PUBLIC UTILITIES JUNE 10, 2019 FORTNIGHTLYimages.e-navigant.com/Web/NavigantConsultingInc/{cde37ddb-2cfe-… · JUNE 10, 2019 PUBLIC UTILITIES FORTNIGHTLY 3 June 10, 2019 • Volume

FORTNIGHTLYPUBLIC UTILITIES

Impact the Debate

JUNE 10, 2019

State and Future of Powerof Powerof Power

PUF Pulse of Power SurveyConducted with Navigant

2 PUBLIC UTILITIES FORTNIGHTLY JUNE 10, 2019

EDITOR-IN-CHIEFSteve Mitnick

[email protected]

EDITORAngela Hawkinson

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VICE PRESIDENT Joseph D. Paparello

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SENIOR ADVISORTom Sloan

[email protected]

ART DIRECTORMichael Eacott

[email protected]

MANAGING EDITORLori Burkhart

[email protected]

MEMBER SERVICES MANAGERAlexandra Revel

[email protected]


Impact the Debate

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SENIOR ADVISORLiz Stipnieks

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JUNE 10, 2019 PUBLIC UTILITIES FORTNIGHTLY 3

June 10, 2019 • Volume 157, No. 8Special Issue

4 From the Editor: State of Power by State

ARTICLES

5 Eight State Commission Chairs on State and Future of PowerColorado Public Utilities Commission Chair Jeffrey Ackermann,

Delaware Public Service Commission Chair Dallas Winslow, Idaho Public Utilities Commission Chair Paul Kjellander,

Illinois Commerce Commission Chair Brien Sheahan*, Maryland Public Service Commission Chair Jason Stanek, Oregon Public Utility Commission Chair Megan Decker,

Pennsylvania Public Utility Commission Chair Gladys Brown Dutrieulle, Wyoming Public Service Commission Chair Kara Fornstrom

What is it like to be chair of the commission? What’s goes on in a typical day? Turning to trends in the electric power industry, in your state and nationally,

what is your take on the current state of industry? Is the industry and regulation of it going well or not, and in what ways? Where do you see the industry going in the next five years?

In the future, do you think that state regulators may have to change how and who they regulate?

30 Power’s Future GloballyLawrence Jones, Vice President for International Programs, Edison Electric Institute

38 Experts Show Us Their Crystal Balls on Power’s Future**By Dan Bradley, Karin Corfee, Benjamin Grunfeld, Aida Hakirevic, Trina Horner,

Wendy Jaehn, Mackinnon Lawrence, Laura Manz, Ted Walker, Robert Wilhite, Navigant

44 Our Confidential Panel of a Baker’s Dozen Senior Leaders on Electric Trends

By Bill Hederman, former senior advisor to U.S. Secretary of Energy

Should our industry accelerate the energy transformation to address climate change? What’s the role and business model of the utility as we de-carbonize? How can utilities best align with the next generation of customers?

What opportunity can utilities pursue in the next three years to build long-term sustainable value? How should utilities use digitalization and innovation to improve customer intimacy and centricity?

52 PUF Annual Pulse of Power SurveyIntroduction by PUF’s Steve Mitnick,

and commentary by Mackinnon Lawrence, Navigant

Cover drawing by PUF artist Tim Kirby of prospective magazine cover in the year 2040.

* Since the interview, Carrie Zalewski was named Chair of the Illinois Commerce Commission and Brien Sheahan moved to Commissioner.

** The opinions expressed by Navigant experts in this article represent the views and opinions of the identified experts.


Impact the Debate


� e power over power is in the hands, mainly, of the states. � e genera-tion mix turning from coal to gas and renewables? It’s a state thing. Driving distributed energy? It’s a state thing. Grid modernization? Again, states rule.

Same with keeping nuclear plants in operation. Ditto with electri� cation of transportation and actually, everything.

� e states are calling the plays on power’s future. Which means that in some states, distributed energy for instance, is going this way and in other states it’s going that way. Each state has its own characteristic economic, political, and regulatory dynamic. Often policies are night and day on the east and west side of the borders of contiguous states.

State of Power by StateFifty Futures

BY STEVE MITNICK, EDITOR-IN-CHIEF

The United States is a country of course. � ough it’s a collection of states too. In U.S. history the relative authority of the federal government and state governments has waxed and waned. True as this is in so many aspects of gov-

ernance, it’s especially true in utility regulation and policy.In some periods, what the Federal Energy Regulatory Commission and other

agencies ruled, and what the Congress legislated held great sway over our industry. � is was the case as recently as the � rst decade of this century. In this decade, not so much, and less so with each passing year as we approach the century’s third decade.

You get a taste of this in these pages of our annual State and Future of Power issue. Check out the interviews of the chairs of eight state commissions, that of Colorado, Delaware, Idaho, Illinois, Maryland, Oregon, Pennsylvania, and

Wyoming. Among the eight states, there are similarities in approach, sure, but as many di� erences.

And check out the write-up of our con� dential o� -the-record panel dis-cussions. Leaders across the states are clearly coping with di� erent dynamics and shaping di� erent solutions.

� ere are other tasty tidbits in this annual issue. Lawrence Jones, our featured thought leader this year, who heads international programs at EEI, gives us his take on power’s future glob-ally. And ten experts from Navigant chime in with what they’re seeing in the industry here and abroad.

And, � nally, the fan favorite, we report the results of our annual pulse of power survey. What was your take on the state and future of power? It’s there, whether your survey response was in the mainstream or contrarian.

Consider this special issue your 2019 crystal ball. PUF

Steve Mitnick is President of Lines Up, Inc., Editor-in-Chief of Public Utilities Fortnightly,

author of “Lines Down: How We Pay, Use, Value Grid Electricity Amid the Storm,” formerly an

expert witness that testified before utility regulatory commissions of six states, the District of

Columbia, the Federal Energy Regulatory Commission, and in Canada, and a faculty member

at Georgetown University teaching undergraduate microeconomics, macroeconomics and

statistics. He has his own crystal ball on the industry’s future; its forecasts frequently accurate

though, alas, not always.

FROM THE EDITOR

The states are calling the plays on power’s future. Often policies are night and day on the east and west side of the borders of contiguous states.

X

xxx

xxx


Eight State CommissionChairs on

State and Future of Power

Colorado Public Utilities Commission Chair Jeffrey Ackermann Delaware Public Service Commission Chair Dallas Winslow

Idaho Public Utilities Commission Chair Paul Kjellander Illinois Commerce Commission Chair Brien Sheahan

Maryland Public Service Commission Chair Jason Stanek Oregon Public Utility Commission Chair Megan Decker

Pennsylvania Public Utility Commission Chair Gladys Brown Dutrieulle Wyoming Public Service Commission Chair Kara Fornstrom


his special issue of Public Utilities Fortnightly focuses on state regulatory Commissions and trends in the electric industry. We asked chairs of eight state regulatory utility Commissions what they thought, and they didn’t hold anything back. Chairs from Wyoming, Oregon, Delaware, Idaho, Maryland, Pennsylvania, Illinois, and Colorado were asked about the current state of the electric industry, their thoughts on where the industry is going in the next �ve years and changes to the regulatory process.

Listen in for a no-holds-barred look at where the states are now and where they are headed as Commissions grapple with regulating in our changing landscape.

and with folks frustrated with either why a whole rail line is not function-ing in revenue service yet or why quiet zones haven’t occurred yet. �ey were not understanding what our role is versus the Federal Railroad Administration, versus what local govern-ments must do.

My typical day is pre-paring for what’s coming at me as a Commissioner. My number one responsibility

is to deliberate with my colleagues and make decisions. Am I su�ciently versed on the record in a proceeding? Do I understand what the decision points are?

Do I understand, if we’re heading into hearing, what unre-solved issues the witnesses represent, what the record still needs, and what line of questioning as a Commissioner should I explore through cross examination, so that we can yield a complete and robust record?

I use whatever time I have left after all that, to do a bit of forward thinking. Each Chairman needs to be doing some prospective observation. All the regulatory people should be doing that. �at’s related to what I call process improvement, but often it’s regulatory process improvement.

How should we be thinking about resource planning? How should we be thinking about our approach to how we preside over cases, realizing what we learned from the past case, and what doesn’t quite seem to work, be it for the applicant, the stakeholders, or for us. �en, I use the little bit of time left engaging policymakers to the degree they want my point of view or I have access to them.

PUF’s Liz Stipnieks: How is it being Chair of the Commission and what is your typical day like?

Chair Ackermann: As a Chair of the Commission it often starts with what may be the least exciting part of the job. I’m the one who is watching procedural duties, acting as the keeper of the process. �at often shows up in conducting our weekly business meetings or hearings when we are presiding, because there’s that extra responsibility of the Chair.

Beyond that, a Chair does not have a lot of unique duties, but sometimes there are expectations that come with the title. My approach is I also try to be an interpreter of regulatory process, back to the public in particular, because at times government can su�er from a duck-and-cover approach to public communications.

We need to be out in front of stories that we will be intimately involved in. Many times, we’re waiting for the story to unfold and people ask us to respond to it. �at’s the worst time to be �nally o�ering your perspective or your messaging.

It’s important to explain often in clear, common language what is happening in front of the Commission. When we were dealing with the City of Boulder desiring to acquire the assets of Xcel Colorado in pursuit of municipalization, I had a room full of attorneys with me, that had answered a series of legal questions.

I used that moment somewhat in jest, knowing I was talking to the media, and said, welcome to the public utility regulatory version of divorce court. �at was so people would understand what was going on. I said we were not here to determine who caused the breakup or to counsel the parties back together, but to distribute the assets between the parties.

I then explained further. I said, just so I o�end everyone equally, we’re making sure it’s clear which children live with which parent. Boulder’s previous attempt at drawing the lines had done it wrong, so we had to revisit who lived with whom.

I also have to manage expectations in the public of what we can deliver, what we will deliver, and what not to expect of us. We’ve had that issue with railroad crossings recently

T

It’s important when talking about Colorado and the state of the electric industry, to know we’re vertically integrated and what we would call traditionally regulated.

Colorado PUC Chair

Jeffrey Ackermann


All those factors need to be taken into consideration in real time – incorporating changes in technology, economics, customer expectations, and policy directives – realizing each decision has longevity to it and it’s hard to undo decisions.

We’re looking at: How should decisions be made? What criteria should be used? How should they be modeled? Who should have a say? How often should those decisions be made? What are the objectives? �at’s the heart of where I see the market going and regulation going. It is that dynamic between regulators and utilities, trying to ask and answer those questions.

PUF: Is it a lot on the planning side of it?Chair Ackermann: Our core in Colorado, what we’re par-

ticularly proud of, is what we’ve developed that we call electric resource planning. So, our IRP, is an ERP.

Our resource planning captures a lot of that and is done very thoroughly, robustly and has incorporated right into its real-time competitive bid solicitation. �at is what populates the mod-

eling, that real-time data from the market, entered into the modeling to yield the resource portfolios.

You have an intensive phase one where all the parties decide what should be in the model and in what ways, in what sensitivities, what scenarios, what data points should be infused, what’s the base case, and what are the other cases?

�en you set the utility forth to do the bidding based on the load forecast we’ve all agreed upon and after that happens, the one hundred and twenty-day report comes in. �en that report triggers a �nal decision by the Commission saying, yes, this is the portfolio we are going to approve for the utility to start implementing contracts under purchase power or ownership and pursue new generation or retirement of generation or any mix thereof.

PUF: Who are the stakeholders?Chair Ackermann: Anyone who has standing in that process.

It is those who have standing by statute, which is the Trial Sta� of the Commission, the O�ce of Consumer Counsel as the consumer advocate, the state’s energy o�ce, and the state’s Department of Public Health and Environment.

�en others who are regularly going to be there are those representing environmental policy and advocacy such as Western Resource Advocates or solar advocates or other clean fuel advocates, and the Inter-West Energy Alliance, the Independent Energy Association, which represents purchased power. �e large end users, under the name, Colorado Energy Consumers,

PUF: Do you set the agenda for the Commission?Chair Ackermann: I meet with the Sta� who prepare the draft

business agenda and then any Commissioner can decide whether to move something from being on consent, which means we’re not going to discuss it, to discuss, or can table a matter.

I tend to be the one who goes to those agenda prep meet-ings just to be the one to discuss the �rst cut of how we should approach things, but I don’t set the agenda beyond that.

PUF: What’s your take on the current state of the industry and regulation of it? How well are we doing? What are some issues we need to be addressing?

Chair Ackermann: It’s important when talking about Colorado and the state of the electric industry, to know we’re vertically integrated and are still what we would call traditionally regulated. Also, we’re not yet fully engaged in regional market transactions in a formalized way.

�at’s somewhat unique to Colorado, to be sitting there amongst states, most of which are in organized regional markets, and then at varying degrees of who’s in a traditionally regulated and vertically integrated state.

What are the trends? �ere is slowly emerging the pioneering of a path, a cost constrained transition away from fossil fuel-based generation to a portfolio of renewables. �at’s clearly where we sit – right in the center of how do you play an e�ective regula-tory role in that transition, from generation portfolios that have been primarily fossil-fuel based ever since they existed, to that transition, and the speed of that transition done in a way that doesn’t overwhelm the end user from a cost-based point of view.

We’re thus leveraging competitive market prices. We’re riding a wave of su�cient load growth. Load growth tends to make things much easier and makes transactions easier to implement. Look at our 2018 decision to accelerate the retirement of six hundred megawatts of coal generation.

Accomplishing that retirement without any additional rate impact was innovative. �at was innovative work by the utility, and by our stakeholders, who found us a way to use an existing rider on bills, reduce that rider, and redirect that resource toward paying o� that accelerated depreciation of the asset. �at’s a big piece of what’s going on in Colorado and will have implications across the country.

It’s also realizing that regulation and regulators should never accept the status quo. Change is coming from several sectors, whether it’s technology, economics, customer expectations, and policy pressures.

�is all needs to occur without us as regulators trying to run the utility. It’s still the utility’s job to run the utility. How does regulation most e�ectively oversee utility decision mak-ing, given that complexity is the new normal and that each decision, whether it’s generation, transmission, or distribution, has signi�cant implications?

Our 2018 decision to accelerate the retirement of 600 MW of coal generation without any additional rate impact was innovative.


progressive side of the equation. History has a bearing on where the industry goes. How a utility has behaved in the last handful of years or decades, and how the utility is perceived, has an impact on the range of motion a utility has going forward.

Utilities have their own challenges to be aware of, regarding public perception and image. �ey are challenged to engage e�ectively, and sometimes in profoundly new directions, to counter perceptions. It can’t be more of the same messaging of, trust me, I’m a good credible utility, I’m a good corporate citizen. �ey need to pivot widely to a whole di�erent, but credible, approach. �is would be helpful.

In Colorado, we’re blessed with the resources, with an increas-ingly progressive yet pragmatic ethic, generally well-behaved electric utilities with some bumps along the way. Sometimes it’s bumps from trying new approaches before they’re well vetted or have built support. We’ve had a few of those hiccups along

come together through their own counsel.Other large consumers may represent themselves through

counsel, or other industrial end users, be they mining interests or local governments, a public utility or like wastewater or water systems, and other large electric end users.

Each can generally establish credibility of having their own unique position and reason to be an intervening party. We have all those parties potentially involved.

We have good stakeholder group engagement. At times where we need to take that next is to push for more engagement before documents are �led. You could add value and e�ciency to the process if rather than waiting for issues to be discussed in a liti-gious way, they can be discussed pre�ling, without Commissioners participating. See what you can resolve ahead of a �ling. It’s done at times. I’d like to see it done much more often.

PUF: Where do you see the industry going in �ve years?Chair Ackermann: Clearly in Colorado, and nationally, we’re

going to see that steady trend to clean energy driven both by economics as well as by public policy. Each state and region is unique. It’s going to be bu�eted by its own circumstances. Colorado is blessed with wonderful natural circumstances that yield some great clean energy resources, be that wind and sunshine, water, elevation.

We have a local political ethic that also undergirds the approach we’re trying to take. It’s the way we engage, the way we’re trying to navigate somewhat of a middle path but toward a

You could add value and efficiency to the process if rather than waiting

for issues to be discussed in a litigious way, they can

be discussed prefiling, without Commissioners participating.


the way, where you’re trying to engage a community in new technology or the like.

For the most part we’re demonstrating how to be successful with a vertically integrated utility operating within a relatively traditional regulatory regime. We’re feeling these pressures to adapt to what is being practiced and proven in other states, like new approaches to how we direct utility performance, and corresponding methods of cost recovery and earnings.

�at’s on the horizon. �e cost-of-service based ratemaking may need to evolve, may �nd that it hits the end of the road, and we have to look at what other states who are ahead of us are going to teach us in performance metrics and performance-based ratemaking.

�ere’s a need to steadily learn how to segment customers more e�ectively. You can’t take a million-plus customers and treat them all as residential. You have to understand unique demands, behaviors, expectations and ways to focus resources in new investments discretely toward certain segments, at the same time leaving certain segments alone.

�e low-use residential segment should stay being a low-use residential segment and that sometimes can be a surrogate for low-income residents. But that’s not meant to be the only way to deal with the low income.

Low income needs their own ongoing evolution of a special approach to what they represent, so that they don’t inadvertently get harmed by things happening creatively across the spectrum where the value to them is less, but the burden to them is the same, if not greater.

PUF: Do you see the vertically integrated model going away?Chair Ackermann: It’s not a universal answer, yes or no.

It’s a circumstantial answer to the question, is the model still achieving the public interest results in the jurisdiction? If it is, there’s a sense that you give it a chance to continue to play out. Although there are pressures, you can’t just say wait, but what about retail choice or di�erent forms of competition, or what about tearing that apart?

We sit in a place where the regulator always has to be watch-ing that they don’t get labeled the impediment to whatever needs to happen next. But at the same time, we need to explain

ourselves to the public, and that brings us back to messaging and the role that the regulator plays.

I have a deck of slides I’ve used with di�erent groups, espe-cially with students, high school, and college students, showing how regulation is applied civics. �ings that legislators used to do and could do on their own because it was simple enough or they had time, like legislators setting railroad rates, it was fairly simple. As complexity comes in is when regulation comes in.

Before we understood what hazardous wastes were, you could just say don’t dump into rivers. Now we have to �gure out, what are we trying to protect against and how do you measure it? Complexity goes hand-in-hand with regulation. Are

we responding to technol-ogy, economics, consumer expectations, political needs, and policy objectives? We have to look at how we’re doing regulation.

Also, on the horizon, not just in the electric space, is the question of who is regu-lated? A lot of these areas are going to ebb and �ow.

Vehicle electri�cation is begging where does the regulatory margin end. But that same is true in what we’re doing with voice service in Colorado.

Where does voice service need traditional regulation or where is what we call competition coming into the market? What’s the role of the regulator �ve years from now in that market and why?

We have to keep asking ourselves those broader questions of what is the public interest and how does it manifest? �at is one of the more complex questions in the electric sector because it’s a blend of safety, e�ectiveness, liability, public health, and long-term sustainability. So how we do regulate electric genera-tion going forward, which may be a di�erent public interest conversation than what you apply to the future regulation of voice service, or what you apply to common carriers, or any other kind of market that we �nd ourselves regulating. m

Cost-of-service based ratemaking may need to evolve, may find that it hits the end of the road.

