By Steve Corneli and Steve Kihm
Continued improvements in distributed energy resources may erode or even end the natural monopoly characteristics of electric distribution utilities, requiring new regulatory and business models to preserve and enhance the continued social benefits of grid connectivity.
n a recent report we wrote for Berkeley Lab’s Future Electric Utility Regulation series (online at FEUR.lbl.gov), we revisited the concept of natural monopoly and asked whether electric distribution utilities will remain natural monopolies if the capabilities and affordability of distributed energy technologies improve sufficiently. Our basic conclusion: Don’t count on it.
The reasons are straightforward. Natural monopolies only exist when cheaper alternatives can’t be provided by multiple firms. The power sector has already seen cheaper and smaller electric generating technologies and competition from independent power producers (IPPs) erode the utility natural monopoly in generation. In much the same way, continued improvements in the capabilities of distributed energy resources (DERs) to produce, manage and store electricity at ever lower price points would create widespread competitive alternatives to local electric utility delivery service. If and when that happens, the distribution natural monopoly would fade, as a simple matter of economics. This does not mean the distribution system or the grid itself should disappear or that it no longer provides critical value to society. But new regulatory paradigms and business models would be needed to ensure and enhance the ...
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By Scott Hempling
The Federal Power Act, like all collaborative federalism statutes, envisions a federal-state relationship requiring interdependence and cooperation. But those principles include the statutory goal of just and reasonable rates for all affected states, not just one or even several.
Background: Just the Facts
ue to generation shortages in transmission-constrained areas, PJM capacity auctions were producing high wholesale prices in Maryland. The Maryland Commission designed a three-part solution: (1) Select through competition a wholesale generator to serve in the constrained area. (2) Order Maryland’s retail utilities to contract for long-term capacity from the winning generator, at the price offered by that generator in that competition. (3) Draft the contract so that the utility, using retail ratepayer dollars, will pay the generator any difference between the FERC-authorized PJM price and the generator’s contract price—with the payment conditioned on the generator being selected in the PJM capacity auction. New Jersey passed a statute mandating a similar solution.
Federal district courts and circuit courts struck both efforts, holding that the Federal Power Act preempted the state actions. Maryland appealed to the U.S. Supreme Court.
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By Karl R. Rábago
Net metering opponents have done a masterful job in casting the debate around mistaken assumptions. As regulators conduct NEM 2.0 and Value of Solar proceedings, those errant assumptions should be exposed and the real questions addressed.
fter 25 years in the electric utility rate-making business, I have come to the conclusion that most rate “fairness” can be better understood if you keep this old math riddle in mind:
By Brien Sheahan, Elizabeth McErlean, and Anastasia Palivos
While companies like Amazon, Google, Netflix and Uber are using the cloud and IoT to disrupt entire industries, offering dynamic pricing and services, utilities are lagging behind. As the energy landscape evolves, regulators must consider whether the technical and functional merits of the cloud can create value for utilities and ratepayers.
ncreasingly, unregulated businesses are adopting cloud-based information technologies to improve service while leveraging back-office scale and security to generate greater value for consumers and shareholders. Burdened by outdated accounting rules that incentivize investments in legacy technology, cloud adoption by public utilities is relatively low due in large measure by the failure of regulators to consider forwarding looking policies. As the electricity grid evolves, cloud-based services will become necessary to manage a smarter, more efficient, and more distributed network and regulators will have to overcome antiquated views regarding how we think about rate-base and cybersecurity.
By Ahmad Faruqui
In seeking to reduce $500 monthly utility bills in the most economic way, this Californian found himself engaged in an odyssey of the mind. Why couldn’t I accept the subsidy rooftop solar offers utility customers in a high-cost state? Could I do as well simply pursuing energy efficiency?
uring the past 12 months, my wife and I paid up to $500 a month for our combined electricity and gas bills during some summer and winter months. The annual average was $300 a month. The high bills hit the pocketbook hard. But they also caused angst.