Advanced Energy Perspectives

In this day and age where information is always at our fingertips and we are constantly connected, the lack of customer engagement in the electric utility industry - on which all our smart electronic devices depend - is mind-blowing. In 2014 alone, the electric utility industry in the United States had revenue of over $389 billion from end use customers. In spite of that level of outlay, it is estimated that the average residential customer only spends about nine minutes a year engaging with an electric utility. Smart meters can change all that. These sophisticated meters have the potential to transform how customers and utilities manage electricity delivery and use. Whether they will, however, depends on how they get put to use - and both utilities and their regulators have a role in that.

Disruptive new technologies, aging infrastructure, strengthened environmental regulation, and increased energy efficiency adoption are all contributing to a rapidly changing energy landscape. In order for utilities to plan for meeting future energy demand in the most cost-effective way, many states require utilities to file integrated resource plans (IRPs) with their state public utility commissions (PUCs). IRPs first started in the 1980s in response to the desire to better integrate energy efficiency into utility planning, the unexpectedly high costs of developing nuclear plants, and the oil embargoes of the 1970s. Today, new technologies, changing market conditions, and new environmental regulations are making IRPs change with the times.

Back in January, we published a list of the top 10 utility commission issues to watch in 2015. With 2015 half gone, we check in on the top issues facing utility commissions. Note: some links in this post reference documents in DocketDash, BillBoard or PowerPortal, applications in AEE's software platform, PowerSuite. Click here and sign up for a free 14-day trial of PowerSuite.

1. New York’s ‘Reforming the Energy Vision’

New York, in its comprehensive Reforming the Energy Vision Proceeding (REV), is determined to redefine the role of the utility and overhaul the utility business model, and that process is marching forward. In its Track One Order issued in February, the NY PSC approved a Distributed System Platform (DSP) model, wherein the utilities will be responsible for managing markets for distributed energy resources (DER). The order also significantly limits utility ownership of distributed solar, wind, and battery storage and increases the standard interconnection cap from 2 MW to 5 MW. On July 1, the PSC is expected to release the Track Two Straw Proposal, which will focus on such crucial matters as financial drivers for utilities - in other words, how they make money.

The times they are a-changin’. There have been a lot of discussions around the country of late about the regulatory changes needed to create a 21st century electricity system. New business models are needed to integrate higher levels of distributed energy resources, take advantage of new technologies, meet environmental goals, and address changing customer needs and expectations. In an industry that has been slow to change historically, there is a lot at stake for utilities, advanced energy companies, and consumers. In order to understand what transformations are needed, it’s first necessary to understand how electric utilities make money today.

It’s not the way most companies do. Electric utilities are monopolies, so they have to be carefully regulated in order to protect the interests of their captive customers. 

At most times of the year, much of the electricity generating capacity in the United States stands idle. In fact, on average we use less than half of the available capacity.That’s because the electric power system is built to handle demand at its peak - those few sweltering summer days when everyone’s AC is running full blast. What utilities pay for power at those times of peak demand drives up the price we pay for electricity around the clock and all year long. One way to reduce spikes in demand is with rates that vary by time of use. By pricing electricity higher at times when demand typically peaks, consumers large and small have an incentive to reduce their electricity use when it matters most to the power grid - reducing the costs of the system overall.