At the enormous annual conference of Canada’s energy and utility

regulators, CAMPUT 2019, in Calgary on May 5-8, CAMPUT’s chair,

Louis Legault, also general counsel of Regie de l'energie of

Quebec, CAMPUT’s executive director, Cynthia Chaplin, and

CAMPUT’s vice chair, Francois Beaulieu, also a member of the New

Brunswick Energy and Utilities Board. Check out the fascinating

interviews of nearly a score of the attending regulators in the July

and August issues of Public Utilities Fortnightly.


State was not in a position to make the Commissioners full-time.�ere was some discussion about having the Chairman of the

Commission be full-time and the others be part-time, but that hasn’t gathered any traction yet in the legislature. As a goal of mine, I’d like to see the Chairman’s position become full-time, because it really is full-time work. �e issues are so important that it really mandates a full-time chairperson.

PUF: Do you regulate all industries? Electric, gas, water, telecom?

Chairman Winslow: Yes, except for telecom and cable. We don’t have jurisdiction over telecom. �e General Assembly, in combination with actions taken at the FCC, determined that there was su�cient competition in those industries and thus less regulatory oversight was needed.

PUF: What are trends in the electric power industry in your state as well as nationally? Is regulation working?

Chairman Winslow: I believe that regulation does very well. It might be a little slow on occasion, but we have competent people, both from the industry side, and the regulatory side, working together.

PUF: What is it like to be Chairman of the Commission, and what is your typical day like?

Chairman Winslow: �e Delaware Public Service Commission is one of, I believe, only two Commissions in the U.S. that has part-time Commissioners, although sometimes it does seem like I am full-time.

It’s a great job, primarily because I’ve got collegial peer Commissioners and an outstanding Sta� with excellent leader-ship. Our Commission meets twice a month to decide on cases. Otherwise, I am in daily contact with the executive director and senior managers regarding issues that crop up regularly. I’m also available for legislative issues and questions from the Executive branch.

Our current setup is that all draft bills are considered as emanating from the Governor. Our role as technical experts in the regulatory �eld is to give input to that legislation so that there are no technical mistakes in the legislation.

On a typical day, I come to work in the morning, and I’ve got a whole packet of documents that I review for the Commission hearing. �en we have a Sta� meeting in preparation for the public meeting.

In that meeting, the executive director and senior managers go through the agenda for the Commission meeting and brief me on speci�c agenda items including personnel, lawyers involved and logistics of the meeting. We discuss legislative and emerg-ing issues, and we get an update on any Sta� activities, such as attendance, training, and conferences.

An interesting aspect about Delaware is that the Commis-sioners are not permitted to discuss their cases, except during the public meeting. In many other Commissions, they’re able to get together and discuss issues, but we’re not permitted to do that. We let it all hang out in public.

We follow the ex parte rules very strictly. On days that I’m in the o�ce, I usually meet with any stakeholders from the industry who might want to discuss matters of interest, but not about any cases that are pending before us.

I also have some administrative and �nancial matters that I take care of. We’re getting ready for an annual educational conference, so we’ve got duties associated with the regional and national organizations as well.

PUF: Is there any inclination to make the Commission full-time?

Chairman Winslow: �ere was discussion a few years ago, but unfortunately, we had not recovered from the recession, and the

The Delaware PSC is one of, I believe, only two Commissions in the U.S.

that has part-time Commissioners.

Delaware Public Service Commission Chairman

Dallas Winslow


Retail competition will be more robust with tie-ins to extra services, including television over electricity wires. �ere’s a vendor that provides that service; I heard him speak at the National Energy Marketers Association in April.

�ere are other innova-tions coming, like the smart inverters. Logically, sophisticated platforms are something we’re going to have to address in the near future.

PUF: Do you think that you’ll need to regulate additional players, or will these players be unregulated? Do you see your job changing?

Chairman Winslow: I don’t see us gathering additional regula-tory functions. I don’t believe that’s in the future. I believe, if anything, that the regulators are going to change how they do business to meet the changing circumstances. I don’t foresee additional regulatory duties.

PUF: Where do you see the industry going in the next �ve years? You talked about TV over the grid.

Chairman Winslow: Regulation is working well in Delaware, and around the nation, although, I’d like to see a faster pace. �at is one detriment for part-time in a Commissioner’s world; it makes it harder for us to push for innovation of positive changes to the regulatory process.

However, we have an outstanding Sta�, and I’m proud to say that Delaware was �rst in the Mid-Atlantic region to roll out smart meters, that we’ve made great strides with retail competi-tion, that we’re close to electric vehicle innovation, and that the Commissioners and Sta� have considered technology in the forefront of their thinking.

�e power industry is moving at a tremendous, innovative pace. We have new technologies being introduced all over the world. My view is that regulation moves at a slower pace than innovation, and it takes time for us to react to new solutions.

One trend I see coming our way is that of electric vehicles. According to a recent Bloomberg report, there will be 18.7 million electric vehicles on the road by 2030, which is a mere decade away. Obviously, we have to act.

Some regulatory bodies, Washington, D.C. for one, are working to electrify their municipal transportation sector. �e question with respect to the electric vehicle trend is, what impact will all of this have on the grid? Who’s going to build out the infrastructure? What should be the rate structure?

How are we going to work proactively as regulators to address the issues? For example, if millions come home after work and plug in, how do we spread the load?

Another question is if electric vehicles become common and the grid goes down, the enemy nation state may get a two-fer. �e electric and transportation sector may both go down. Don’t we have to incorporate microgrids for law enforcement and other sensitive jobs?

�ere are numerous questions that arise about the electri�ca-tion of our grid. In Delaware, the sta� is addressing the nascent phase of electric vehicle regulation, and fortunately, we have our good friend and my fellow Commissioner, Harold Gray, who’s a nationally known expert in this area, to help us out.

Another trend I see coming is in communications. �ere’s a spectrum that’s being sold by vendors. �e spectrum is called pdvWireless. �ey have a nine hundred megahertz spectrum, and it works on the broadband so that it is highly e�ective.

5G is coming. We’re going to have a much more sophisticated communications system in our power companies and the grid, as well as more robust and interactive communications between a company and its customers.

I’d like to see the Chairman’s position become full-time, because it really is full-time work.


at a fast pace. Regulators must reexamine their paradigms and make appropriate changes in order to maximize the bene�ts of new technology.

However, we will do it thoughtfully after due consideration of the consequences and the expense of change. As an example, the Delaware Public Service Commission and Delaware’s Public Advocate, Drew Slater, reached out to the legislature last year asking them to give us statutory authority to allow the electric industry to collect its distribution charges for certain basic infrastructure improvements. �ere were well thought out and prudent parameters to the legislation.

In my mind, the most basic and important parameter was that the parties had to sit down together, look into the future at a variety of infrastructure concerns, including innovation, and agree upon a path forward.

�is new regulatory paradigm will provide a quicker cash �ow to the utility, decrease the number of the rate cases, avoid some of the expenses of regulatory litigation, and bring more certainty that the cost of infrastructure improvements for consumers is just and reasonable.

I believe that more regulatory change will be considered in the immediate future. �e quickest that comes to mind are future test years and things of that nature. But regulators have got to adopt a more �exible paradigm, because there are going to be some dramatic changes in the future. m

Finally, Sta� and industry representatives strive hard to have a good working relationship. We have open doors for industry, and we feel comfortable reaching out to them. We have a collegial attitude and are welcoming to parties at our public meeting. It’s the Delaware way.

With respect to the question, is the industry and regulation of it going well or not, it is. Of course, the one positive aspect I see about the regulatory paradigm is that there are many entities in addition to the industries that we regulate that provide us the education to do our jobs.

As I said, I’m a part-time Commissioner. I’m not an economist, I’m not an engineer, and I get educated by these entities and by my industrial people who come in and talk to me and educate me.

We try to keep a strong relationship with our industry in Delaware.

We want them coming in every year to give us an annual state of the company status update. We want them to feel free to call us if they want to discuss an issue, and vice versa.

I feel comfortable picking up the phone and calling the CEO of PJM, Andy Ott, or utility executives in Delaware. I’ve always gotten my questions answered.

It’s in the best interest of all, including the Public Advocate, to have open lines of communications.

It’s this two-way discussion that’s the basis for a strong regula-tory process. I’m amazed at how bright and sophisticated, hard-working, and innovative, the industry people that we regulate are. I see us changing with respect to how we do business a little bit in conjunction with the technological advances that take place.

I feel that the industry and its regulators will follow innovation and adopt many methods of the large digital players. �ere will be increased communications and services for customers. �ere will be an increasing emphasis on customers and what they want.

It is the total customer experience, not just customer service, that’s important. At the same time, all parties have got to avoid the trap of undermining customer privacy. �ere has to be a customer privacy sacrosanct attitude. Innovation such as 5G and the pdvWireless that I mentioned before, that’s the place where the Internet entities orbit.

�e strong emergence of electric vehicles and its dynamic impact on infrastructure will challenge regulators and industry.

We’ll see great technological advances in infrastructure, such as the upcoming smart inverters pursuant to the new IEEE rules.

How will 5G change industry communications? It’s an exciting time to be in the utility venue. I believe that industry and its regulators will embrace change to the betterment of services to our customers and will continue to do it in a just and reasonable way without leaving anybody behind.

PUF: In the future, do you think state regulators may have to change how and who they regulate?

Chairman Winslow: Change is here now and will continue

Innovation such as 5G and pdvWireless, that’s the place where

the Internet entities orbit.


PUF: What is it like to be the Chair of the Commission, and what does your typical day look like?

Chair Kjellander: In our state, we’re actually called the President and CEO of the Commission.

PUF: Why is that?Chair Kjellander: Because we don’t get paid any additional

funds. �e duties of the President and CEO in that capacity really become more administrative, and that’s part of why we take that approach as well, because we have a three-member Commission in which all three members have equal weight.

What I take on are more the responsibilities as it relates to some of the human resource issues. My role also includes some of the broader issues, with regard to making presentations before the joint �nance appropriations committee and being the lead to the extent that the Commission needs to be involved directly with the state legislature.

We’re elected by our colleagues; it’s the Commissioners who select the President. I was just elected to another two-year term, and this’ll be about sixteen years that I’ve had that role.

As far as actual decision making in this role, I’ll talk to my colleagues about a path I see, here’s the problem that we’re faced with, here are several options, this is one I like, but let’s talk this through. Everybody’s involved.

We do rotate chairmanship of various cases, so we do not use administrative law judges. We could, but we don’t. We’re a small state by population and as a result, we’re not a large Commission.

We recognize that people want to see the Commissioners. We go out and when we have a public hearing, they see at least one Commissioner, if not all three of us, there at the dais taking the testimony.

Likewise, when we do hearings, we sit through them, and nobody does a draft decision for us and then sends it to us. We deliberate and then we go from there.

We deliberate in private.As a result, we have very few dissents. Once a case is fully

submitted, we then go back and deliberate. You don’t have Commissioners who accidentally might get out on a limb that they can’t walk back from.

It’s di�cult when you’re in an open public forum and you say, if we go down this path, unfortunately customers’ lives will be in jeopardy. It’s hard to walk that back once you go out to a statement like that.

We get to be in a private deliberation scenario, and we can talk things through and say, hey, I see it this way, and I see this,

and I’m not so sure how this �ts in, but this is the direction I’m leaning, or, these are some questions I have.

�en another Commissioner will bring in some experience and add their concerns. A third one will do likewise, and before you’re too far into it, you say, oh, there’s a lot of common ground in the mix here.

You end up with a decision that, at least from our perspective, holds up well. We seldom get overturned by the courts. At the end of the day, we work well as a three-member Commission.

But it’s because there isn’t some-one who sits down and says, well, I’m this and I have this authority and I’m going to take over all the plum assignments and you guys are going to get all the dregs. �at’s not how we operate. I’m not saying that others do, but I’m saying that’s one of the things we don’t do. No one here passes their ideology o� as a substitute for wisdom.

I look forward to going to work on Mondays to see my colleagues. �at’s what makes it easy for me to play the role of president and CEO, because I’ve got two colleagues

that are actively engaged. �ey bring a lot to the table. �ey will step up to the plate and take on a di�cult case and do a ton of homework in preparation.

When you do end up in the point of actually having to �nally deliberate on that case, you know that everybody, every one of those Commissioners, has read the record and has seen all the public comments.

PUF: Do all of you have equal expertise on telecom, gas, and electric? How do you spread that out if one has more expertise?

Chair Kjellander: We will defer to each other, issue-by-issue, scenario-by-scenario. I got involved in the telecom committee at NARUC. Eric’s [Anderson] involved with the water committee. Kris [Raper] is with the electricity committee.

�e good thing is that we get together and talk. We say, what did you learn? Because when I was Chair of the telecom committee, I was glued to my chair in the telecom committee. I did not leave.

Now I have a lot more �exibility to get around and do other things, but I still sit back and look to Kris and Eric for

Idaho Public Utilities Commission Chair

Paul Kjellander

We’ve always wanted one larger regional transmission planning group because we all know that the benefits are going to be better.


discussion about what that next step is with the Day-Ahead Market, the EDAM.

We’re seeing and hearing from some of the various groups that are out there that are doing the hard work. My colleague Kris Raper is one who’s in the middle of it; she’s doing a lot of the hard work on the EDAM.

We’re hearing back that all the right questions are being asked. Now, they don’t have all the solutions yet, but the concern or ultimate fears that we may have had maybe eight months ago, two years ago, are slowly evaporating. �ey’re �nally getting down to, okay, we need to come to solutions on these core issues and once we can, we can feel comfortable that we’re moving in the right direction.

We’re seeing a lot of desire by utilities in the region to be more cooperative and collaborative amongst themselves. Some of these things weren’t necessarily by their choice, but as we see the PEAK reliability services going away, we’re seeing more utilities starting to look at where those services are going to come from.

�ere’s more conversation about: where’s the right place to be? We’re also seeing, too, as far as some of the FERC Order 1000

a level of expertise because they’ve been exposed to more of those details. �at’s the advantage, which is tre-mendous, but I have a responsibility to be up to speed on every case that comes before me.

�e majority of the public speak-ing engagements that I do have nothing to do with telecom. I was at the FERC technical hearing on cost recovery for cyber costs last week. �e next day, I went and spoke to the AGA about natural gas issues that were impacting us regionally as well as within our state.

One of the huge advantages of hav-ing a job as a Commissioner is you get to be a lifelong learner. You have to be because things are changing so rapidly. It’s certainly nice to count on some expertise that you know your Commissioner colleague has, and it’s also good to know that you can trust them in that case. Having been a Commissioner �rst appointed in 1999, I’ve worked with some great Commissioners.

PUF: Yes, because the issues are complex right now, on all levels; water, electricity, gas, and telecom.

Chair Kjellander: Sure. When I get ready for speaking engage-ments, I’ll put together talking points, because I tend to come up with my own. Again, we’re a small Sta�. It’s not that I don’t rely on Sta� to pull some things together, but I like to put my own speeches together based on material that I’ve read, what I’ve researched, or meetings I’ve attended.

But I’ll pop in and have a conversation with one of my col-leagues and say, hey, here’s what I’m thinking about saying. Does that comport with what you’ve been hearing? Additionally, once I get some of my �nal bullet points together, I may run them by them and ask, hey, what do you think? Also, if my colleagues want to use any of my comments in presentations they make, that’s �ne with me.

PUF: What are some of the trends you’re seeing in the electric utility industry both on the state level and on the national level?

Chair Kjellander: Every utility in the country is trying to respond to some of the same issues. We’re all trying to deal with electri�cation; what does that mean? We’re all looking at deep decarbonization; what does that mean?

In our region, in the west, we’re all looking at, okay, we’ve started down this path with the Western Energy Imbalance Market; we’ve got a lot of utilities that have moved in that direction. �ey’re seeing bene�ts, and now they’re having the

Chair Kjellander at right, with NARUC President Nick Wagner, Iowa, at left.

PacifiCorp operates in six western states. You probably couldn’t find

six states split more evenly on issues, three on one side of the fence

and three on the other.


customers want and being more responsive to customers. �ey’re doing that without regulators telling them.

�ey’re recognizing this as business practices evolve and people begin to have the ability to have their own distributed generation. Instead they’re recognizing that if we’re going to be relevant, we’ve got to start listening to customers and start telling them where utilities want to be. We also need to listen to them and say, all right, if we’re not really sure what direction to go, they might actually have a few things that they’re saying to us that if we listen, might actually be relevant going forward.

I like seeing that because, again, it’s not the regulators sitting over them saying, you must do X, Y, Z. Now, that doesn’t mean that we won’t, when those issues arise and we have to, and they certainly aren’t going to get everything they want. But it’s nice to

see that evolution happen because it’s one that makes sense. If the customer’s happy, ultimately everybody else in the chain is happy as well.

PUF: Where do you see the industry going in �ve years?

Chair Kjellander: Anytime somebody asks about the future, I get the image of the crystal ball. I’m a regulator. First of all, if I knew what the future was going to be, I wouldn’t be a regulator. I’d be out there invest-ing in the markets and making a ton of money.

I don’t have a crystal ball. �e closest thing I have is the

rear-view mirror of my truck. �is is an old truck, so it’s a big rear-view mirror. When I look at my rear-view mirror, I see some words. It says, objects in mirror are closer than they appear. I don’t know what the future will be, but it will be here real soon.

I’m not going to try and pretend that I can dictate the future. �e utilities are in a much better position to manage their utility than I am. If we see some things and have some conversations and we get into cases, our experiences and exposure to other issues and other experts out there is going to have an impact on what we see and do as regulators.

But we have a pretty good idea of the questions we have to answer. How are we going to integrate more renewable energy resources? How are we going to move to cleaner energy solu-tions while trying to get some of our existing, more carbon dioxide-laden resources to the end of their natural life without stranded costs?

We’re addressing a lot of those concerns.But we don’t know exactly what the clean energy picture

obligations the utilities have with regional transmission planning, there is a big consolidation e�ort underway.

I’m on the steering committee for regional transmission plan-ning, called the Northern Tier Transmission Group. A group of utilities that we regulate are in it. �en Avista, which is one of the other large utilities that we regulate, is in ColumbiaGrid.

Well they’ve recognized, for a variety of reasons, the partici-pants in those groups, that ultimately, we’ve always wanted one larger regional transmission planning group because we all know that the bene�ts are going to be better.

Especially when you get to the end of the rainbow talking about cost allocation, you’ll have a much better picture of: all right, who really should be sharing a piece of this, when it’s all said and done?

But through a variety of other things that have happened within the industry and the need to be more nimble, competitive, and collaborative, we’re seeing this converge on its own, not by regulatory mandate at the state level.

Is it going to be a simple thing when it’s all said and done? Probably not simple, but twenty years ago we wouldn’t have been able to do this. Now we’re in a scenario where there are a lot of synergies, and a lot of things coming together. Regionally, I see a lot of planning that ultimately is going to help everyone.

