Utilities Profit from the Smart Grid, Too

September 8, 2009 at 4:54 pm

Policymakers are driving Smart Grid to capture the many consumer benefits, including demand response and conservation programs that save money for consumers.  Importantly, utilities also can and do benefit from the Smart Grid, though the right regulatory policies are needed.  Policymakers need to ensure utilities make more money by selling less of their product.

Consumer bill savings and carbon emission reductions result from lower peak demand and lower electricity consumption, and most public utility commissions are requiring utilities to include these programs in their overall resource plans.  Smart meter-enabled consumer engagement software is a low cost way to achieve energy savings – through information feedback – that also increases customer satisfaction.  In addition, PUCs and the U.S. Congress recognize the incentives problem and are developing ways of allowing utilities to earn the same level of profits with lower sales.  The methods include decoupling, rate of return kickers, and putting energy efficiency investments in rate base, allowing earning of a return.  Twelve states have done this already, and most of the rest are evaluating it.  States receiving Stimulus funds from the Department of Energy even had to promise they would consider these options before receiving the funding.

As for utilities, Smart Grid enables them to reduce their operating costs while maintaining or increasing reliability (things like automated outage response and restoration verification).  Smart grid also requires significant investment, which then goes into rate base and increases utility returns.

Smart Grid works best when both consumers and utilities see clear benefits.

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Entry filed under: Chris King, consumer benefits, Energy regulation, Smart Grid, smart grid benefits, Utility benefits. Tags: , , , , .

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