The Utility Business Model: Evolution or Revolution?

As residential consumers take increasingly active stances toward energy management and generation, fundamental assumptions of the electric utility model are being challenged. Power providers counting on load growth and guaranteed rates of return for consistent financial returns now face disruption from the rapid expansion of residential solar, storage, and new financial innovations. GTM Research has shown that distributed PV nearly halved electricity demand growth in California, Massachusetts, and New Jersey in 2013. In another few years, New York may face a similar situation.

Lost profits and the threat to shareholder value and pensions are serious concerns, but are only the tip of the iceberg. Tying utility revenue to kilowatt-hours sold has resulted in an oversized power grid and lagging incentives for demand response, energy efficiency, and distributed generation. NRG CEO David Crane has suggested a scenario in which “the grid is, at best, an antiquated backup system to a different way of buying electricity.”

Several state regulators have taken steps toward remaking the utility business model to address these issues. New York policymakers, at the forefront of these efforts, recently launched an overhaul of electricity regulation in the state with the goal of increasing efficiency, resource diversity, and resiliency. This panel will examine emerging challenges and opportunities as utilities in NY and around the country evolve to meet the needs of a next-generation power system, develop services that offer their customers more choice, and deliver increased value to their shareholders.

This event was originally recorded on September 22, 2014