�en there have also been state public policies passed. Most notably the state of Oregon a few years ago passed legislatively that no coal-�red generation will serve any customers. I think the target year is 2028.

We’ve got one utility, Paci�Corp, that operates in six western states. �ose six states are California, Oregon, Washington, Wyoming, Idaho, and Utah. You probably couldn’t �nd six states split more evenly on issues, three on one side of the fence and three on the other.

But as regulators, we come together recognizing, look, we can’t bankrupt this utility, and we can’t just ignore the discus-sion because it’s going to happen anyway. We’ve had a lot of this multi-state protocol work that’s gone on. Maybe ten years ago there would have been arguments about: you go deal with that, you passed that legislation.

Instead, we recognize that you don’t get to dictate public policy as a regulator, but we all have the same responsibility to ensure that reliable service is provided and that, to the extent we can still provide reasonably priced energy, we want to be there. We certainly don’t want to bankrupt the utility, because it makes it hard to do any of those things.

I’m not saying that we’re all on the same page. It’s at least given us the appropriate forums to share more information, as regulators but also with utilities, to recognize: what are the real problems you’re facing; what are your real priorities?

�e other thing I’m seeing that I �nd interesting and I like seeing, is the electric utilities paying more attention to what their

Electric utilities are paying more attention to what customers want and are more responsive to customers. They’re doing that without regulators telling them.


PUF: What is it like to be chair of the Commission? What’s goes on in a typical day?

Chair Sheahan: �e Illinois Commerce Commission oversees electric, gas, and water utilities providing critical services to 12.7 million residents including those of Chicago, one of the largest cities in the world, with a Sta� of two hundred and forty and a budget of approximately sixty million dollars.

�e weight of that responsibility is something that is acute-ly felt. In addition to the normal responsibilities of being a Commissioner handling a docket of seven hundred-plus cases a year, the Chair has ultimate responsibly for administration of the agency, managing its docket and budget, interaction with the Governor and his sta�, General Assembly, legislative leaders, and other stakeholders. Being the Chair of a large state Public Utility Commission is a seven day a week job. �ere is no typical day that is in part both exciting and stimulating, and challenging.

PUF: Regarding trends in the electric power industry, in your state and nationally, what is your take on the current state of industry? Is the industry and regulation going well or not?

Chair Sheahan: Technology and the industry will undergo greater transformation in the next decade than the last century. �is is an extremely exciting time to be in the industry with rapidly declining prices of clean energy and distributed generation requiring �exible regulatory frameworks that can mature as fast as the technology. We are seeing a variety of regulatory approaches to accelerate and prepare for this transformation.

Most states have some form of renewable portfolio standards, requiring massive additions of renewable energy generation in

the next two decades to meet climate goals. Many states, like Illinois, have established �nancial incentives to develop these projects but with limits. Nevertheless, it is unclear whether policy makers, ratepayers, and markets are truly prepared for the cost and complexity of the undertaking.

Massive infrastructure, technological, and market upgrades will be necessary to handle the dramatic increase of distributed

might look like. Is that going to include cleaner burning coal-�red generation? Is it going to include cleaner burning natural gas resources?

Where does renewable natural gas �t into the mix? If you’re doing renewable natural gas, should that be something that’s used to create electricity? You’re going to pay that extra money and push that into pipeline-quality natural gas.

�ere are so many di�erent issues on the horizon, and of course then there are the ones that could be game-changers, and we don’t know what they are. For example, is it going to be small scale nuclear that’s a piece of the puzzle for baseload going forward?

Is it going to be cleaner natural gas-�red generators? Is it going to be battery storage? None of those are ready for primetime today, but that doesn’t mean in the next �ve to ten years they won’t be.

�ere are a lot of opportunities. What do those all look like? I couldn’t remotely begin to tell you. But what will they revolve around? �ey’ll all revolve around providing safe, quality service to customers at reasonably a�ordable prices. �at’s what they’re going to hopefully focus on, at least within the state of Idaho.

When I came on as a Commissioner, we had some of the lowest rates in the nation. When it’s my turn to cycle o� of the Commission, I want to be able to say the same thing. But I also want to be able to say that we left things better for the customers, and the utilities.

I want to say that we all worked collectively to ensure that we left it better, and that serving in the broader public interest was really what drove it.

�at we really strove to do what we genuinely believed was the right thing. m

Illinois Commerce Commission Chair

Brien J. Sheahan


PUF: What’s it like to be Chair of the Commission?Chair Stanek: It’s a great position because I have the ability

to e�ectuate change and implement the state’s policy on a daily basis. �e role of the Chairman contains everything that the four Commissioners do, but in addition I have some added responsibilities including administrative responsibilities, human resources, and personnel, as well as contacts with other agency heads, both within the state and externally, including the PSC chairs of other states.

�e Commission is active in a number of proceedings with respect to grid modernization and rate design and on any given week we will likely have hearings.

By statute we are required to hold a public open meeting once a week, so we are always on the bench every Wednesday. In addition to that, we’ll have some type of a public hearing either to explore an issue, have a technical conference, or gather public input.

Aside from those Commission responsibilities, I have frequent weekly if not daily, contacts with the public. Whenever a member

of the public contacts the PSC, we provide a response and I draft the written response.

�ere are times when I �nd that it’s easier just to pick up the phone and contact the ratepayer or the taxpayer to address their concerns, and that helps ground me somewhat and puts me in touch with the people whose lives we a�ect on a daily basis.

�ose folks are sometimes happily surprised that the Chair of the PSC is calling. In other instances, they take it as an oppor-tunity to air their concerns and share any thoughts that they have on an issue.

�eir concerns could range anywhere from electricity or natural gas bills, to utility tree trimming practices or our trans-portation portfolio, which includes actions by car services such as Uber and Lyft and other modes like limousines and buses.

Often times, folks that contact the PSC just want to be heard. Maybe they don’t necessarily expect that some action will be taken by the utility, but I feel that if they’ve taken the time to pen a letter to us, the least we can do is respond thoughtfully and appropriately.

generation and bi-directional power �ows while maintaining reliability and safety. �e role of regulators to balance all of these competing interests will grow in importance and di�culty.

�e example of states sacri�cing investment in basic grid infrastructure, to fund the development of renewables that cannot be e�ciently assimilated, resulting in the loss of life and many billions of dollars in damage should serve as a prescient warning. �e only successful regulatory strategy will be dynamic with the ability to quickly anticipate and react to technological, policy, climate, and market developments but must be predicated on safety and reliability.

PUF: Where do you see the industry going in the next �ve years?Chair Sheahan: Aggressive policies to address the e�ects of

climate change, electri�cation, and rapid reductions in the cost of distributed generation will quicken the pace of renewable development and battery storage and put enormous pressure on traditional generators and energy markets in restructured states.

�e cost, complexity, and economics of integrating this surge of intermittent renewable energy and distributed resources into brittle often antiquated networks will test policy makers, grid and market operators, and ratepayers.

PUF: In the future, will state regulators have to change how and who they regulate?

Chair Sheahan: In the short-term, state regulators will have

to be more agile in adapting to new and changing technology and the economics of renewables, bat-tery storage, electri-�cation, and digital transformation.

In the medium-term, grid operators and markets will have to incorporate vast amounts of new zero marginal cost electric-ity, while �nding new

ways to value many of the attributes of traditional thermal and nuclear generation.

In the long-term, as the democratization of energy generation and storage becomes more prevalent and distribution grids evolve to function more like platforms, regulators will have a greater role in overseeing the interaction of these resources within the distribution system and with each other. Regulators will have to be �exible and consider new paradigms and approaches in face of transformational technological and economic trends. m

The only successful regulatory strategy will be dynamic with the ability to quickly anticipate and react to technological, policy, climate, and market developments but must be predicated on safety and reliability.

Maryland Public Service Commission Chair

Jason Stanek


but we haven’t seen any slowdown in the number of new market entrants that want to compete against the utilities. I don’t want to cite the number, but it’s safe to say we have several hundred retail supply choices that either residential customers or commercial and industrial customers can choose from.

We’ve been doing this for about twenty years now, since the state of Maryland became deregulated, and I hate using the term deregulated, back in 1999. �e term I prefer to use is restructure.

Since then the number of customers that have chosen a retail choice supplier has �uctuated, but it’s steady right now and depending on what utility territory you’re in it can be as high as twenty percent.

PUF: What about changes in regulation? Do you see a change in the regulatory paradigm?

Chair Stanek: �ere is. �ese trends will be a�ecting the way that all Commissions across the country will regulate their utilities. As we see more choices, as we see more competition, you’ll see a greater mismatch between energy rates and the costs incurred by the traditional utilities who serve those customers.

Rate structure, I believe, needs to actually re�ect cost structure, as well. In our state, in this coming summer, we will be spending

PUF: Do you set the agenda for the Commission?

Chair Stanek: We have a collaborative approach at the PSC, so I do seek the input of the other Commissioners when we launch any type of proceeding.

�e Chairman controls the day-to-day agenda and the calendar, so I set the process and procedure of the agency, but I have to admit my predecessor left the agency in very good shape. When I began last July there were very few changes that I needed to implement on day one.

PUF: In your state, and nationally, what do you see as the current trends in the electric industry and in the regulatory community?

Chair Stanek: �ose are probably two di�erent questions, but to your �rst question on trends in the electricity industry, it’s all premised on the backdrop of decarbonization. You see various states moving forward with a push for more renewable energy, and increased RPS targets.

Just last month in Maryland, the General Assembly passed a new renewable portfolio standard with a goal of �fty percent renewables by 2030. �at law also requires that we have particular set asides for solar energy.

�at’s going to a�ect how our utilities procure electricity, and how it �ts into our state. Maryland is a state where we rely on imports from many of our neighbors, more than most states in the country. Being an importer a�ects us in a number of ways, particularly when it comes to the cost impact.

In addition to environmental policies and decarbonization, we see that there are more sophisticated consumers, and there’s more access to data based on technology, such as smart meters, so consumers have the ability to make more informed choices. �at in turn is creating more competition, particularly in the retail supply market.

Maryland has a state policy to support retail competition. We are seeing more suppliers compete with our four large investor-owned utilities.

PUF: You have seen an uptick in retail competition within Maryland?

Chair Stanek: We’ve seen a leveling out of the competition,

In Maryland, the General Assembly passed a new renewable portfolio

standard with a goal of fifty percent renewables by 2030.


it with respect to the energy markets today. We are at an in�ection point where we’re seeing increased con�ict between state policies and the wholesale electricity markets.

Back in May of 2017 Commissioners LaFleur and Honorable at the time were the only two members of FERC that put a spotlight on this issue. From my position now, unfortunately, I don’t see that we’ve made a lot of progress with respect to accom-modating state interests at the wholesale market level.

Here in Maryland we are in the PJM Interconnection and there’s been a tremendous amount of uncertainty for our market participants, utilities, and consumers because we’ve had so much uncertainty associated with both FERC and where the PJM market will be going.

You may be aware that the capacity markets were deemed to be unjust and unreasonable in June of 2018. As of today, we have no resolution with respect to that. Any time there are large degrees of uncertainty, investors are going to either avoid the markets or they’re going to price in additional costs.

Merchant generators are concerned about whether or not they will be able to recover their investments if they don’t know the

a good deal of time taking a look at the issue of ratemaking reform. Some refer to this as rate modernization.

�e Maryland Commission for most of its history has used historic test years to determine what, going forward, rates will be. We recognize that many other states and Commissions across the country use di�erent forms of ratemaking to set their utility rates.

For instance, they may employ future test years, formula rates, or performance-based rates. In Maryland, the PSC has not yet examined those other tools and we think it’s appropriate to, at this point in time, begin to examine those other rate methods.

We recently held a two-day technical conference to learn from other Commissions around the country. I’m happy to report our fellow regulators from Pennsylvania, Illinois, New York, and others shared their perspectives to inform how we develop our policies going forward.

We also received a lot of interest from external sources regard-ing our conference. At this point we’re just in the research and review phase, but the utilities are most interested because they recognize that the ratemaking model that we’re using now may not be the most bene�cial for their shareholders and their interest.

We have a responsibility to a number of constituencies includ-ing the ratepayers, the utility, and others. We’ll be taking a very holistic approach to this rate review.

PUF: Looking out �ve years, ten years, do you think you’ll be regulating di�erently? You might be regulating di�erent entities?

Chair Stanek: Just a few years ago we did not have entities such as Uber and Lyft, within the Commission’s regulatory portfolio. Now we have tens of thousands of vehicles and drivers that fall under the purview of the PSC.

In terms of the energy space, I believe that our regulation will change. I’m hard pressed to say how it will change, but if you just look forward, let’s say as you suggested �ve years, we’re going to see the build out of the modernization of the electric grid.

In about �ve years the auto manufacturers are projecting to have a hundred new models of electric vehicles on the road. �is Commission has begun to move forward with proposals to develop utility charging infrastructure along public corridors so that people who drive electric vehicles will have some certainty that they’ll be able to charge.

Energy storage is a relatively new industry, but if we can get to the point where energy storage is economically competitive, I recognize that our utilities see the value of storage in so many ways and the potential bene�ts for ratepayers. We’re getting there relatively soon, and these solar and storage projects will drive utility scale infrastructure changes.

�e Commission is looking at these issues now. It’s hard to say what we’re going to be regulating in �ve years, but I’m con�dent to say there’ll be additional aspects of the utility industry that we’ll be looking at that we currently are not focused on now.

You asked the question earlier, I’m not sure if I fully answered

Maryland is a state where we rely on imports from many of our neighbors, more than most states in the country.


PUF: How is it being Chair of the Oregon Commission, and what does your typical day look like?

Chair Decker: Being a Chair of the Commission combines executive management of a state agency and all of the usual administrative and external relations responsibilities that go with that. It also requires leadership in the decision-making process – the how and when we make decisions – as well as the decision-making role itself. �e Chair remains an individual contributor who’s responsible for understanding and evaluating the details of all the cases in what has become a busy docket for our agency.

A typical day has been changing for our agency over the last �ve years. I’ve been a Commissioner for two years, but I have observed that in the last �ve years it has become a busier agency with a higher volume of complex and challenging issues and more attention from more people, whether it’s customer groups, community groups or policymakers.

I’ve tried to come in as a Chair with a focus on making our internal communications and processes more inclusive and regular, and I appreciate having a great team that is adapting to that and also adjusting in terms of how we incorporate participa-tion from wider sets of stakeholders.

As Chair, I have recognized that as our scope and responsibili-ties grow, we have needed the support of our stakeholders to seek additional resources for our agency, and so far, our legislature has been responsive.

PUF: When you say stakeholders, can you elaborate?Chair Decker: As a catch-all term, we have the utilities that

we regulate and the traditional customer groups that have been,

along with our Sta�, the core cadre of participants in Commission dockets.

We h ave to d ay expanded quite a bit beyond that to include in our proceedings repre-sentatives from technolo-gy and industry focused groups, environmental groups, generators, elec-tric vehicles, and smart grid technology groups, among others.

We have a growing interest from commu-

nity-based organizations who are seeing a need to engage in our process to understand how the bene�ts of new investments in the electric system are distributed throughout our state.

PUF: Turning to electric power industry trends, what’s your take on the current state of the industry? Is the industry and regulation going well?

Chair Decker: It’s a time of transition, but I am generally optimistic about where we’re headed. I see and believe others see the electric sector as an engine of progress in addressing climate change and as a sector that’s ripe for technology innovation. �e industry is attracting people and companies who are excited about these things, and it’s also attracting new interest from customers and communities.

parameters, designs, or rules of what the capacity market will look like going forward. So that’s the concern of mine. I’ve been in the business almost twenty years now and I’ve never seen a time where there’s more uncertainty at the wholesale market level than I do right now.

PUF: How do we resolve this?Chair Stanek: So far, we haven’t seen any resolution in the two

years that we’ve been having these discussions. �ere are obviously political considerations at work and there’s lots of money on the line depending from where you sit. But I do believe it’s incumbent, particularly on federal regulators to provide some direction.

Just as a side note, FERC regulates PJM, but the PSCs do not. So, it is incumbent on the federal regulators to provide some certainty and direction one way or another to PJM so we could

get these markets back on track.�ere are lots of stakeholders and interests attempting to shape

these markets, which are only getting more complicated by the year. At one time, PJM’s only charge was to operate economic and competitive electric markets. �ey’ve taken on many more responsibilities since then. With continued inaction at the federal level, that vacuum will be �lled by others.

We have states as diverse as Delaware and West Virginia who may have di�erent state policies, but we all recognize that as a member of PJM we bene�t more collectively than we do individually.

It’s one of our top priorities because it a�ects everybody within the PSC’s jurisdiction including our utilities and straight down to the ratepayers. m

Oregon Public Commission Chair

Megan DeckerWhen we talk about paying for underlying grid values, it’s becoming more complicated in terms of the emerging disruptive resiliency threats from wild-fires, cybersecurity, and in my region, seismic threats.


PUF: Where do you see this industry in �ve years? Do you see a major change or continuing down this path?

Chair Decker: Five years is a long time in the technology cycle, and I try to retain an awareness of the uncertainty in the landscape. With that said, I see this industry advancing forward on the puzzles that we know we have to solve.

I see the industry engaging with a wider range of zero-car-bon solutions and that next wave of low- and no-carbon solutions that policymakers and customers want, and that responsible action on climate demands.

In that area, in order to advance with our reliability and cost-e�ciency goals in mind, it’s

got to be an all-in approach. It’s transmission utilization, market expansion, demand and distributed resources, and advancing our central station technologies, too. Engaging across the spectrum to get to where our customers and policymakers need us to go is something that’s going to take a lot of focus for the industry.

�e other big piece that we’ll continue to grapple with over the next �ve years is a continued customer-, policy-, technology-driven demand to di�erentiate electricity o�erings. We’ll probably continue to struggle a bit with how to balance that di�erentiation with the public good of a low-cost, e�cient, centralized system that’s delivering those baseline values for everyone, and that is not leaving anyone behind.

Ideally, in terms of how we pay for demand response, energy e�ciency, net metering, onsite storage, EV charging, and all these things, we’ll have moved closer to a set of technology and pricing platforms that can automate and simplify the value exchange across di�erent resources.

We need customers to be able to see that they can meet their

At the same time, I continue to see a real sense of mission-driven stability around the sector’s underlying values. Electricity is more than ever a universal basic necessity that’s foundational to the success of our communities and our economy. I see a strong commitment to that backbone of providing safety, reliability, and now resiliency, in a system where high quality and a�ordable service has to remain accessible to everyone.

�is presents some challenges, but all of this talent, commit-ment, and investment bodes well for us to come out stronger on the other end.

Without an RTO and with expanded customer choices, who we regulate,

how we regulate, and what value we ask them

to contribute, will have to evolve.

At the National Conference of State Legislatures’ Smart Communities

Summit, on May 14, the session entitled Catalyzing Smart Transpor-

tation Technology in Ohio featured Eric Phillips, executive director,

Union County-Marysville Economic Development, left, Jordan Davis,

director of smart cities strategy and collaboration, Columbus Partner-

ship, middle, and James Barna, executive director, DriveOhio. More

on the NCSL Summit in July’s Public Utilities Fortnightly.


individual priorities, feel they’re being fairly paid for what they contribute to the system, and still see why they get value from and pay for being part of that interconnected whole that is the grid. We ask a lot of technology to make all of this happen, while recognizing that the typical customer needs to not have to think very much about it.

