nest, Oracle, Salesforce, Siemens and Simple Energy.
Noting the rapid pace of change in the energy sector, the companies said in their letter that the rulemaking addresses a key barrier to the adoption of cloud-based information technology: “On-premise deployments often entail a significant up-front expenditure in software, hardware and implementation services, the majority of which the utility can capitalize and add to the capital rate base. Cloud-based solutions, including software and infrastructure, are often accounted for as service contracts as opposed to capital assets.”
“Regardless of the deployment approach, ratemaking should reward the utility for delivering systems in the most effective and reliable manner,” said the letter.
The companies commended the ICC for leading on an issue that the National Association of Regulatory Utility Commissioners (NARUC) elevated in 2016, adopting a resolution that “encourages State regulators to consider whether cloud-computing and on-premise solutions should receive similar regulatory accounting treatment.”
*Access docket via AEE's PowerSuite tool.
About Advanced Energy Economy
Advanced Energy Economy is a national association of businesses that are making the energy we use secure, clean, and affordable. Advanced energy encompasses a broad range of products and services that constitute the best available technologies for meeting energy needs today and tomorrow. AEE’s mission is to transform public policy to enable rapid growth of advanced energy businesses. AEE and its State and Regional Partner organizations are active in 27 states across the country, representing more than 1,000 companies and organizations in the advanced energy industry. Visit AEE online at www.aee.net.