Illinois Commerce Commission Improves Rule for Utility Investment in Cloud-Based Technology
New proposed rule reforms accounting rules to better align the interest of the utility and customers in cloud computing investments
WASHINGTON, D.C., June 1, 2018 — Today, national business group Advanced Energy Economy (AEE) praised a proposed new rule for Illinois utilities that offers more equitable financial treatment of cloud-based solutions utilities use to manage delivery, operations, and customer service, but noted that the rule could be improved further. The Illinois Commerce Commission (ICC) approved the first notice rule and posted it earlier today in a formal proceeding, based on earlier stakeholder input.
“This ICC proposed rule represents significant progress in leveling the playing field between investments for on-site technology and cloud computing services for utilities,” said Lisa Frantzis, senior vice president, 21st Century Electricity System, Advanced Energy Economy. “The rule will place pre-paid cloud computing services on par with on-site IT investments. This is a big step forward and will enable utilities to choose the best technology solutions, whether they be cloud-based or traditional on-site IT, to meet operational needs and serve their customers at the lowest cost. Utilities have a path forward to capture the benefits of cloud computing, just like other industries.”
“We appreciate the significant effort by ICC staff and all parties to resolve the complex regulatory and accounting issues that make utilizing cloud computing solutions a challenge for utilities, and we look forward to engaging further in the rulemaking process,” Frantzis added. “However, some additional work remains. We are concerned that the rule does not go far enough to give utilities equivalent earning opportunities for pay-as-you-go business arrangements, which is ultimately what’s needed to remove any disincentive for utilities to choose the best solutions for their customers.”
The ICC’s proposed rule is a result of a formal rule-making proceeding announced last December, after receiving stakeholder input on its Notice of Inquiry (NOI)* process, which began in April 2016.
AEE’s affiliated Advanced Energy Economy Institute (AEE Institute) has worked on this issue for more than a year and weighed in during the NOI process. AEE submitted 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 the docket via AEE’s PowerSuite tracking tool; reporters and members have complimentary access; all others, sign up for a free trial to access to the proceeding’s documents.
Background Material:
- AEE Applauds Illinois Commerce Commission for Initiating Review of Cloud-Based Solution Investments by Utilities, Dec. 12 statement is here.
- AEE Institute report, “Utility Earnings in a Service-Oriented World: Optimizing Incentives for Capital- and Service-Based Solutions,” shows electric utilities can reduce costs for customers without hurting profits for shareholders by considering service-based alternatives to capital investments, utilizing one of several mechanisms.
- AEE Institute Issue Brief, "Optimizing Capital and Service Expenditures," a shorter take on the report prepared as resource for regulators, policymakers and other interested parties, as they tackle the various issues arising in the rapidly evolving electric power regulatory and business landscape.
About AEE and AEE Institute
Advanced Energy Economy (AEE) is a 501(c)(6) business association whose purpose is to advance and promote the common business interests of its members and the advanced energy industry as a whole. 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. The affiliated Advanced Energy Economy Institute (AEE Institute) is a 501(c)(3) charitable organization whose mission is to raise awareness of the public benefits and opportunities of advanced energy. AEE Institute provides critical data to drive the policy discussion on key issues through commissioned research and reports, data aggregation and analytic tools. AEE Institute also provides a forum where leaders can address energy challenges and opportunities facing the United States. Track the latest industry news @AEEnet.