�e question of who pays for what also creates puzzles that we have to solve in terms of regional cooperation and market expansion, and how customer alternatives to traditional utility services are made available and structured.

When we talk about paying for those underlying values that the grid has to deliver, that is becoming more complicated in terms of the emerging disruptive resiliency threats from more intense wild�res, cybersecurity intrusions, and in my region, seismic threats.

In that area, we need to get to more sophisticated investment and risk mitigation frameworks so that we’re con�dent that we’re putting resiliency dollars to best use. �at’s going to take a new commitment to coordinating with the best thinking in other sectors like emergency management.

PUF: You’re coming from the West, and issues like wild�res are not being discussed in other areas. People have to think about resilience, and about the rate design mechanism.

Chair Decker: Yes. Without an RTO and with expanded customer choices, who we regulate, how we regulate, and what value we ask them to contribute, will have to evolve. �at takes making sure that customers and policymakers understand the values that the grid is providing.

It’s those traditional mission-driven values around making electricity accessible to everyone, but also dealing with some of these emerging resiliency threats that require additional invest-ment in infrastructure and operations.

PUF: �at’s going to be an interesting future for the West because you don’t have an RTO in the West, and you don’t have an organized market.

Chair Decker: One thing that will happen for the West in the next �ve years is discussion of how to move toward gaining the advantages and the e�ciencies of an organized market structure. What form that takes is still emerging.

PUF: Do you think that state regulators will have to change how they regulate and maybe who they will be regulating in the future?

Chair Decker: In some respects, we have already changed. Maybe five years ago it was a side conversation that the Commission had on how to structure rate designs for net

metering, or other customer-generator programs. �at has come into a more central position in the work that we do day-to-day.

We spend a lot of time sorting through program design and avoided cost structures for traditional customer programs like energy e�ciency, and other emerging programs, whether that’s demand response or �exible charging. We are, like many other states, beginning to extend planning into the distribu-tion system and are having to manage the way utilities pay for value that customers bring into the distribution system. �at is already a change.

As technology and customer preferences continue to drive di�erentiation of electricity o�erings, whether that’s from the incumbent utility or new avenues for alternatives from other providers, we have to make sure we’re still identifying the critical outcomes that the grid needs to provide and that the utilities are accountable for in the end, and ask everyone who bene�ts to pay for those values fairly.

We certainly don’t want to be in a position of crowding out innovative solutions from other providers while we’re doing that, but we will have to think about how we regulate as opportunities for di�erentiation continue to grow.

As regulators, we need to keep central the question of how bene�ts are distributed as the system di�erentiates and disag-gregates. We need to consider who gets left behind, and what underlying values are not being cared for, if we’re not thoughtful about how we manage choices within the system. m

As regulators, we need to keep central the question of how benefits

are distributed as the system differentiates and disaggregates.


a meeting. But there’s always something that is brought to my attention, not only on the administrative side, as it deals with the Chairman, but then also with my responsibilities as

a Commissioner, preparing for those items that will be before us at a public meeting to vote on. �ey’re always busy days.

PUF: Do you set the agenda?Chair Brown Dutrieuille: In terms of the public meeting

agenda that comes forward, we have several bureaus that have items that will be part of consideration for those public meetings. Some of those items that are coming before us have a statutory deadline, so it could be set in that way that it needs to be before us by a certain time.

Or the request would come from the proposals from the di�erent bureaus, or there could be a cer-tain Commissioner that would like to see something come before us in a quicker time period than Sta� may have proposed.

With that, they do a speci�c written request to come before the Commission for consideration. I don’t necessarily, in my o�ce, set the entire agenda. It’s part of a collaborative e�ort and part of it is statutory deadlines that we have.

PUF: Regarding trends in the electric power industry, what do you see as the cur-rent trend in your state as well as nationally?

Chair Brown Dutrieuille: �e energy sector is always busy. �e electric power industry is part of that. As a state, let me separate the two because I want to go with as a state in terms of state regulatory matters, which is more along the distribution line. �en we can get into the wholesale market, which is also a big part of the discussion.

As a state, we’re dealing with many issues that many of our sister states are dealing with. When we talk about our regulatory author-ity, we talk about the distribution side of it, especially since we are a restructured state.

We’re dealing with making sure that there’s safe, reliable, and a�ordable delivery

PUF: What is it like to be Chair of the Commission and what does your day-to-day look like?

Chair Brown Dutrieuille: Being Chair, as with any orga-nization, is not only an honor but also brings its own chal-lenges because you’re responsible for the everyday activities of the Commission in terms of the administrative part of it. We have an executive director and I’m grateful for having that type of position with such a large agency.

For the day-to-day administrative-type responsibilities, whether it’s coming from the Governor’s o�ce or the legislature, they’re always going to come to the Chair just to bounce o� ideas, get authority and permission to do certain things, and also for personnel issues. �at re�ects some of the responsibilities of being Chair, and that’s part of the typical day.

When I come in in the morning, I might have a schedule in place or maybe I think I have a free day because I don’t have

Pennsylvania Public Utility Commission Chair

Gladys Brown DutrieuilleI’m curious as to who is regulating solar installers.


watching and are looking to see what the general assembly wants to do. We have been invited for future meetings or hearings to provide any information or testimony on the record. What our position has been as a Commission, is that we are neutral on nuclear legislation in the sense that we prefer to be a resource to the general assembly.

�e reason why we emphasize that part, especially since pick-ing up on my legislative background, is the fact that Pennsylvania is a restructured state. We as a Commission, do not have jurisdic-tion over generation per se.

But we as a Commission have been involved over the years since restructuring of the electric market, or the electric industry. We have provided comments on the record in certain proceedings on the federal level, and on the wholesale market level, where we feel that there could be some type of impact on the retail competitive side that would impact the consumers that we’re there to protect.

of service to your home. In doing that, we are one of the many states that over the years, even before I came on as Commissioner, have had to deal with that distribution side and the aging infrastructure of it.

As a state, back in 2012, the general assembly passed legislation that extended the current DSIC or Distribution System Improvement Charge, that they had in place. It was originally just for water companies. �ey extended it to, not only natural gas, but also the electric industry.

That has been very helpful in accelerating the replacement of aging infrastructure, which also ties into making sure that it’s safe from things like cyberattacks in that build-up of the infrastructure.

�e general assembly in 2008 passed Act 129 that required smart meter deployment. In �fteen years from that time, especially our larger electric distribution companies have almost �nished the completion in terms of implementation. One is going in the second round where they’re replacing those smart meters or advanced meters that they had in place.

In terms of state trends, we are also dealing with cybersecurity. Especially on the electric side, we have brought in our larger companies to talk about what they’re doing, and at the same time, we also are looking internally at our Commission, at what we need to be doing di�erently.

We have hired an in-house cybersecurity expert to help with auditing of our electric companies to look at what they’re doing, understand better what they’re doing, and make some recommendations. Currently our regulatory requirement as it relates to cybersecurity, is still just allowing for the companies to self-certify that they have a cyber plan in place.

Our general assembly just passed alternative ratemaking. It passed that legislation last year, and we are in the middle of a docketed proceeding in terms of implementation.

But let me switch over to the wholesale side. �ose trends that we’re seeing, as with other states around us, we are having that legislative discussion in terms of the wholesale market and some of the players in the wholesale market. Speci�cally, I’m referring to nuclear energy.

We’ve seen some of the changes legislation has put in place by states like Illinois. In New York, theirs was done mostly by an order from their Commission, not necessarily by legislation, but you saw legislation in New Jersey. New Jersey’s still in the middle of their Commission process in terms of implementation and deciding what they’re going to do.

�at conversation has now come to Pennsylvania and we’re

Our position as a Commission, is that we are neutral on nuclear legislation

in the sense that we prefer to be a resource to the general assembly.


of PJM States Inc. or OPSI] is our representative for that and makes sure that we as a state put comments on the record.

PUF: You mentioned electric vehicles. Where is that going say in the next �ve years? Do you see an increase of electric vehicles?

Chair Brown Dutrieuille : I de�nitely see an increase. We’re seeing that now, especially in more of our urban areas. Philadelphia is one urban area where we’re seeing market increase.

As a state, we’re also seeing an increase in interest, not only by our administration and our Department of Environmental Protection, but we

as an agency have worked with them to provide information, and we recently passed a policy statement that provided clari�cation needed from our current statute. Our policy statement clari�es that third-party electric vehicle charging is providing a service and not considered resale/redistribution under the Public Utility Code. We wanted to make sure that there was no misinterpretation. Our current statute is talking about situations in terms of landlord/tenant, not electric vehicle charging.

We’re trying to remove any barriers that people thought may be in place when you’re putting infrastructure for charging for electric vehicles. We’re trying to make sure we remove any barriers because there’s going to be that increase in interest in electric vehicles. Some type of infrastructure is the current discussion, not only within our agency, but also within the general assembly.

Legislation does need to be passed to make it clear and provide for what needs to be in place. �e legislation that we’re seeing is one that they’re identifying the di�erent areas of interest for charging infrastructure in Pennsylvania and it would be more so in our urban areas, like Philadelphia and Pittsburgh, but also for the larger suburban areas, including the area in which our headquarters is in, which is central Pennsylvania.

�ey’re putting that infrastructure in place, but they’re iden-tifying it more in those public areas. For us, that would be the interstate roads, the turnpike, especially when you’re dealing with interstate commerce, and people coming through our state. We are the Keystone State.

You’re going to see people coming through and you want to make sure that they come through our state and spend their tax dollars. �ey need that infrastructure in place for charging their electric vehicles. We see an increase of interest there.

Automobile makers are showing an interest in changing more to electric vehicles.

As we go along with this discussion, we’ve seen that our general assembly, in the legislation that has been introduced so far, is looking to do some type of change to the current alternative energy portfolio standards, or AEPS. We are the agency currently under statute that implements that, along with our Department of Environmental Protection.

From every piece of draft legislation that we have seen the Commission would continue to play a role. We will be there as a resource.

What we always say, and what we’ve said in our budget hearings when we were asked questions in terms of this big discussion of providing some sort of subsidy to nuclear, is that we will always be a resource, but we will remember and maintain that we are the economic regulator.

We are part of the nuclear discussion and have to give the legislators all the information and facts that come from our part, but we’re part of the entire discussion, not the ultimate decision as to whether or not they should pass such legislation.

�ere’s a lot going on. We generally watch what’s going on and participate. �ere are other proceedings on the wholesale side, that PJM is involved in, and we are as a state involved in it in terms of providing comments.

We play an active role there with our commissioner. Andrew Place [PUC Commissioner and Secretary for the Organization

Our policy statement clarifies that third-party electric vehicle

charging is providing a service and not considered resale/redistribution

under the Public Utility Code.


PUF: What is it like to be Chair of a Commission, and describe your typical day?

Chair Fornstrom: No two days are the same. I have a di�cult time predicting on any given day how my day’s going to go or what’s going to be involved. I wear di�erent hats, including administrative hats, just running the agency, personnel issues, and budget issues.

�en there’s the day-to-day business of the agency with open meetings and dealing with regular business. We’re making sure procedurally that the big cases are getting routed accordingly and appropriately, and that we’re doing things in a transparent, public process in a timely manner within the statutory deadlines.

In addition, we have several regional and national forums and issues that we’re involved in. �e longer you’re on a Commission,

the more involved in some of those issues you are, the more invitations you receive, and the more things that you want to do on behalf of your state. Trying to balance all of those components of your job can be challenging.

PUF: Do you set the Commission agenda as Chair?Chair Fornstrom: I don’t. We have a Sta� process that’s

e�cient and e�ective. I usually meet with our Chief Counsel prior to an open meeting, just to make sure there aren’t any issues.

Today we had something on consent that needed to be moved to regular agenda. Some of those details get worked out between publication of the agenda, and when we have the open meeting.

PUF: Regarding trends in the electric power industry, in your state as well as nationally, what do you see as the current state of the industry?

PUF: Where do you see the industry in the next �ve years? Do you see it more distributed?

Do you see regulators having to change the way they regulate, or who they regulate?

Chair Brown Dutrieuille: Yes. We’re seeing a lot of what you’ve already mentioned in terms of distributed energy, and things of that nature. We, the Commission have an interest. Also, our energy o�ce, PA’s Department of Environmental Protection, because they have historically had an interest in energy e�ciency and distributed energy.

�ey’re interested in solar. �e administration is rolling out more in terms of renewable energy. But also, with the electric vehicles, we’re going to need to do more in terms of the tari�s that have been put in place or may need to be put in place. When you talk about solar, as a Commissioner – and I believe others are getting the same questions – I’m curious as to who is regulating solar installers.

As technology evolves and more renewable interest is there, even with electric vehicles, you will always have that conversation of as you’re trying to put protections in place for the consumers, do you need to regulate certain individuals or certain parts of the industry that you normally don’t regulate.

We’ll continue that discussion. �ere’s always the discussion as well as for microgrids. We’re looking to provide legislation that would address that for resiliency purposes. But, we as a Commission, testi�ed on that. We also said when you’re address-ing resiliency, you also may want to, in terms of microgrids, address it along the lines of reliability.

Part of the discussion is that our regulated electric

distribution companies cannot own generation. So, what do you want to do with that? �ere’s a whole host of things that are being discussed that were not considered back in 1996 when we �rst restructured the electric industry.

So, I foresee that you may need some changes in legislation, or there will be a continued discussion and always making sure that you have protections in place for consumers when you’re coming up with new ideas that we may need to regulate certain areas that we didn’t regulate before.

To give you an example, we as a state, when we look at our AEPS and solar industry, it did not at that point in 2004 and even in some of the changes that they made in 2007 when they provided some clari�cations to the act, anticipate community solar.

�ose are also part of the areas that we’re discussing, and it would need some type of legislative change for that. �ings evolve when we’re passing legislation or thinking about new technology. You’re working out more issues, and you want to put not only protections in place, but also opportunities.

For those persons that are in rental properties, they currently don’t have access to solar for their home or their apartment or have the bene�ts of solar. We don’t have community solar speci�cally within our statute.

It just shows that it’s an exciting time in the electric industry. I’m looking forward to the challenges that we are going to have in the future, because I believe with any change in legislation that this general assembly may have in the next couple of years, we at the Commission are going to be serving in a front and center role in all of it. m

Wyoming Public Service Commission Chair

Kara Fornstrom


is going to be favorable and interested. But when you add the economic question, how much are you willing to pay for it every month? You start getting some di� erent answers. Then the third question is, how often are you willing to be without it? � e typical answer is never.

I’m concerned that we’re building false expectations into consumers about what the future looks like in terms of a hundred percent clean energy or renewable energy.

I would prefer that we talked about clean energy in the context of the three components and not just the one. � e trend is what I work hard on outside of my Commission duties, when I am asked to speak on coal. I talk about carbon capture and how the potential regulatory environment should be looking at those projects as we foster that new innovation.

PUF: How do you get the debate, and the language to change? It seems like we’re on that path to clean energy.

Chair Fornstrom: I prefer clean energy to renewable, because clean does leave the door open for carbon capture. It’s a carbon neutral tech-nology that allows coal to stay in the power mix. I prefer that.

I do want to talk about it in the context of economic reliability at the same time, but what I try to do and a lot of people in Wyoming are trying to do is get the message out, and make sure people understand that innovation is on the horizon when it comes to carbon capture technologies.

Without these projects, without the mines that supply them, my state looks very di� erent, and not in a positive way. I try to bring aware-ness to the issue, open peoples’ minds, and try to encourage utili-ties to participate in these projects.

I o� er regulatory proposals for how we encourage investor-owned utilities with traditional ratemaking principles to involve themselves in carbon capture. It is such an emotional issue and gets people in

Chair Fornstrom: I spend a lot of time talking about the coal industry and coal-� red power generation. Wyoming is the largest coal producer in the country. We produce forty percent of the coal that’s used in this country for coal-� red power generation.

It is the backbone of our economy. I’m a � fth generation Wyomingite so I’m partial to my state, and I fully understand coal has made our state run for many years. I’ve been quite concerned about the coal industry for some time, and that has developed my interest into carbon capture issues, which I spend a lot of time on.

� e trends that I see and am most sensitive to, are the con-tinuing announcements of renewable portfolio standards now shifting to clean energy standards. In most cases that leaves carbon neutral technologies like carbon capture, utilization and storage on the table.

I get really concerned when I read about clean energy standards in isolation. In my view, the standard is one of three components. I don’t think we can talk about clean energy without talking about associated economic and reliability impacts.

In the absence of those other two components when asking anyone how do you feel about clean energy? Of course, everyone

Wyoming produces forty percent of the coal that’s used in this country for coal-fired power generation.

Wyoming PSC Chair Kara Fornstrom in Gillette, Wyoming, touring a coal mine.


for other industries, such as data centers. Basically, if a utility is going to serve a project of more than ten megawatts, and the load is potentially transitory or volatile, and you’re uncertain whether the utility could convince regulators to put investment of new generation to serve that customer into rate base because of the uncertainty investment, innovative solutions should be considered.

For example, the Commission could allow the utility to � gure out how they want to serve those customers outside of traditional utility investment. � e utility bears the pro� t or loss from how successful they are in providing that service. However, the costs to serve that customer are not going to be paid for by other ratepayers because we want to protect them from a potentially risky investment in generation that isn’t warranted.

In exchange for taking the sole risk, the Commission is going

corners so quickly. Governor Mead set a great example that is continuing for all of us on how we can talk about these issues in an e� ective and calm way.

I’ve been able to have a lot of those conversations with people who are very opposed to coal. We’ve been able to talk and we both leave the conversation understanding the other side much better.

PUF: Where would you like to see the industry in � ve years? Chair Fornstrom: I’d like to see a commercial carbon capture

facility on a regulated utility’s coal plant, selling that carbon dioxide either for enhanced oil recovery or for di� erent utilization technologies resulting in a credit on ratepayers’ bills.

In this scenario, the utility is not only making revenue by producing power at that plant but is making additional revenue by selling the commodity of carbon dioxide. If we get one commer-cial project o� the ground, it could change the conversation and the trajectory of where we’re headed with coal-� red generation.

PUF: What projects do you have going on in Wyoming? I believe you have some funding with the Department of Energy on some projects with carbon.

Chair Fornstrom: We have quite a few projects going on. One is a state-supported initiative operated by the Wyoming infrastructure Authority called the Integrated Test Center.

� e ITC diverts 20 MW of � ue gas from one of the newest coal plants in the country owned by Basin Electric Cooperative for several research projects, including the global competition sponsored by Carbon X-Prize.

We also have a Department of Energy project in the same area called Carbon SAFE. � e University of Wyoming School of Energy Resources quali� ed for a Phase Two project in this program. � ey’re getting ready to drill their well to obtain a core and analyze the geology to determine whether it meets the speci� cations to go to Phase � ree about how safe that sequestration space is, and what they could anticipate in terms of potential leakage.

