Utilities that supply gas and electric face a troubling future. Even though trust in them has increased by almost 20% over the past couple of years, that provides little solace as only 20% of people trust them as of 2012. Compared with 31% who think they need more regulation, this does not bode well as utilities try to convince customers and lawmakers that they need higher rates and more infrastructure to continue to meet obligations. Compounding this, many states - responding to environmental and economic concerns - have established programs supporting energy efficiency efforts among institutions, businesses and residents. For an industry that collects its revenue on a price-per-unit-consumed, reductions in energy use by customers means that rates have to rise even faster to keep up with increasing costs.
For those interested in increasing the amount of community energy - and more specifically renewable energy - available in our cities to help improve resiliency, reduce environmental impact, and increase economic development, this troubling future bodes ill for us as well. If utilities face ever-increasing fiscal constraints, they will have little incentive to participate in programs or accept technologies that will result in further reduction of consumption, and with it, revenue.
So what can we do?
One approach has focused on only the financial health of the utilities by eliminating the use-based charge and allowing utilities to charge on a per-customer fee basis. This decoupling solves the problem of utility finances suffering from energy efficiency, but since they are not structured to promote energy efficiency or renewable energy, utilities still have no incentive to participate in either (in the absence of a separate statutory mandate). This also creates a possibility for tension and uncertainty as flat-rate customers who use less than others (or in some cases may have taken steps to use almost nothing at all) find themselves paying the same as another less frugal customer. In Chicago, our municipal water utility has charged single-family residential customers on a flat-rate basis (determined only by property dimension) for decades, and has recently begun moving to a rate-of-usage basis to address this inequity.
The ultimate issue that drives the inability of utilities to adequately address environmental issues related to usage comes from the charter of utilities as providers of reliability. Our lives depend 24/7/365 on available energy. Our economy requires it, our health requires it, and safety requires it. Utilities have set themselves up in such a way as to deliver two consistent products: nearly 100% reliable energy flow, and consistent dividends to investors. Anything that jeopardizes either of these falls outside the priorities for those that lead utilities - and that includes energy efficiency and renewable energy. The only times that utilities have participated actively in these programs have either been by statutory requirement (in the form of renewable energy portfolio standards or energy efficiency requirements) or when the capacity of existing infrastructure falls less than predicted demand and the cost of quickly increasing infrastructure exceeds that of implementing energy efficiency. Both of these come back to reliability and profitability.
So the question remains: what can we do?
The simple answer is that utilities must get out of the business of supplying units of energy. Right now your electric utility supplies you kilowatt-hours (kWh) of electricity and your natural gas utility supplies you therms, cubic feet, or British-thermal units (Btu) of natural gas. None of us eats or drinks natural gas, and we do not hook our bodies up directly to an electrical socket to "power up". We consume goods and services that use natural gas and electricity: heating systems, refrigerators, entertainment devices, etc. If the utilities could charge us based upon our consumption of the goods and services in our home, instead of the units of energy that supply them, then the measure of reliability would still exist, but it would focus on the end service and not the amount of energy consumed. In this way, utilities would no longer have a concern about how much energy a customer consumed, and would even have an interest in minimizing the infrastructure needed to provide the service at the most reasonable cost.
The trouble with this is getting there.
Utilities are big business with thousands of employees and huge bureaucracies. They do not shift focus overnight, and until some future day when they might possibly behave differently, getting there poses a major challenge. This change can happen in one of two ways:
1. States allow smaller service companies set in neighborhoods to aggregate customers and supply the service on a local level, while continuing to pay the utility. Over time, the obligation to the utility gets smaller and smaller as the service providers find alternative means of supplying the service to customers. The utilities then have the option to absorb the smaller service providers, or negotiate a different fee-for-service plan.
2. Utilities get into the business of providing community energy system and energy efficiency through on-bill financing. In these structures, either a utility or a third-party puts up the capital to install a local renewable energy, energy storage, or energy use reduction technology, and the utility charges all the customers who benefit from this new technology through a line-item on their bill. The customers see little-to-no change because the benefit should reduce their bill comparably in another area (either in shifting supply cost or in lowering the amount of energy used). The utility can bank on this revenue stream for an acceptable period of time (say 15 years) over which they overhaul their business model gradually. If a third-party invests the capital, they can benefit from a utility-backed investment that provides consistent but reasonable return over a longer period of time.
There is a third option, that really cannot be an option: that larger utilities go bankrupt, or become marginalized as municipalities opt out of them and take over the service. Gradually, these broken utilities will recombine, just as Ma Bell did over the timeframe from the 80s through the 00s, but with a vastly different service model. Although enticing to some, reliability of the energy infrastructure has many more health consequences than reliability of a communications network, and does not have the same potential for innovation that might replace it.
We are going to need, at the very least, electricity delivered to our homes, businesses, and institutions for the foreseeable future. Inviting instability in the way we receive that energy brings a measure of risk to our economy that we can ill afford to accept. We have a choice: continue to think of utilities as providers of energy, separate from the service they provide, or open ourselves up to greater innovation and possibility as we consider utilities as providers of services and not of kWh and Btu. In this manner, utilities become more useful to our lives, and as we see them as connected to these great services that improve our quality of life, trust will grow, and with it, an understanding of the costs associated with their services.
No comments:
Post a Comment