Evolving Utility Business Models

Transcription

1 JK. November 2014 Evolving Utility Business Models Jonathan Kleinman CLEAResult Vice President, Policy, Design & Evaluation We change the way people use energy

2 Agenda Major Tenets Drivers of Change Snapshot of Regulatory Model Transformation Final Thoughts 2

3 Major Tenets The two groups that most influence utilities: CUSTOMERS LEGISLATORS / REGULATORS As a general matter, regulatory and institutional change lags technological change. This regulatory compact served us well for 100 years. The current predominant regulatory model challenges utilities ability to grow and adapt to serve customers. 3

4 Drivers of Change Policy / Regulations Technology & DR These changes to the manner in which electricity is generated and delivered are exacerbated by declining demand growth Customer Preferences 4

5 Profound Forces Are Shaping Utilities Industry Declining Load Growth Today s Utility Disruptive Technologies Regardless of perspective, consensus is we are facing profound changes to the manner in which electricity is produced and delivered 5

6 Utilities Will Reach a Fork in the Road Smart Integrator Full Service Provider 6

7 Evolving Utility Business Models Status Quo Enhanced Status Quo Smart Integrator Full Service Provider State-mandated social policies inhibit cost recovery. IOUs remove customer options different from cost-of-service (COS) tariffs. Maintain universal cost-of-service rates. Provide some advanced technology for reliability and resilience. Grid functions to deliver energy. Add new uses to network. Distribution grid operator functions like RTO: manage 2-way power flows and myriad intermittent and dispatchable resources. Optimize communications network, metering functions, public lighting, EV charging stations. Offer full array of generation and related services, including DG, energy efficiency services, and financing options. Provide benefits to all customer segments. 7

8 Evolving Utility Business Models Operations Status Quo Enhanced Status Quo Smart Integrator Full Service Provider Build, maintain, operate distribution grid. Provide moderate level of reliability / resiliency at low cost. Invest in foundational automation technology, smart meters, remote monitoring and control. Invest in security measures. Interconnect utilityowned DG (e.g., solar). Address aging infrastructure: build, maintain, operate distribution grid. Provide moderate to high level of reliability/ resiliency at low cost. Invest in foundational automation technology, smart meters, remote monitoring and control, and distribution automation. Invest in security measures Interconnect customerowned and utilityowned DG on demand. Administer statemandated EE. Incorporate technology for measurement, data capture, and control related to grid management. Integrated DG resources into planning and operation of the grid by sending correct price signals and managing two-way power flows. Compensate consumers for technologies that benefit the grid. Charge consumers for the value the grid provides, commensurate with usage profiles Potentially expand other functions, like meter multiple utilities (e.g., electric, gas, water) Offer wide variety of customized, valueadded products and services for consumers (e.g., enhanced reliability, better power quality, usage management, network capabilities of smart grid, product bundling. Provide creative price structures for energy products and services. Finance customerowned resources, such as DG and energy efficiency. Complement customerowned resources with utility-owned resources. 8

9 Evolving Utility Business Models Regulatory Status Quo Enhanced Status Quo Smart Integrator Full Service Provider Address declining load growth by increasing cost-ofservice, throughput (input-dependent) rates. Implement measures to prohibit customer migration. Assess fixed distribution charges for residential customers. Address declining load growth via alternative regulation and rates (Performancebased regulation, Straight Fixed Variable formula rates) and demandbased rates. Address stranded cost risk. Long-term planning with regulatory preapproval. Minimize/eliminate regulatory lag. Address innovation, fund shorter asset lives, shorter rate cases, create innovation fund. Outcome-based ratemaking, symmetrical earnings incentives for IOUs. Pricing structures for premium reliability services redefine standard service, competitive tariffs, special contracts. Regulations allow for system balancing, control behind the meter. Reassess structural model from commodity to services. Address regulatory treatment of data. 9

10 Business Model Evolution Where Do We Go from Here? Process of transformation will be uneven Balance investment between existing legacy and emerging distribution grid infrastructure and position for optionality Consumer differentiation and product customization Strategic partnerships Deconstruction of universal service concepts 10

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