If that’s positive and it can go to Phase � ree, that would be a sequestration facility. � e other thing Wyoming’s investing in is our CO2 pipeline infrastructure. � at pipeline infrastructure is located near several potential enhanced oil recovery projects, and close to concentrated sources of carbon dioxide of Wyoming’s power plants.

� ere’s a lot going on in Wyoming in terms of trying to lead on these issues. I talk about how the regulatory component can feed into that as well.

PUF: What are you doing on the regulatory front?Chair Fornstrom: We’ve just been given some policy direction,

most recently in this legislative session. � e Wyoming Legislature expanded our innovative ratemaking jurisdiction that we’ve had for a number of years and have used in various dockets.

� e concept of the innovative ratemaking statute passed this year is that it’s tailored toward blockchain customers, but it works

I prefer clean energy to renewable, because clean leaves the door open

for carbon capture.

Wyoming PSC Chair Kara Fornstrom at the Drax Power Station, the large biomass (2.6 GW capacity) and coal-fired (1.29 GW capacity) power station in North Yorkshire, England. With her is Brian Kroshus, Chairman of the North Dakota Commission.


an E&P company and a utility. I have this graph that shows their beta in the market.

Normal beta’s about one, average beta. A utility is about .25, and E&P companies are around 2.5. �at gives you a good illus-tration of their risk tolerance. So, an E&P company approaches a utility and says, hey you’ve got carbon dioxide. I want carbon dioxide. I’ve got this EOR play right here next to your power plant and we can all make a lot of money.

�e utility says, whoa, that’s not what we do. �e E&P company doesn’t understand the utility’s hesitation about the project because they are sure it is going to be great.

�ere’s just a complete lack of understanding between those types of entities about their risk pro�les, and who’s willing to

get into projects and who’s not. Both of them probably need to be tempered more to that 1.0 level, to bring down the risk that E&P companies want to look at, but to encourage utilities to be willing to take some risk in a controlled way in pursing these kinds of technologies.

PUF: It sounds like you’re looking at new ideas, and new regulatory paradigms to help your state, economy, utilities, and customers.

Chair Fornstrom: We’ve been trying to be innovative for a while, and one of the presentations I give now is about whether regulatory innovation is the missing piece of the puzzle.

Wyoming is leading on all other fronts related to carbon capture. �e legal framework on carbon dioxide and sequestration, com-pleted in 2012 in Wyoming, is leading the nation on those issues.

What we’re doing on innovation with the Integrated Test Center and UW’s School of Energy Resources in terms of seques-tration and utilization technologies is important. Our pipeline infrastructure is important, too.

Regulatory innovation is the piece of the puzzle that we need to focus on and try to put that missing piece together. �e regulatory approach could be di�erent for every project. It depends on how you motivate that speci�c utility or that speci�c plant. It could be very di�erent, but I think the possibilities are numerous and I’m optimistic about our ability to develop these mechanisms nationally. PUF

to leave the utility to earn that pro�t stream on its own. �e utility does not have to include those revenues in its return on equity calculations or rate of return calculations. �e Commission’s not going to look at that. �at’s going to be outside our jurisdiction so the utility can make the deal it wants to make.

I’m concerned that utilities in the traditional ratemaking model are not incentivized to be investing in carbon capture, because the technology is so new that it hasn’t been commercial-ized. No Commission is going to allow the investment of carbon capture, which are big projects, into rate base.

�at’s how utilities operate. �ey want to invest, and they want to earn a return. If we’re going to take that option away from them, how can we �nancially incentivize them to invest in innovative technologies? If you build on this ratemaking concept that there are things utilities can do outside of the traditional context of rates to earn revenue, then why wouldn’t it work for them to say, you partner with a third party to do this carbon capture facility, and you sell them your carbon dioxide.

We likely treat that carbon dioxide as a commodity, just like natural gas. We could use a pass-on mechanism to spread that bene�t to customers. Perhaps you have to adjust it just like you do with natural gas, because the commodity price varies with the index of oil.

�e next step then to incentivize the utilities, is we probably need to say to them, you get to keep some of that revenue stream. You get to keep some of that revenue stream from the carbon dioxide, because we’re not allowing you to put the carbon dioxide project into rates. We want to incentivize you to earn revenue.

�ere are a million possibilities, and I know once utility minds would spend time thinking about this, that they would come up with all sorts of ideas. My message to Commissioners is to be open to these di�erent concepts to allow this technology to grow to the point that it can be treated as a traditional rate base asset and be put into rates, and we go back to our traditional model potentially.

But in the meantime, to get these projects up and running and to a commercialized space, we’re going to need innovative think-ing about how we compensate utilities to get them in the game.

PUF: Developing mechanisms for utilities to get them in the game is the right approach.

Chair Fornstrom: I know there’ll be other ideas and I’m anxious to hear what others come up with. Once again, I try to talk to utilities about this. Sit in your back rooms, toss this around and see how this might work that you see a pro�t motive. �e Commission’s not going to look at it – it’s yours. I believe there has to be some attractiveness to that.

�e other thing I talked about in terms of hindering utilities getting into this game, is the di�erence in the risk pro�le between

I’d like to see a commercial carbon capture facility on a regulated utility’s coal plant, selling that CO2 either for enhanced oil recovery or for different utilization technologies resulting in a credit on ratepayers’ bills.

Power’s Future Globally


Conversation with Lawrence Jones, Vice President for International Programs,

Edison Electric Institute by Steve Mitnick, Editor-in-Chief


XUF’s Steve Mitnick: Give me your take on the current state of the power industry, with an emphasis on global.

Lawrence Jones: �e power industry, from a global perspective, is going through a transformation. All over the world, everyone recognizes that because of technology, demand from consumers, and environmental reasons, the industry is changing.

What is interesting is that the change is di�erent, depending on where you are. I like to characterize it as being global in scope and local in context. But the change is occurring. Take some of the big trends that are driving it. If you look at clean energy, we know that across the globe, everyone is embracing the use of cleaner energy. But the pace at which it’s occurring will di�er, depending on the resources available and developed in di�erent countries.

For example, if you go to Africa, where they have a wide range of renewable energy resources, they also have a de�cit, in terms of infrastructure. Consequently, if they don’t have the physical infrastructure, their ability to adopt renewable, or cleaner energy, faster is constrained.

Take Washington D.C., where we are. Twenty years from now, the population in this city could probably outstrip what it was designed for. �e question then is, can you supply electricity under such condi-tions, just using decentralized solutions? �e architecture is going to be driven and deter-mined by the need.

I believe that the need is going to be more of a hybrid design, where you have some decentralization taking place.

You will still have a lot of centralized systems. �at’s simply because mega-cities will be demanding more electricity.

�is is one of many factors that will determine the energy transition pathway for every country. Whether countries are on the same trajectory, or not, will depend again on how far out into the future a country is prepared to plan and execute for. �ose that have the patience and take the long view may have a very di�erent pathway.

Be that as it may, I believe that eventually we will see some convergence of pathways. But when that convergence occurs will depend on interconnected and interdependencies of the energy systems as well as externalities that we cannot foresee at this time.

PUF: �e mega-cities of the present, and their rapid growth in the future, is a challenge to the clean aspiration of the countries. Will they be able to achieve that?

Lawrence Jones: In many countries today, there is an increas-ing recognition that realizing the clean energy transition is going to require a focus on greater use of electri�cation, or electricity.

As a clean fuel source, electricity has a lot of advantages. I envision that everything from mobility to transportation is going

On the other hand, you have countries like Japan, where they do have more developed infrastructure. However, they have a de�cit, in terms of the natural resources. �at means Japan’s transition will hinge on importing certain types of their base generation resources, for example natural gas.

In India, they have a mixed set of conditions, depending on what state you’re in. But in general, you have several hundred million people in India who lack access to electricity.

While they’re adopting renewables at a fast pace, they also have recognized that scaling up renewables to a hundred percent for the entire country will take time and requires signi�cant investment in the infrastructure.

As a result, India still is going to be relying on, or using coal, for some time, in order to meet the high demand for electricity. Renewable is not just getting up, in terms of the capacity, as fast as it is needed to provide access to the entire population.

When we look at the whole global energy transition, I always tell people it’s important to understand where you’re starting from. It’s going to be di�erent in countries across the globe.

PUF: If they’re on di�erent paths, depending on which country you’re in, and you look out ten, �fteen, or twenty years, will they stay on di�erent paths? Is there a convergence or a divergence?

Lawrence Jones: What will drive a convergence will be some forces that we cannot foresee today. One of the drivers will be population growth – both human and devices. Human population on the planet is going to reach, at some point in the next couple of years, between eight to ten billion. In terms of devices that number could exceed �fty billion. �ese two factors will shape future energy systems everywhere.

For example, there are those who envision a future pathway that is highly decentralized. However, is it a realistic assumption, given vexing problems of physical spaces as energy demand increases in large mega-cities, like Mumbai, Lagos, Delhi, and Shanghai, and as we increasingly have mini mega-cities popping up in many OECD countries?

P

The needs and expectations of customers and society at-large will continue to evolve and so must the electricity that enables services and solutions.


Lawrence Jones: We’ve seen this trend of increased electri-�cation across the globe coming. Let me give a few examples.

�ere’s going to be greater need for new forms of electri�ed transportation such as trains, cars, trucks, busses, ships, and bikes. Especially bikes, which are gaining momentum, not just in developed countries, but in emerging economies. Because as you have an aging population, it’s di�cult to bike, to pedal. Your knees are worn out. But more people will start using electric bikes. �at creates some of its own challenges.

Globally, we are set on a course of having the next era of electri�cation, which I call the second wave of electri�cation. �e �rst wave of electri�cation came, and was focused on the mechanization, or the industrialization, of society. �is second wave will lead to solutions constrained only by our imagination and creativity. But, like the energy transition, the impact of electri�cation will depend on the starting point of each country.

Some societies haven’t even fully bene�ted from the first wave. I’ve been reading a book on the fourth industrial revolution. It talks about how you have parts of the world at di�erent stages.

It’s only the fourth indus-trial revolution for someone who’s living in a well-indus-trialized country. If you’re living in a less developed

country, you’re not even on the third yet.But irrespective of the wave of electri�cation, going forward,

each wave will integrate information technology and easy access to information in a world in which we are hyperconnected. But this will increase the demand for electricity because everyone will want to enjoy the bene�ts of electri�cation.

Information connectivity opens the eyes. As everyone’s eyes open, they want to get more. �ey say, he has this, I want it, too! Because of connectivity, because of access to information, there’s going to be greater demand for electricity which ties into the other area where we see a lot of interesting trends, which is the response of the customer. We discussed it earlier, but I’d like to view the trend from the eyes of the customers.

Are customers in the world going to be responding similarly to these trends? Or will those expectations di�er?

What does that mean in how you design your system? You can design a system for customers in country A, based on the expectations of customers in country B. �at’s a challenge we have now across the globe where people in poor countries just want access to electricity.

�ey don’t care if it’s coming from resource A or resource B. Whereas if you’re already in an industrialized country, where

to get more electri�ed. �e production of water, food, and other essentials in many parts of the world, will become more electri�ed.

In the coming decade, food production and access to clean water are going to be major issues with signi�cant impact on the energy systems. On top of that, we have the issue of what I call the complexity creep. In the sense that as we layer systems on top of systems on top of systems, you’re going to reach a stage where we will need to start relying on arti�cial intelligence, and other types of technology, to help us understand the whole.

Another aspect of future energy systems is meeting the needs of a complex landscape of customers and their ever-changing expectations. In many OECD and more industrial-ized countries, electric companies are investing in new tools and technologies to better engage their customers in order to enhance the customer experience.

It is no longer enough to design solutions for customers based on the longstanding aggregate categories of industrial, commercial, and residential. Today, in addition to solutions for low-income customers, there are other subcategories to be considered based on other factors.

In other countries and emerging economies in Africa, Latin America, and Asia, you have many of these same customer categorizations. However, you also have what I call the no-income customer.

In many of those countries, governments are demanding that electric companies provide electricity to those people, many of whom have no jobs. �is is common, and many CEOs in these countries must cope with it. I’ll give one example to highlight the problems this creates.

A few years ago, I visited a CEO of an electric company in a large city in India. He said, Lawrence every morning between two to three million people travel into my city from the rural areas. �at’s in addition to the current seven to ten million that we estimate are here on a regular basis. How do I forecast their actual demand for electricity? Most of those people who are coming cannot pay. But when they come into the city, they’re going to charge their cell phones. �ey’re going to charge their electric bikes. �ey’re going to run their fans. �ey’re going to need cold beverages and ice in the burning heat.

�erefore, to e�ectively manage the challenges and harness the opportunities of the energy transition, countries need to take a more holistic and pragmatic approach to policies and regulations that result in energy systems that are both a�ordable, as well as �nancially and environmentally sustainable. �e needs and expecta-tions of customers and society at-large will continue to evolve and so must the electricity that enables services and solutions.

PUF: �at’s a big change. It sounds like electricity will be the key enabler of economic growth and development in the coming decades. Globally, will there be di�erences in how electricity is used?

Because of connectivity, because of access to information, there’s going to be greater demand for electricity.


access to electricity, I keep asking myself, what happens if the darkness is removed and light becomes permanent in their lives? What will that mean? What could that mean for society? What could that mean for innovation? What could that mean for their ability to deal with some of their challenges?

Across the globe, where you have limited access to electricity, often is where you have lack of industrialization, healthcare, and innovation. You have poverty on levels that you shouldn’t have.

As I travel around the world, one of my hopes is in the spirit of �omas Edison, to see how can the success of electric companies, in the developed part of the world, and the lessons that they’ve learned over the past years, be shared with others to accelerate electri�cation globally?

�e conversations I’m having start with a few questions: How many schools, hospital, clinics, factories in your country have access to electricity? What barriers prevent them from getting electricity? How reliable and a�ordable is the electricity?

My mission is not just to bring the American perspective on electri�cation. Sometimes, I’m bringing the perspective of electri�cation from Australia and New Zealand to the U.S., or taking it from Europe to the U.S., or taking it from Europe to

you have a strong and reliable energy grid, you have the luxury of options and can say, I don’t want it from resource A. I want it from resource B.

W hat happens i s , the demands of customers in one country seem to be dictating how systems will evolve in other coun-tries. �at creates an interesting how-to-manage-expectation chal-lenge for the electric companies because their customers are look-ing at the services that customers in other countries are getting.

�ey’re not understanding that what these other custom-ers have could be the result of the infrastructure that’s in their country. What happens is they say, why don’t we leapfrog for what Steve has over in that other country? You can’t just leapfrog because Steve is bene�tting from existing infrastructure that was built thirty or forty years ago.

�at is the root of the global conversations about the role of infrastructure over the next twenty to thirty years. What is that going to mean for the energy industry in terms of the physical infrastructure?

How do we design a modern system? If we were to modern-ize our systems, should it be by layering a new on top of the old – creating a legacy depth? Or do we do like many parts of Scandinavia, where they keep the physical structure, but they go in and do changes within?

What’s going to be the pathway to building the necessary physical infrastructure for the next �fty years?

How do you redesign a midsized city for an additional one million people? �ese are the kinds of questions that keep me awake at night but from a global perspective.

PUF: As the international representative for the Edison Electric Institute, you’re constantly seeing and talking with leaders in energy all around the world. What are you trying to accomplish?

Lawrence Jones: I believe that light, an import symbol of modernity, is one of the greatest inventions of man. �e reason being, when you can see, you can tap into one of your most vital senses, which is sight. �is in turns shapes your imagination and ultimately spurs creativity and invention.

As I travel the world and see people who have, and don’t have,

You can’t just leapfrog because of infrastructure that was built 30 or 40 years ago.

That is the root of the global conversations about the role of infrastructure over the next 20 to 30 years.


China. For most of my life, I have been fascinated by electri�cation and the work of electric companies around the world, because electricity workers are innovative, and they have passion in what they do.

I’ve had the good fortune to speak to electricity crews in di�erent countries, starting with my father who worked with linemen. For these men and women, noth-ing is more important for themselves than to keep the lights on

We don’t as an industry do a good job in telling that story of the people who sit in the control room, 24/7, to keep the lights on. �e average person doesn’t understand. It’s the human dedication that a person will climb an electric pole or climb in a bucket truck under extreme hot or cold temperatures.

Working with electricity is dangerous, and these workers need to be highly skilled and incredibly focused to safely bring the light back on after a storm, hurricane, or other natural disaster. It’s a victory for them when they do.

PUF: When you’re talking to these leaders all over in an amazing number of countries, what do they ask you?

Lawrence Jones: I will put the ques-tions in three categories. �e �rst category is about how they can attract more inves-tors. A lot of them are keen on wanting to understand how do we, in the U.S. and other OECD countries, get more capital?

�e second question, which is perhaps a surprising one, is, what can we at EEI do for them?

�at is always one of the most chal-lenging questions we face in the interna-tional program because each international member has a di�erent set of expectations. EEI’s International Program has about seventy-plus members with operations in more than ninety countries. Each of them forces us to come in with a unique value proposition with we must deliver.

�e size of our international mem-bers scale from the large ones in China, Europe, and Brazil, to the smaller ones in the Caribbean. It is exciting to have this

Delegates from every continent participated in the recent EEI Annual Global Electrification Forum hosted by Dr. Jones.


spectrum of companies wanting to be part of your organization, but how do you make it relevant for them? I spend a lot of time working with my team identifying what I call points of relevance for each company, and then we leverage the exper-tise of our colleagues across EEI and our global networks to create and deliver value.

In the past four years we have launched several platforms relevant for EEI members worldwide, including: Global Electrification Forum (GEF), Africa Utility Power Sector Exchange (AUPSE), Global Executive Leadership Network (GELN), and �omas Edison International Utility Executive.

�e last category of questions I get is more on a personal note. �at is, why do you do this? Why do you travel to my country to sit down with me, and talk about electricity?

PUF: What’s the answer?Lawrence Jones: �e answer is because

it just could make a di�erence by lighting up the future of a child or a hospital room or enabling a factory to provide jobs in country. By sharing the experiences from around the world with that utility execu-tive, regulator, or policymaker, that gives them new ideas of how they can increase electri�cation in their country.

PUF: Looking toward the future, are you optimistic about the industry? Do you fear certain threats or trends?

Lawrence Jones: My optimism is high. �e source of my optimism is what I have been able to garner over the last couple of years talking to industry leaders and another key stakeholder around the world.

Everyone is �red up about the impor-tance of electricity and what it could mean for their society.

I have always had this no longer a uto-pian vision that we could wake up one morning, and every child in the world would be able to �ip a switch to light at sunset, and then �ip a switch to darkness when they go to bed. Imagine what that would do for humanity.

I do have a few concerns. �e �rst

Photos by Allison Shelley

Dr. Jones addressed Global Electrification Forum delegates.

Many Forum delegates from Canada participated.

CEO of the utility serving London and surrounding areas was a Forum speaker.


�ey are consumers of water. �ere are going to be ten billion of them. �en you have the enevores, the consumers of energy, including the devices. �e future customer is a combination of those three vores.

When you design a system, those three coexist. We will need physical infrastructure to make the trio work. It is high time to step back and try to understand how we embrace digital technol-ogy without underestimating or devaluing the importance of the physical infrastructure.

