Transforming the utility business while staying ahead of the regulatory curve

Published: Fri 02 May 2014
A blog entry by Smart Grid Watch

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Around the world, shifting regulatory requirements are supporting more innovative energy options (such as distributed generation and time-varying pricing) and mandating operational changes (such as integrating ever more renewables). As utilities expand beyond their traditional business model, how can they plan for an evolving regulatory landscape as well as rapidly evolving energy technology?

A breakout session at the Siemens Smart Grid Software Leadership Conference (May 5-7, Orlando, Fla.) will explore these questions -- and help utilities understand how they can "future proof" their business model in a regulatory context.

Don't miss: Responding to Regulation: The Business Case Approach to Utility Business Transformation

Chris King, Global Chief Regulatory Officer for Siemens Smart Grid Services, will draw upon decades of experience with hundreds of utilities and U.S. and international strategic consulting activities to offer insights and learnings in this session:

What's changing about how regulators can impact utility business models?

King: The impact of regulation used to be very predictable when the core utility business model was mostly about selling kilowatt hours and ensuring access and reliability. As long as a utility operated efficiently, it had a positive business case. But these days, regulators are responding to new priorities, especially the need for more renewable resources. So they're starting to impose new mandates on utilities. Also, regulators are trying to keep up with new technology, especially for the smart grid and distributed generation.

For instance, in Spain, hourly electricity pricing is now required for all residential and small business customers. And in Germany, some central power plants are being retired early in response to subsidized fast growth in renewable capacity there.

How does this change the way utilities make business decisions?

King: With regulatory mandates, the business case is not to decide whether to increase renewables, introduce time-varying pricing, etc. -- but how to do these things most cost effectively.

Part of this is looking at total cost of ownership for software needed to meet new requirements -- as well as the potential new business opportunities that this technology offers.

It's important to build in flexibility that will accommodate future regulatory shifts, since regulation is increasingly a moving target. What if regulator comes up with a different rule in five years, like adding a demand charge to time-varying pricing? You need to be able to implement that without having to make other major new investments to support such a change.

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