PUF: When we sit down for this interview, for the 2040 annual state and future of the power industry, what will be the big topics?

Lawrence Jones: We will be talking about the role of arti-�cial intelligence in increasing the e�ciencies across our energy ecosystem. We’ll be talking about greater use of electricity.

We will see, even though we will have e�cient systems, we’ll still have high demands for energy because of the three “vores.”

We will still be discussing cybersecurity.

But one topic that will be deeply enmeshed in our discussion will be resilience. Resilience will be a very hot topic in 2040. If the aging assets in the energy grid today are already forty years old, in the next ten to twenty years, they’re going to need to be replaced with new equipment

We will be discussing massive re-modernization of

physical infrastructures across the globe. Infrastructure is going to be a booming sector by the year 2040.

We also will be having a conversation about how you’ll build smarter buildings, smarter roads, and smarter infrastructure. Because the ones we have now, within the next ten to twenty years, we can’t push them beyond their lifespan further.

PUF: Here the customer is the center of everything we do. How does that apply internationally? Is it the same question, the same problem, or is it di�erent?

Lawrence Jones: It is primarily the same set of questions in general, but from a di�erent starting point. If you don’t have access to electricity, the question you’re asking will be fundamentally di�erent than if you have access to electricity, but you want it dif-ferently, or provided from a di�erent means, or a di�erent source.

Customers across the world have one thing in common. In general, except for maybe one or two countries, all of them want cheaper electricity. In some countries, like Germany, or Sweden, people are prepared to pay more for electricity in order to generate cleaner electricity and improve air and environmental quality.

You’re seeing that customers are not all the same, but their needs

concern is that we oversimplify the reality in which we live. By that I mean yes, change is imminent upon us; however, there is a reality in terms of what does it mean to get an electrical system up and running. �e oversimpli�cation is because we’ve tried to use analogies from other industries.

Case in point, every time I travel to Africa, Latin America, and some other countries, people say, why not leapfrog, bypass the energy grid and go straight to decentralized generation? I say, sure, but do you desire to industrialize your country? If you do, do you think you can industrialize your country if you only use decentralized solutions? Some of the concern is that we oversimplify the complexity of providing reliable, a�ordable, and cleaner energy for billions of people around the world.

If you oversimplify it, it could become more di�cult to make the case for why you should invest because people will think it’s easy. If you oversimplify the message and you trivialize the chal-lenge, people will say, why do I need to make huge investments?

�e other concern I have is around what I call the growing gap between the understanding of the physical ideas of electrifying the world and the bene�ts of the digital world. I’m all for digital, but electricity is di�erent.

I believe that the job of an electric company in the future is going to be to manage watts, bytes, lumens etc.

We’ve been good at managing watts. But we should start to prepare to manage bytes and related services.

�e challenge in a lot of what we do is being seen from the lens of bytes. If you look at all of the business models that are evolving, at all the new regulatory models, the policies, the technology from blockchain to arti�cial intelligence, these are technologies that are coming to our industry with rapid speed. �ey are supposedly going to transform the industry.

But I ask everyone the question, do you still need to get a watt from point A to point B? If the answer is yes, you need a medium for getting it from point A to point B. You also need a medium of getting a byte from point A to point B. But here is the di�erence. One medium is invisible and wireless; no one sees it. �e other medium is physical; people have to see it.

PUF: Isn’t there a di�erence in amperage levels?Lawrence Jones: I know there are di�erent amperage levels.

But the issue is as you think about the infrastructure, people who say, we can just go o� grid, perhaps forgetting that even if you go o� grid, you still need to connect two things with a wire. �e only di�erence is that the o�-grid connection might be con�ned to a little area, but you still need the wires.

I’m scheduled to give a talk next month in Hong Kong, which has an interesting title. “Feeding Ten Billion Infovores, Aquavores and Enevores - From Value Chain to Value Networks.”

�e three “vores” you can guess. You have carnivores. �e infovores are consumers of information. �ere are going to be ten billion of them. �en you have aquavores demanding more water.

I’m concerned that we oversimplify the complexity of providing reliable, affordable, and cleaner energy for billions of people around the world.


control room, went upstairs, got on the phone, and talked to an electricity crew, who is about to climb a pole to take an action that will put the lights back on.

If they make a mistake, the result could be fatal. In the rare and unfortunate case that something goes wrong the custom-

ers would never know. But when the light comes back on, we’ll say, yay!

But who cheers for that lineworker when the lights come on? Not enough people do. We just take it for granted.

I’m not trying to com-pare different jobs, but electricity is so critical to the vitality of our society, and electric company crews across the world make that magic a reality. The ones

who live in Africa, Asia, Middle East, and other countries, they probably do more, because they’re working under very extreme conditions and should be equally heralded.

If you ask me who should get the Nobel Peace Prize in the year 2030 or 2040, I would say the Nobel Peace Prize should go to electricity crews across the world who will have tremendous responsibility to ensure our energy systems are resilient to cyber and physical threats of all kinds. PUF

are generally similar. �ey’re starting from di�erent starting points. �at is going to be a key challenge for us going forward and why we should stop generalizing when we use the word customers.

People say, customers want this or that. With today’s technol-ogy, we should be able to segment our customers better. By the way, by 2040, there will be a di�erent discussion around customer centricity, what does it mean to serve your customer, and how you serve your customer.

Successful companies in 2040 will be those that can serve their customers across multiple platforms.

Utilities of the future, say in Africa for example, may be providing electric, gas, and information. We are beginning to see multi-commodity companies popping up around the place. Why? Because they may be able to share infrastructure.

I could use the same conduit to put in my �ber, my electric, and my gas. You don’t have to dig twice. I call it the dig-once mentality. If I’m going to dig, I’ll dig a conduit, and put what’s going to be put there now or in the future.

PUF: Do you see commonalities about electricity around the world?

Lawrence Jones: I wrote a book two years ago that I dedicated to the electric company crews, the people who run the energy grid. �ey truly are the unsung heroes. As I previously stated, what they share is their passion to light up their communities.

We are living in what I call a take-for-granted society. Electricity, in some societies, is taken for granted. It’s always there. Behind the scenes, however, for it to always be there, someone got up this morning, left their family, rushed to the

If you ask me who should get the Nobel Peace Prize in the year 2030 or 2040, I would say the Nobel Peace Prize should go to electricity crews across the world.

Americans’ monthly electric bills averaged $121.83. The latest Consumer Expenditure Survey also shows they were 1.9

percent of income before taxes. And 2.4 percent of expenditures on goods and services.

Midwesterners’ electric bills averaged $107.92. Westerners averaged $109.25. Northeasterners averaged $111.42. (The

national average is higher because of higher bills in the South.)

This semi-annual survey is extremely accurate since it has over ten thousand households completing diaries of their

spending and answering questionnaires, and the Bureau of Labor Statistics checks bills. The latest survey was for the twelve

months through June 2018.

This is the seventh time the Bureau has done the semi-annual survey through mid-year. The first time, for the twelve

months through June 2012, Americans’ electric bills averaged $116.58, 2.2 percent of income before taxes and 2.8 percent of

direct expenditures. Since then, average electric bills increased $5.25, but fell by a lot as a percentage of income and

expenditures. This trend of relatively small changes in average electric bills and decreasing percentages of income and

expenditures has continued through the last seven years.

When you break down the numbers, you find that Midwesterners, Westerners, and Northeasterners generally have lower

bills than the national average. Similarly, low-income households generally have smaller bills as well, thirty percent less for the

lowest income quintile in the period through June 2018. And, renters generally have smaller bills too, twenty-nine percent less.

Also, the bills of households in the central city – whether homeowners or renters – average sixteen percent less than the

national average.


Experts Show Us Their

Crystal Balls on Power’s

FutureBy Dan Bradley, Karin Corfee, Benjamin Grunfeld, Aida Hakirevic,

Trina Horner, Wendy Jaehn, Mackinnon Lawrence, Laura Manz, Ted Walker, and Robert Wilhite, Navigant


XUF’s Steve Mitnick: You have a short elevator ride alone with the chief executive of a major utility. What would you want to tell him or her? What does Navigant see as some of the initial steps in preparing for the energy transformation?

Wendy Jaehn: Focus on your customers, as their energy needs are changing rapidly. Include environ-ment and climate risk mitigation into your strategic decision-making and day-to-day operations, as

it will have far-reaching consequences for your business and the customers you serve. As your business becomes more customer-centric and sustainability-focused, it must also embrace innovation, adaptation, and transformation at scale.

Innovation of new products and services to better meet customer needs will require di�erent processes, technology, people, and culture, all supported across the organization. Climate change will require utilities to adapt and make di�erent investment decisions. �e customers, cities, and communities they serve are increasingly focused on reducing their carbon footprint, improving resiliency, and implementing sustainability strategies and plans.

What is a utility’s best response? While a utility’s core business today is to optimize its operational and capital e�ciency, it should also pursue an approach that disrupts its own core business.

Strategic planning, as well as investment governance and processes, must change. Traditional

integrated resource planning and �ve-year strategic planning cycles are not adequate anymore. Long-term planning gives way to short-term innovation and ideation. With enough runway and su�cient regulatory rewards, today’s emerging threats will be future opportunities for utility growth.

PUF: What role should utilities play in accelerating decarbon-ization? What climate change risks, physical, �nancial, legal, or other, will utilities encounter in the next decade?

Karin Corfee: Climate change is likely to be one of the most serious issues that utilities will face in the twenty-�rst century. Utilities are already encountering risks related to extreme weather events – hurricanes, wild�res, cyclones, and �oods – that are further intensi�ed by extended periods of droughts, as well as rising sea temperatures and levels.

�ese physical risks threaten the very existence of utilities due to associated legal and �nancial risks and liabilities. In California, for example, inverse condemnation provisions make utilities liable for all damages associated with a wild�re to which their equipment was a causal factor, regardless of whether there is a �nding of negligence. As a result, we could see the �rst major utility fall victim to climate change.

At this time, it’s critical that utilities are engaged, are ready to lead the energy transition, and are helping to accelerate the decarbonization of our economy. In addition to playing

Utility leadership needs to de�ne a broader customer and environmental vision and mission. To do so, it is imperative to develop a strategic transformation roadmap to ensure consis-tent internal adoption as well as external engagement with the ever-growing number of stakeholders and partners within their ecosystem. Environmental, social, and governance strategy and execution are key cornerstones for the utility of the future.

Simply put, utilities must innovate. �ey must adapt and transform. �ey must invest in sustainable energy infrastructure and develop business and regulatory models that support new energy products and services. �ese initiatives are critical to staying relevant to shareholders and customers as well as to supporting a cleaner energy future.

PUF: What are the existential opportunities and threats confronting utilities, if any? What are clients’ major blind spots in strategic planning and execution?

Rob Wilhite: As the energy transformation accelerates, incum-bent utilities are seeing latent threats, but more importantly, new opportunities. As value creation shifts downstream toward the energy prosumer, energy platform-driven growth – for example, building-to-grid (B2G), transportation-to-grid, integrated distributed energy resources, and smart cities – will provide opportunities to develop new energy products and services.

Utilities will see more competition from new entrants but will also �nd that innovation will enable new partnership opportu-nities, turning threats into margins. �ese new stakeholders, already active with market o�erings, include tech �rms (such as Google and Amazon), oil and gas majors (such as Shell and Total), automotive manufacturers (such as Tesla and BMW), and consumer retailers (such as Ikea).

�ese disruptors bring ample cash, strong R&D, higher risk appetites, a relentless customer-centric focus, and an ability to acquire or partner to rapidly build new energy services portfolios. �e only dimension not yet achieved is scale commensurate with incumbent utilities, but time and a strong customer focus will enable this advantage.

PWith enough runway and sufficient regulatory rewards, today’s emerging threats will be future opportunities for utility growth.


communications, to more complex journeys, like energy e�ciency programs, DER interconnections, EV charging (vehicle-to-grid), and building energy management (B2G).

PUF: Some say utilities should become leaders in DER at every scale and some say utilities should stay out to foster greater competition. What is the utility’s role in responding to more distributed resources on the grid?

Laura Manz: An all or nothing approach to utility DER participation has the potential to sti�e innovation and unnec-

essarily block competition as the industry pivots into a new energy future. DER is an essential part of the resource mix going forward and an important complement to the proliferation of an intermittent renewable supply.

As DER proves its useful-ness, important debates are underway in the policy arena such as how to promote infor-mation transparency without compromising privacy and auto-mate control response without compromising security.

Speed and control improve-ments have been enabled through advanced technologies such as hardware-in-the-loop. The essential function of information-gathering and dissemination will ultimately change participation by both utilities and others.

Microgrids, operating as grids within the grid, make it clear that there is room for – and

a need for – a hierarchy of orchestrators and operators until technology can take over critical reliability and resiliency grid management tasks.

Innovative tari�s that are accretive rather than value-shifting are also important. Until full automation takes over, parts of some utilities will still have essential orchestration functions for a grid that operates in cycles and seconds. Creative partnerships, with room for all solutions, will a�ord more rapid advancement as the resource mix shifts and the industry paradigm shifts along with it.

PUF: What lessons can be learned from European energy companies with respect to adapting U.S. utility business models in a time of transition?

Benjamin Grunfeld: European utilities and energy companies

a major role in helping to shape policy, utilities should take a more active role in accelerating decarbonization within their immediate control.

Doubling down on energy e�ciency and demand response, for example, makes sense for all. Making electricity loads more �exible could help synchronize demand and supply, as well as avoid bottlenecks, all while helping to ensure network stability in a cost-e�ective manner.

Increased deployment of renewable energy, storage, and grid modernization solutions to support higher levels of intermit-tent resources and distributed energy resources (DER) will also be required. Additionally, customer programs and infra-structure deployment to help facilitate the electri�cation of the transportation and building sectors are becoming increas-ingly necessary.

To manage risks associ-ated with climate change, utilities should adopt internal carbon pricing (ICP). ICP is a multifaceted strategy to manage climate-related business risks and prepare for a transition to a low-carbon economy, which utilities should leverage to sup-port future investment decisions. Best practice approaches to ICP can bring the utility’s business strategy in line with the transi-tion to a low-carbon economy.

PUF: How can utilities best align with the next generation of customers? What are examples of leveraging digitization to improve customer centricity and engagement?

Aida Hakirevic: Utility customers of all classes and segments now use digital platforms to meet their daily needs – it’s not just millennials. Other sectors have already reimagined the customer experience, with companies like Uber, Net�ix, Amazon, and Airbnb leveraging digital platforms and data analytics to directly impact customer relationships.

Utilities will need to reach similar levels of e�ortless end-to-end customer experience to achieve better alignment with customers and address the four C’s – choice, control, convenience, and cost.

�ese include the basics, like start/stop service and outage

Utility customers of all classes and segments now use

digital platforms to meet their daily needs.

-Aida Hakirevic


in the short term? How can leaders position their organizations to survive and thrive in the long term?

One idea is to start your own crisis. Create a burning platform for change by;

Opening up: Utilities are often inward-biased and siloed. Open up your organization to collaborate both internally and externally. Become more agile and relieve bottlenecks to innovation. Utilities must establish a culture that learns, shares, listens, and acts on the best ideas, and where it is OK to fail, fast and often.

Partnering up: Although utili-ties built the energy system of the future, they need to partner with other companies – technology companies, car manufacturers, and others – and work with them to learn and implement new ways of delivering value to customers.

�ey will need to establish a data sharing policy that protects customers and mission critical data while also leveraging that data to drive continuous inno-vation. And they will need to create a clear path to partner-ships and investments to move faster and stay competitive.

Scaling up: Most utility grids and systems aren’t ready for the digital tomorrow. However, by opening up and partnering up, they can begin the journey to scale and deliver a refreshed product to customers.

�ink of the possibilities that can be scaled—a new and better customer journey, new platforms to enable vehicle-to-grid and

B2G applications that decarbonize and digitize whole new systems, and new ways to drive energy e�ciency and sustainability more e�ectively with less investment!

To the disruptor, change is groundbreaking growth and innovation. Utilities should set their fear aside and create burning platforms to drive their organizations into the future.

PUF: What will the role of the regulator be in 2030, especially in establishing and monitoring the grid platform to accommodate more dynamic and networked energy systems? What legacy assumptions should regulators reconsider?

Trina Horner: Regulated utilities have only a short time to adapt to the profound transformation brought about by the Energy Cloud and climate change.

are fully embracing the energy transition and are focusing their businesses accordingly. �is includes restructuring to compete across traditional and emerging markets, while also rebranding and repositioning themselves in the market to shift toward higher margin services and solutions.

For most, this means moving away from low-margin com-modity products and directing investments into renewable and new energy resources, capabilities, and solutions to compete across regulated and competitive segments.

European utilities and energy companies are �xated on owning the customer relationship and controlling the value chain in their own traditional regulated service territories and beyond. �ey are taking a global view in pursuing opportunities related to power, natural and renew-able gas, and related services, which is creating tremendous opportunities for growth even when consumption and demand growth slows in more mature markets.

�e transformation is not painless, and it is not complete, but the commitment from util-ity executives and their strate-gic focus are starting to deliver returns. As such, European utilities and energy companies are becoming a clear threat to incumbent utilities across North America.

PUF: What immediate oppor-tunities can utilities embrace to accelerate technology innovation – whether through strategic partnerships or acquisition or other? How can utilities more proactively position their business to take advantage of long-term impacts brought about by technology disruption (such as two-way power �ows, transactive energy, grid defections, etc.)?

Dan Bradley: Over the next few decades, forces such as decarbonization, grid modernization, digitization, aggregation, decentralization, and arti�cial intelligence will introduce substan-tial new risks and challenges to the traditional utility business.

It’s tempting to shy away from leading change, but that means giving into fear and complacency, which is not a strategy for sustainable growth. So, what should a utility’s strategy include to capitalize on opportunities that accelerate technology innovation

European utilities and energy companies are becoming a clear

threat to incumbent utilities across North America.

- Benjamin Grunfeld


For commercial and industrial customers, this means chang-ing the conversation toward sustainability and energy as a service (EaaS) o�erings. Similar to other industries, utilities should be asking, “How green, how reliable, how resilient, and how cost-e�ective do you want your total energy solution?” While standard electricity service is part of an EaaS solution, the end result is much, much more – perhaps even resembling a microgrid construct.

Leading 2030 utilities will be organized di�erently than today’s utilities;

Platforms and product-line orientation: Future utilities will organize around the future pro�t and losses of the util-ity model. �ese include the distribution system platform (DSP) focused on optimiza-tion power �ows, information �ows, and �nancial �ows across the future Energy Cloud dis-tribution system, as well as new emerging platforms that will plug into the DSP (such as e-mobility, B2G, and smart cities). �e traditional silos of operations, customer care, and engineering will be morphed into these new market-focused operating models.

Growth and innovation: Future utilities will focus their brightest leaders on keeping ahead of the game. �ese lead-ers will drive future business models, future revenue streams, and future customer value propositions. �ey will even be focused on cannibalizing

the existing business for future business models (if Apple can do it, so can utilities!).

Today’s leading utilities are well-positioned to be the leading utilities in 2030, but a signi�cant amount of reinvention will be required. Some utilities will succeed, many will likely not.

PUF: What opportunities should utilities pursue in the next three years to build long-term sustainable value?

Mackinnon Lawrence: Utilities are faced with two equally critical, but divergent investment pathways. On one hand, aging infrastructure in the ground today requires reinvestment to maintain a minimum threshold of reliability and performance, while signi�cantly improving resiliency. On the other, emerging

It is critical that regulators are also prepared to adapt with utilities and take steps to modify their own organizations and skillsets to; safeguard access to and security of utility systems, proactively identify and implement market and consumer protec-tions, and develop ratemaking mechanisms that recognize the value of technologies, safety, and platforms.

We can be certain that our future energy system will be a more complex, diverse, and customer-centric environment; it cannot be regulated with traditional command-and-control or hybrid approaches. It will require a fundamental regulatory mindset shift.

Key to this shift is expanding the rate-setting paradigm beyond traditional cost of service to consider, and even leverage, the myriad value streams provided through emerging new energy products, services, and platforms.

At the same time, regulators cannot chase every issue and opportunity. Effective, effi-cient, and relevant regulation will require regulators to hone their risk management skills to identify, monitor, manage, and mitigate risks, including those that impact safety, security, consumers, reliability, and, the utility itself from climate change. �ese skills will be critical in set-ting and executing regulatory priorities and will help regula-tors shape the Energy Cloud and ensure its long-term viability in a time of dramatic change.

PUF: What will the utility of the future look like in 2030? How will it be di�erent from today’s utility? How will it provide value beyond electricity service?

Ted Walker: Leading utilities will look very di�erent in 2030. From a customer perspective, they will be more focused on delivering on evolving customer expectations (the four Cs – choice, control, convenience, and cost).

For residential customers, leading utilities will be more focused on meeting a broader set of customer needs and delivering clear value propositions. �is means having a more extensive set of o�erings (energy and energy-adjacent) while simplifying the bundling of these in straightforward subscription-style pricing (such as Net�ix).

Regulated utilities have only a short time to adapt to the

profound transformation brought about by the Energy Cloud

and climate change. -Trina Horner


di�erentiators. Stress testing solutions early will reap bene�ts later as the utility will be better equipped to adapt to changing market demands, a shifting policy and regulatory environment, and continuous technology innovation.

Hitch the wagon to infra-structure megatrends: With revenue growth from traditional utility services harder to sustain, utilities should start targeting Energy Cloud platforms to sup-port long-term expansion.

Energy Cloud platforms take advantage of four operat-ing conditions that will enable long-term growth and scale: Demand density or a concen-tration of potential customers, a high level of innovation con�u-ence and technology synergy, high potential for DER adoption and prosumer engagement, and potential synergies with adjacent industries.

Broad megatrends like the electri�cation of transportation, optimization of smart buildings, the transition to DER, and the digitization of cities each repre-sent dynamic growth opportuni-

ties for utilities to leverage to achieve long-term scale. Tying back to investment pathways, utilities should aim to orchestrate these infrastructure assets as networks rather than capitalize or own the assets outright. PUF

cleaner, dynamic, and decentralized technologies, including renewables and DER, require investment in new assets and enabling technologies.

�e capital investment required to pursue both e�ectively and at scale will be prohibitive. Whichever pathway a utility pursues, to remain competitive in the long-run, it should act on the following immediately;

Start building an ecosystem: Partnerships and acquisitions are critical going forward – both to neutralize potential competi-tors as well as to start building unique customer solutions that take advantage of complimen-tary products and services.

The complexity of the technology and infrastructure environment are only increasing, and future opportunities require venturing further a�eld from the core utility business. An ecosys-tem will enable product diversity and position utilities to tap into value in ancillary industries.

Develop customer-centric solutions: A�ordable, safe, and reliable power are merely table stakes in an increasingly dynamic and networked energy eco-system. Customers want individualized solutions.

�ey want autonomy and �exibility in how they access services. Sustainability and clean power will be important

Partnerships and acquisitions are critical going forward.

– Mackinnon Lawrence

Saluting utility workers, let’s quote the 1937 hit movie Slim that starred Henry Fonda and Pat O’Brian. The movie opens with

inspiring footage of the newly-completed Hoover Dam and linemen working, and with this poetry:

“Every generation has witnessed the increase of mankind’s control over the natural forces of the earth. The waters that

flow, the very air we breathe, is harnessed and made subservient to the will of man. But in the conquest of electricity, he

obtained the power that dwarfs all others. The power that girdles the globe and annihilates distance and gives him control of

time and space. The whole structure of our civilization depends upon the unfailing supply of that power. And upon the

trembling lines that carry the electrical current over vast distances.

We who live in this great age are perhaps cognizant only of the inventive genius of a few men who enabled us to harness

this great giant. But without the courage and fidelity of the men who labor at all hours, and in all weather, to build and keep

aloft the lines that bring us our electrical supply, this era of miracles would not have come to pass. The power that lifts our

elevators, runs our factories and trains. The current that lights our great cities, our homes, and our hospitals, stands obedient

ready to answer the pull of a switch.

But behind all this is an army of men whose skill and daring have made this great power a reality. And it is to them we

dedicate this picture. The linemen.”

By Bill Hederman

Our Confidential Panel ofFourteen Senior Leaders on

Electric Trends

A Tipping Point



his article reports the results of the fourth annual PUF o�-the-record discussion with electric industry thought leaders selected by PUF editorial leadership.

�e objective of this exercise is to provide a safe setting in which industry leaders can speak frankly about what they see and expect to be happening regarding a set of questions shared with them before the interviews.

�e group includes utility executives, commission members and sta�, association executives, RTO/ISO leaders, and even a retired utility executive who has been an entrepreneur in energy since retirement. �e Northeast, Midwest and West participated. �e South was shy this year.

5. How should utilities use digitalization and inno-vation to improve customer intimacy and centricity?

Question 1: Accelerating Transformation to Address Climate ChangeThe range of responses to this first question was broad, ranging from no to yes, including “the transfor-

mation is already accelerating.” Most interviewees considered accelerating the energy transformation a good thing. One regulatory leader, who did not take that opinion, stated that those calling for acceleration were using an argument of convenience.

�e concern expressed was that acceleration could sweep aside prudent cost-based known and measurable rate-setting standards. �e regulator cautioned that, instead of allowing a claim of urgent necessity for continued costly subsidies, the proposed innovations should face the hard test of competitive markets.

Most of the interviewed leaders saw a need to advance the energy transformation. Some believe the transformation needs acceleration. �ese leaders generally detected a change of momentum in the last year. �ey used the terms tipping point or in�ection point to describe what they considered a recent shift from traditional utility practices and outlook.

One leader who did not think the pace of transformation had yet reached an acceptable level asserted that utilities need to adapt to the reality that customers are embracing a move to a cleaner and greener power sector. �is leader thinks utilities need to help �nd a way to get there using competitive, market-based e�ciency and avoid the work-around subsidies that are causing serious problems of system integration.

Several utility and other executives expressed similar opinions – that utilities can and should lead elements of the energy transformation.

Key Selected Observations�ere were many fascinating observations.

Here are selected items that we think are key to understanding where the utility sector is today and appears to be headed tomorrow: �ere is consensus that a tipping point has happened or is under-way; Utility leadership has the potential to make a big di�erence in the pace and e�ectiveness of electricity’s future; Without excellent grid reliability, other innovations will not succeed; and Utility roles should include enabling customers and regulators to have the knowledge to make good decisions.

Other observations include: �ere is no one role or business model – there are many important variations for each situation; �ere remains serious concern about utilities’ ability to change, but utilities are con�dent; Partnering with utilities will be a key element of successful electricity sector transformation; and �ere are new individual customers and new corporate customers – both want utility changes.

Final observations include: �e next three years could o�er many opportunities, including community solar, o�shore wind, demand-side load shifting, electri�cation and more; �e digital economy will a�ect utilities, yet they are behind some new industries, where digital is in their DNA; and �e pace of technology change and regulatory change are not synched and this needs attention.

The QuestionsPUF’s editorial team, with input from an outside industry consultancy, prepared these questions. �e questions have changed from year to year, although the reader will recognize connections as the issues selected evolve.

�e questions for this year are:1. Should our industry accelerate the energy transformation

to address climate change?2. What’s the role and business model of the utility as we

de-carbonize?3. How can utilities best align with the next generation of

customers?4. What opportunity can utilities pursue in the next three

years to build long-term sustainable value?

The consensus is that performance-based incentives will be a major element of how regulators can successfully guide the necessary transformations.

T


state-level public opinion or to attract high technology businesses insisting on cleaner and greener power.

Several of the leaders interviewed opined that there is an absence of Federal policy leadership. Additional support from FERC and NERC were noted as of special potential importance. �e major link to addressing climate change mentioned was that, in several areas, those interviewed thought that the shift in momentum resulted from phenomena that people considered linked to climate change.

One interviewee cited Kahneman’s book, Thinking, Fast and Slow (2012) as describing the downside of substituting fast thinking for slow critical thinking. �is remark suggested concern that economic regulatory principles could be endangered through the pressure to accelerate.

Speci�c measures identi�ed as part of the acceleration of the energy transformation included:

Electri�cation of transportation (broadly); Electric vehicles EVs (more specifically); Infrastructure developments and modernization; Energy storage technology innovation; and Additional renewable resource development (most notably o�shore wind and community photovoltaic generation).

Question 2: Role and Business Model for De-carbonization�ere was strong consensus on this question. No one anticipates stability for the traditional utility role or business model. Changes anticipated in the role of the electric utility generally involved less emphasis on increasing the quantity of electricity sold – although that could be one by-product of electri�cation.

�ere was a fair amount of discussion regarding the key functions of grid operation. Maintaining reliability and e�ciency are two roles that most leaders believe will continue to require utility expertise. Achieving greater e�ciency will also require the optimization skills of utilities. One non-utility executive said, “Everything needs utilities.” �us, few of the anticipated innovations can succeed unless the wires work.

One new entrant leader did note that, “energy e�ciency should pay for itself.”

Most of the leaders interviewed see the utility roles growing with respect to facilitating changes necessary in local electric systems. �ey realize that not all utilities are with the program yet on this.

Among the changes interviewees identi�ed as needing facilitation by utilities were: Help educate customers regarding options and costs; and, Provide platforms for plug and play technologies.

One utility executive noted that the possible outcomes from utility leadership in the transformation have, “the potential to be very potent.”

Regulators, as well as other leaders, see an urgent imperative

In a similar vein, some interviewees applied the common stages of grieving to note that utilities had moved from denial to bargaining and now were accepting the need for transformation. �e interview consensus is that most utilities have come to recognize that an energy transformation is going to happen and that concern about climate change is an important driver.

One utility association executive observed that a transformation is happening all around us. �is transformation is evident in changes such as new business services, new analytic tools, and other technology changes.

�ere are also industry leaders who see the transformation underway and want it to accelerate. Some identi�ed the risk aversion of utilities as a challenge. One state legislative leader said that being risk averse is in the industry’s DNA.

�ose wanting faster change identi�ed several potential drivers for such change: State governors; Big commercial and industrial customers; Adverse e�ects occurring in states and regions at this time (extreme weather or agricultural or aqua-cultural e�ects); State legislators; and Boards of Directors (of utilities or of their customers).

Interviewed leaders said state policymakers, such as governors and legislators, were taking the initiative to accelerate greenhouse gas emission reduction targets, both relative to earlier state Clean Air Act goals and relative to the Paris Agreement goals.

While not all states are adopting accelerated targets, there appear to be several that are pursuing aggressive goals because of

Approaching 100%

Electrification

PUFPUFPUFPUBLIC UTILITIES FORTNIGHTLY

APRIL 10, 2040


was an area where some utilities are viewed as having developed the necessary expertise and where others still have work to do.

�e future of utility regulators also encompasses massive change while maintaining the same fundamental mission of insuring safe, secure, and a�ordable electric service to all. �e con-

sensus of those interviewed is that performance-based incentives will be a major element of how regulators can successfully guide the necessary transformations.

Again, state commis-sions will play a leading role in the state-level role as the laboratories of democracy. �ose interviewed expect to see many di�erent ideas tried. �e hope – and expectation – is that successful policies will

be identi�ed and spread rapidly. An earlier point from a regulator about the need to tow the line on proper regulatory processes could lead to some clashes with those seeing a need for speed.

Nevertheless, most see the transformation proceeding through the necessary steps at a pace increasing relative to the recent past. �e interviews yielded several measures as likely candidates for performance-based incentives.

�ey include: Reliability (especially SAIDI and SAIFI metrics, which probably require some �ne-tuning for consistency among jurisdictions and utilities); Resiliency (which remains challenging to assess in an a priori situation); and Establishment of e�ective approaches to stand up and integrate microgrids at the utility level;

�ey also include: Ease in connecting new technologies and systems to utility grids; Providing options for all customers (residential, commercial, and industrial) to exercise choice in the services they wish to purchase and in how they make purchases; and Provisions of fundamentally new ways to achieve mobility (through electri�cation) and comfort in dwellings and places of business (through e�ciency and building-grid integration).

�e incentives that utilities will face, developed by regulators with signi�cant input from utilities, their customers, and their suppliers will drive the utilities to new business models. An important challenge for utility regulators will be to navigate a path that is just and reasonable to all incumbent stakeholders and provides opportunities for new entrants. New entrant success is viewed by many interviewees as an important source of innovation essential for transformation progress.

In discussing utility business model changes, one leader of a new entrant identi�ed PG&E as the �rst corporate casualty of climate change due to the liabilities linked to California’s massive wild�res losses.

to get the regulations right. �ere are, for example, important questions regarding what utilities should be allowed to do, what they should be required to do, and what they should be prohibited from doing.

For example, regulators need to determine when utilities may compete with others and when they must cooperate with others. Some still see parallels with the telecommunications transition from the earlier switching of the land line global network to today’s largely wireless systems.

Most of the interviewed executives expect to see many variations in approaches among the states. An expected key to success is that regulators e�ectively serve as referees in the competitions among the many stakeholders.

Some thought utilities can lead regulators to good decisions by sharing information from customers. Some thought that utilities need to focus on listening to customers more than leading them (although they did favor informing customers about options and costs).

One interviewee noted the gravity of the growing dangers arising around cyber threats to both privacy and grid security. Some others thought that the concerns about privacy and utility customer data were not likely to rise to major issues in this time of Facebook and other social media.

With regard to grid security, those who raised this cybersecurity issue saw the potential for harm as quite high. �is

APRIL 102040

Fortnightly Smartest

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New entrant success is viewed as an important source of innovation essential for transformation progress.


generation and end use sectors; and Develop new mobility options for individuals and industry.

Two concerns about how utilities would develop new business models were raised multiple times: A perceived lack of openness to innovation by utilities; and A danger of outside interference by policymakers such as legislators, governors, or federal o�cials.

�e challenges for utilities in navigating this transition period are multiple and signi�cant. Some believe utilities have already demonstrated the �exibility to make it to a new day. Others are skeptical. One interviewee expressed the opinion that innovation is not in utility DNA. �at, however, was a

minority opinion. Overall, utilities must make it

through a challenging transition. All have great con�dence in the technical sophistication of North America’s electric utilities. The rapid development of the necessary“emotional IQ” is a concernfor some.

While speci�c future business models remain to be determined for utility success, several attri-butes of success were identi�ed by interviewees: Pro-active engage-

ment with customers, regulators, �nancial institutions, and other stakeholders to identify and implement incentives that will reward utilities for providing what customers and society want; Linking revenue and pro�t generation to speci�c outcomes in a timely and �exible way; and Linking fees to the costs of services and technologies o�ered in ways that relate charges for use to the costs for serving the uses (at particular times and places).

Still other attributes to success included: Incentivizing measur-able and veri�able loads reductions as well as load growth; and Partnering with traditional stakeholders and new participants (such as, auto manufacturers or port authorities).

One regulatory leader summarized actions that a successful utility would take as including execution of balancing both centralized and de-centralized generation, resilient distribution with islandable districts, cybersecurity based on resilient recovery, and advanced rate design addressing lost management and load balancing, and multiple partnerships to explore innovative approaches to serve changing customer preferences.

Among the big changes we could see, another intervieweesuggested, at least in some areas, are electri�ed transport systems, pre-subscribed load shedding, and integration of distributed generation.

Utility executives saw a continuing need to rely on the utility strengths of cost discipline, cost recovery, capital spending for long-term future goals, and good project management.

�ere was a fair amount of consensus that there is no one “utility of the future” model that either utilities or their regulators can start to replicate. Di�erent regions and states face important di�erences in challenges and opportunities.

Several leaders expressed the idea that regulation needs to �nd new ways for covering the �xed costs of the utility business. Continued recovery through variable charges that encourage utilities to sell more kilowatt-hours cannot work in the high-e�ciency grid future that is required.

�e issue of inappropriate subsidies and cross-subsidies came up repeatedly. A common topic related to business model was that many special interests have become comfortable with subsidies bene�tting their businesses.

At the same time, the overall e�ect of all the subsidies is to distort and harm performance of the grid and to cost all stakeholders considerably higher charges (whether paid through electric bills or taxes). No one expressed optimism about a clear path for unwinding all these subsidies.

Some executives suggested the establishment of additional markets, especially for ancillary services. �ey think this could provide a path forward that could achieve environmental, economic, and technological sustainability.

�e promise of this approach is to: Provide customers with energy as they want it; Provide more green and renewable energy options; Provide many ways for customers to pay and manage their bills; Better manage peak use of electricity – at the

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What’s So Artificial About AI?

State commissions will play a leading role in the state-level role as the laboratories of democracy.


Question 3: Aligning with Next Generation Customers�is proved to be a somewhat surprisingly controversial topic, with some interviewees seeing major rapid changes and others considering the stark di�erence for the next generation customers exaggerated.

One leader said, “Customers just lead” businesses to where they need to be to pro�t from the marketplace. �is observation seems to capture many of the ideas provided in responses on both sides of the generational assessment.

Several leaders took this opportunity to make broad points relevant to any customers: Never tell customers no; Always listen for what customers want; Communicate frequently with customers about their wants; Educate your customers about the options you can o�er and about the associated costs; Make every e�ort to o�er products and services customers would value; and “Electrons are just electrons;” utilities should shift the supply mix to what customers want.

To the extent the next generation of customers is di�erent, we need to think in terms of two types of customers: individuals and corporate.

Some of the interviewed leaders do consider millennial cus-tomers di�erent from the predecessors with regard to their preferences. Many ideas made the same general point (but with variations in nuance).

�e next generation: Is more vocal about what they want; Wants clean, a�ordable, reliable, electricity; Expects powers of “agency”; and Considers new technology ubiquitous.

�e next generation of customers are also: Sophisticated end users; Social media savvy; Varies signi�cantly, especially with regard to urban/suburban and rural attitudes; and Could bene�t from education about energy and the grid.

Even after noting the di�erentiating characteristics of the millennial cohort, several of the industry leaders cautioned about over-generalization. Several expect needs to more closely resemble traditional patterns as they get married and have children.

One said a single young man may have fun adjusting condi-tions in his room while he was away, but he would not likely do the same thing when he has a wife and children there. Another executive with millennial children did generalize by observing that, “millennials want to be independent and, yet, they are entirely dependent on what prior generations have built,” with regard to their a�ection for electronic devices.

A topic that did not come up often in the interviews was interest in the next generation going o� the grid. �ere was a sense that regulators might want to make this an option and that it is important to price the move o� the grid – and the likely move back on – appropriately to capture all the costs incurred. �e experience in Hawaii about migration from and back was mentioned.

One last point regarding individual millennials was how one executive from a major utility spoke enthusiastically about how

his utility employed interns and an Advisory Council made up of STEM high school students to brainstorm issues and get insights about their future customers and future employees.

�e threat of major corporations like Amazon and Microsoft or Walmart and Target leaving utilities has incented some utilities to respond with the greener and cleaner options these �rms want for their investors, customers, and employees.

A regulatory leader said the question of transitioning to new customers keeps him up at night. Setting rates and providing for reliability through backup supply systems are major challenges. Moreover, the necessary transformation from radial to two-way service, with the entire necessary telecommunications infrastructure can have immense e�ects regarding grid cybersecurity defense. �e regulator already sees changes in utility-customer relations and expects continued

change in a world where a LEED Platinum Building is cool.

�ere was another inter-esting side conversation triggered by this question. A leader from the “new entrants” category had some uncomplimentary remarks about utility billing. �is executive described billing

statements as deliberately confusing, perhaps to protect utilities’ market power. Some PUCs are, this interviewee said, addressing this issue. (Addenda to bills would seem to address some of these concerns.)

Question 4: Opportunities in The Next Three YearsWith regard to opportunities for utilities over the next three years, electri�cation and communal solar came up most often. Data analytics and load shaping were also identi�ed as sustainable value opportunities over this period. �ere was a sprinkling of other ideas, as well; such as, one utility executive noted that each utility needs to invest in innovation.

�is leader also noted that this was a company value of the family of utilities to which the utility belonged. Non-utility leaders had some concerns about how well utilities might respond to opportunities, but most were at least hopeful.

�e executives interviewed saw many potential initiatives within the broad opportunity of electri�cation. Utility investing in the infrastructure for electri�cation in the form of charging stations for EVs, distribution transformer upgrades, and other physical upgrades provide opportunities for rate base growth, in the traditional form or via performance-based alternatives.

Industrial electri�cation, at ports and factories may bene�t from utility investment in the supporting infrastructure.

A leader from the ‘new entrants’ category had some uncomplimentary remarks about utility billing.


relationship on load-shaping and build a foundation for this in the next three years.”

O�shore wind and building transmission lines to connect this power to urban centers was mentioned a few times as another attractive opportunity along the Atlantic Coast. Developing resiliency was another area discussed as rich in opportunities. An interviewee called resilience “a step beyond” reliability.

Reliability, this leader suggested, addresses operational risks arising from normal circumstances. Resilience, in contrast, relates to responding e�ectively to abnormal circumstances, whether from nature (earthquakes, extreme weather, or malevolent attackers). Resilience will include resistance to attacks and recovery through defense via in-depth technologies and strategies.

A retired ISO executive said that although distributed utilities have been viewed as “�ve years away for twenty years,” some elements of local platforms have arrived. For instance, many wealthy homeowners have installed emergency generators after experiencing blackouts. Hospitals, hotels and other businesses have also taken this step. �is leader sees this as part of the response to the serious need for “Islands of Reliability.” Another interviewed leader noted “the grid, itself, is changing.”

Most of the interviewed leaders considered the next three years to o�er a target-rich environment for utility opportunities. �ere was a general sense that advancing technologies outpaced market and regulation changes and that utilities needed to address barriers to change in consultation with their regulators.

A renewable industry leader noted estimates that eighty percent of carbon reduction could take place with current technology.

Leaders could envision such opportunities authorized by state regulators or proceeding via unregulated initiatives, perhaps in partnerships with building owners, employers, car rental agencies, gasoline distributors, or a variety of other private sector stake-holders. An RTO/ISO leader saw lots of interest, from many stakeholders, in electri�cation around the utility’s service area.

One regulatory leader and several utility executives went into detail on a speci�c electri�cation opportunity: electric school bus batteries on “vacation” for the summer could help serve summer peak electric demand. �is was among the more intriguing and imaginative ideas presented during the hours of thought-provoking discussions.

Several interviewed leaders mentioned community solar projects as a means for customers of modest means to participate in the energy revolution of decreasing costs for photovoltaic electricity generation. Such community-wide projects could serve apartment dwellers, residents of public housing, and others. Moreover, utilities could create value by providing relatively low-cost capital and create economies of scale not possible on single family rooftop photovoltaic installations.

One non-utility leader spoke of the important opportunity arising over the next few years from using advanced information technology for better customer segmentation. Segmentation could address patterns of use or payment, customer concerns about (and valuation of) reliability, cost consciousness, and/or concern about the environment.

Understanding what customer value will allow development of pro�table o�erings. �is interviewee believes that utilities, which can develop sophisticated communications with their customers, even through electric bills, could create substantial value for their customers, their shareholders, and their local economies.

Load-shaping came up in several interviews. �e most common ideas related to shaping loads with advanced storage technologies, tactical load shedding, and/or distributed generation technologies (advanced or conventional) coordination. �ere was even specula-tion that, with the right load shape changes, even California’s ugly duck could be transformed into a swan.

An RTO/ISO leader made some key points related to load shape, emphasizing the importance of being technology-neutral in promoting shifts in load shapes.

A key way to promote value-adding load shifts is to clearly specify changes and/or services needed for reliability or e�ciency in a technology neutral manner. �en the potential battery, other storage, load shifting, and generation supply options could compete in a competitive market setting for markets for each of the speci�ed requirements. Closely related, a key challenge to RTO/ISOs is to ensure that their markets can ensure adequate valuation of what’s needed to achieve reliability.

A public power executive’s remark summed up the load shape discussion nicely: “It’s time to revise the utility-customer

PUBLIC UTILITIES FORTNIGHTLYAPRIL.10. 2040

Not Your Grandfather’s

TeslaPUF


�e point was that much can be done cost e�ectively in the next three years. Wouldn’t achieving eighty percent reductions constitute amazing progress?

A utility leader made another broad point that leads to a similar bottom line. �is interviewee recommended an approach that “plants a lot of seeds” rather than pursues one particular opportunity.

Several interviewees also mentioned enhancing infrastructure as a broadly attractive opportunity for creating enhanced and sustained customer value.

Question 5: Digitization, Innovation, Customer Intimacy and Customer Centricity�e theme of customer-focus has permeated many of the responses in this interview project. Not surprisingly, several customer-centric topics arose around this last inquiry.

One interviewee from a utility observed that, “�e fact that we ask this question says a lot.” He thought that the utility industry “still thinks analog,” yet he sees much progress. One of his key points on this topic was that bright potential employees expect to be in a digital workplace.

One non-utility association executive urged utilities to adopt “a culture of settlement” in which utilities practiced more collabora-tion with customers, other stakeholders, solution providers, and regulators. A public power leader noted that “customer centricity is really what the next stage of the utility industry is all about.” An RTO/ISO leader noted that customers increasingly want a say in “their energy destiny.”

A regulator expressed the opinion that “customer intimacy” begins today in the relationship started when a customer clicks on to a utility’s website. �is leader suggested that utilities o�er invitations to customers such as, “Want to save �ve dollars per month?” that would take a customer to some e�ciency or load-shifting suggestions.

Another interviewee recalled that when his/her company was considering diversi�cation, acquiring a cable company was proposed. �e supporting reasoning was the utility’s operational excellence on networks. Upon further re�ection, the team doing this assessment saw that the serious pro�ts from cable were in the media/entertainment side.

After no one on the evaluation team wanted to claim media/entertainment expertise, this option was dropped. �is execu-tive’s point was that utilities need to be careful jumping into data analytics, where they may have lots of data and not have analytic expertise.

Leaders from multiple industry segments expect utilities to provide more outreach for customer education. Some education might explain what creates costs in the production and delivery

of electric power. Other education could explain product and service options and the associated advantages and risks.

Information about electri�cation of transportation, its role in decarbonization, and potential utility roles was another educational opportunity identi�ed. A regulator even noted being caught out of town when a major snowstorm hit home. Even a regulator could �nd comfort in being able to look on the utility website to check on the status and expected time for restoration for a neighborhood.

It is important to remember that not all technology innovation being discussed here is hardware. Software and IT play major roles in the innovation underway now. A non-utility executive noted that telecom munications remains an important aspect

of electric digital technology and that cyber risks come with this linkage.

A regulator interviewed drew parallels to data mining experience in the Bell System decades earlier. Another inter-viewee presented the idea for a Center of Excellence for big

data analytics serving utilities and customers.�ere were also multiple remarks noting the importance

of ethical considerations regarding customer data and insights utilities would gain from con�dential information.

Pace of Technology Innovation and the Pace of Regulation�ese interviews identi�ed a broad consensus that the pace of technological change continues to increase. �e pace of regulatory review and approval, however, has not kept pace. Although the need for deliberative consideration is recognized to take time, interviewees expressed opinions that sought a way for utility regulators to better accommodate the rapid technological improvements that are frequently becoming available.

�is seems to be an area ripe for collaborative discussions. Some Federal policymakers (at USDOE and FERC) could take a lead on addressing this challenge, but one interviewed leader noted that New England needs to address some critical issues soon and FERC is not ready to make key decisions in a timely and knowledgeable way, especially with the recently announced departure of legendary Commissioner and Chair Cheryl LaFleur, who is from New England.

ConclusionThe energy utility business has often been described as a roller-coaster ride. All the persons we interviewed appeared to �nd their rides exhilarating and are ready for more. PUF

No one expressed optimism about a clear path for unwinding all these subsidies.

PUF Annual

Pulse of Power Survey


How You Answered Eight Questions

By Mackinnon Lawrence, Navigant


Xor the fourth straight spring, Public Utilities Fortnightly asked you what you think about the state and future of power. Sponsored by Navigant, we developed and �elded an eight-question survey to tease out how PUF readers see some of the industry’s most important trends.

Who completed the survey – speci�cally – is not known. It was intentionally con�dential. But who completed the survey – generally – is known. Based on the demographic questions, thirty-eight

percent of respondents are in senior management and twenty-one percent are in regulatory. And thirty-four percent are at utilities, �fteen percent are at utility regulators and twenty-seven percent are at vendors or professional services �rms. �e northeast, southeast, midwest and west were almost equally represented, at around twenty percent each, plus Canadians were nine percent of the respondents.

Which responses were most interesting to us? On survey question two, sixty-eight percent of the respondents said climate change is already posing a tangible threat to utilities. And on question �ve, sixty-nine percent said utilities should pursue a dual strategy investing in both current and new business models. And on question eight, sixty-�ve percent said tech and telecommunications companies pose the biggest competitive threat to utilities.

Well, let’s get to it. How you all see where this great industry is heading.– Steve Mitnick, PUF Editor-in-Chief

install 62 GW of DER capacity, representing a CAGR of 7.4% between 2019 and 2028, and generating revenue of at least $44 billion, according to Navigant Research. During the same period, EV charging load revenue is expected to grow from 2.6% to 10.3% of the market.

Climate Change Threats Are Here Today for UtilitiesOver two-thirds of respondents said that climate change is threatening the utility industry right now – not tomorrow or in 10 years. When asked what utilities can do to respond to climate change, 55% of respondents recommended that utilities focus on developing more resilient infrastructure to help mitigate the e�ects of climate change and better adapt to changing conditions. Another 30% believed that utilities should value climate risk in their investment decision-making.

After Navigant and Public Utilities Fortnightly surveyed nearly four hundred executives and in�uencers across the utility industry on their perspectives on the future, there is one de�nite conclusion: Change is upon us. Whether from disruptive forces or chang-ing business models, utilities face complex challenges, but also unprecedented opportunities for growth. Here are the key trends de�ning what’s next for utilities, according to you, our readers.

DER and Renewables Are the Most Disruptive Forces for UtilitiesWe hear about �at and declining demand for energy, but other forces are driving more potent disruption in the traditional utility business model. Nearly 60% of survey respondents said rapid increases in distributed energy resources (DER) and renewables are clearly the most disruptive force for utilities.

Between 2018 and 2027, according to Navigant Research, North America is expected to install more than 260 GW of solar PV alone at a compound annual growth rate (CAGR) of 14%. A little more than half of total North American capacity additions over the forecast period will be distributed installations. Of which, residential installations will account for 65 GW of the additions, and the remaining 73 GW will come from commercial and industrial customers.

Meanwhile, new global DER capacity deployments – includ-ing distributed generation, energy storage, plug-in electric vehicle (PEV) charging load, demand response, and energy e�ciency – are already outpacing the deployment of new centralized generation capacity. In 2028, North America is expected to

F

Flat demand for energy

Rapidly increasing renewable and distributed resources

Changing customer needs and wants

15.1%

25.1%

59.8%

Pulse of the Industry: What’s Next for UtilitiesQ1 Which is most disruptive to the utility business model?


respondents believed that utilities can achieve new growth by diversifying their products and services (44%) and through the electri�cation of transportation (43%). In terms of DER, utilities have multiple opportunities to support deployment, including by serving as a grid services developer, operator, or broker (50%) or as a transactive energy orchestrator (28%).

With the growth of intelligent infrastructure and communi-ties, and new platforms such as Transportation-to-Grid and Building-to-Grid, utilities are poised to o�er a variety of new products and services to their customers. Many are pursuing Energy as a Service (EaaS) solutions. According to Navigant Research, annual �nanced EaaS solution deployments in North America are expected to triple to nearly $60 billion in revenue by 2026, experiencing a CAGR of 12.5%.

Utilities are taking various steps to improve the resiliency of their networks, and one area to highlight is the role of microgrids. Rather than seeing microgrids as a threat to public safety, due to intentional islanding, or departing customer load on long-term revenue projections, a growing number of utilities view the microgrid they may own and operate – a utility distribution microgrid (UDM) – as an opportunity to deploy grid reliability and optimization. As the energy industry continues its radical transformation, UDMs are emerging as a critical platform to enable deployments of new technologies while also supporting new business models that can help ensure the longevity of incumbent distribution utilities. According to Navigant Research, UDMs represent 10% of the global microgrid market by capacity and have been primarily deployed by investor-owned utilities in North America.

Utilities Need to Invest in Current Business Models, but Also Offer New ValueWhether it’s DER and renewables or climate change, dis-ruptive forces drive utilities to explore what’s next for their organizations, including new growth opportunities. Yet, 69% of respondents said that utilities must focus on delivering on their current business models in addition to future business models (i.e., dual-track innovation).

Even as utilities seek to preserve their current business models,

Now; it’s already affecting us

Within the next ten years

Never

68.5%

12.0%

19.5%

Digitization and artificial intelligence

Electrification of transportation

Product and service diversification

13.1%

44.3%

42.7%

Stress-test assets and current business models

Value climate risks in investment decision-making

Develop resilient infrastructure, and mitigate and adapt

12.2%

55.6%

32.3%

Dual focus on both current and new business models

Double down on current business model, with limited investment in new business models

Shift to new business models with limited investment in current business model

3.5%

27.3%

69.2%

Asset developer or owner

Grid services developer, operator or broker

Transactive energy orchestrator

22.6%

27.7%

49.7%

Q2 When will climate change pose a tangible threat to utilities?

Q4 Which should utilities most embrace for sustained growth?

Q3 What should utilities do today – most importantly – to address climate change risks?

Q5 Which overall strategy should utilities pursue?

CLIMATE CHANGE BUSINESS STRATEGIES

Q6 What is the most attractive new business model in distributed resources?

Percentages add up to more than 100% due to rounding.



customers. Navigant Research expects North America to represent the largest global market (43%) for Internet of �ings (IoT) for lighting in commercial buildings by 2026, growing from $255 million in 2017 to nearly $2 billion by 2026 at a CAGR of 24.7% across all building segments. PUF

Regulations and Competitors Challenge New Utility Business ModelsAs utilities develop new business models and opportunities, they face several challenges. First, is the rigidity of utility regulation and business structures. Approximately 58% of respondents said this is the biggest roadblock to utilities investing in new business models. Another 42% pointed to the immaturity of new business models and their uncertain potential as preventing further investment.

Concurrently, utility competitors are also seeking to develop new business models and opportunities. According to 65% of survey respondents, technology and telecommunications companies are some of the biggest threats to utilities, even as they support utilities in developing what’s next.

Even with challenges in their �exibility, regulatory structures are evolving around the U.S. E�orts such as REV Connect – which brings together market players and New York electric utilities together to accelerate innovation, develop new business models, and deliver new value – work to engage and support utilities in new business model development and enable more experimentation with DER orchestration. At the same time, as utilities enter the market with expanded o�erings, ranging from charging infrastructure and mobility services to lighting as a service, they will increasingly bump up against traditional technology and telecom suppliers that once just served them. In the case of lighting as a service, utilities are actively partnering with competitors to co-create the future and deliver value to

Oil and gas majors

Global electric and gas companies

Tech and telecommunications companies

13.4%

65.2%

21.5%

Q8 Which potential competitors pose the biggest threat to utilities?

Immaturity of new business models and uncertain potential

Rigidity of utility regulation and rate structure

41.9%

58.1%

Q7 What primarily prevents utilities from investing in new business models?

REGULATIONS AND COMPETITORS

Look at the cost of electricity in Minneapolis in 1926, ninety years ago. Minneapolis General Electric charged ten cents per

kilowatt-hour for the first three kilowatt-hours used over the course of a month, per room. Per room? So the number of rooms

in your home impacted your electric rate and bill. Because the utility charged seven and a half cents per kilowatt-hour for the

next three kilowatt-hours. Again, per room. And especially because the utility charged three cents per kilowatt-hour for any

excess consumption. That’s any electricity used above six kilowatt-hours over the course of a month. Per room. (American

households in 2016 use that much electricity, six kilowatt-hours, in about four hours, on average.)

Consider a modest Minneapolis household in 1926 with three rooms. This family gets to the cheap three cent rate after

using eighteen kilowatt-hours. Then consider a Minneapolis McMansion in 1926 with six rooms. This family gets to the cheap

three cent rate after using thirty-six kilowatt-hours. All this was the variable energy charge. The fixed charge was a dollar per

month per customer.

Suppose that family with a six-room home used fifty kilowatt-hours in a month. The energy charge was $1.80 for the first

eighteen kilowatt-hours, $1.35 for the next eighteen, and $0.42 for the remaining fourteen. The energy charge totaled $3.57.

And the fixed charge was $1.00. Total bill, $4.57.

That’s twenty-two percent fixed, seventy-eight percent variable. For most families, with small homes and small total bills,

the percent fixed was closer to fifty percent or even more. A dime in 1926 was like $1.35 today. So the cost for a ten-cent

Minneapolis kilowatt-hour in 1926 was effectively $1.35. And the cost for a three-cent kilowatt-hour, the lowest block of the

decidedly declining block rate structure, was effectively forty cents.


Documents

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