Top Ten Resolutions for Utility Executives in 2022: Addressing Major Issues Impacting Utilities for the Coming Year and Decade Ahead

Guest Editorial

Top Ten Resolutions for Utility Executives in 2022:

Addressing Major Issues Impacting Utilities for the Coming Year and Decade Ahead

Jason Price and Niki Shah

When the clock strikes midnight on December 31st we embrace the new year with a fresh start.  However, utilities do not have the luxury of starting the new year from a clean slate. As each year passes, the utility’s role grows more complicated; arrearages are increasing year-over-year, the planet is getting warmer and weather events are more severe, calls for decarbonization are getting louder, and the world is demanding the energy industry take action. While utilities are not in the business of solving the world’s problems, regulators, policy makers and the general public expects results.

For utilities, 2022 presents both challenges and opportunities and may very well serve as a defining year in our history in transforming the industry to slow climate change.

It will be the year many countries including the US operationalize environmental, social, and corporate governance (ESG) strategies. It will be the year that public and private transportation electrification finally reaches the federal policy level. It will be the year that launches transactive energy and the visible role that distributed energy resources (DER) serves in the electric grid and our daily lives.

For utilities, 2022 presents both challenges and opportunities and may very well serve as a defining year in our history in transforming the industry to slow climate change.

In the second year of our top ten resolutions for utility executives, we start by acknowledging how different this year’s list is compared to the top ten for 2021 published in the Climate and Energy journal (February 2021). The difference from year-to-year illustrates how dynamic and complex the industry and our energy system has become. As the electric grid continues to modernize new possibilities and opportunities emerge. Let’s make a pledge to act and think differently and opportunistically in the upcoming year. Here are ten ways the authors believe utilities can kick off 2022!

1. View DER holistically where cross sharing of DER data within the utility can optimize grid efficiency and grid performance.

Communication and alignment of assets are key for utilities to effectively manage grid performance, especially as the grid becomes more distributed and assets are owned by multiple parties. Utilities should work to break down barriers and accept the importance of integrating DER assets into the grid. As of now, the information and organization of DER mostly remain isolated and siloed, creating potentially unsafe conditions for field workers as well as missed opportunities for improved customer engagement and satisfaction. Utilities need to embrace and support accelerating third-party DER and using DER data to improve grid operations and performance.

2. Align with regulators and invest in areas that aim for 2030 and 2050 climate goals.

Less than 22 percent of all US proposed grid improvements were approved by regulators last year[i]. This misalignment between utilities and regulators needs to be addressed. Both parties should work together to identify and implement necessary improvements through an equitable lens to improve the grid for everyone. The Biden Administration’s initiatives present an opportunity to collaborate and accelerate what is necessary to upgrade the system. The opportunity to build a solid foundation of communication and coordination between all parties and make meaningful choices that avoid placing the burden on the future rate base is now.

3. Define a pathway to hydrogen as part of the energy mix to accomplish decarbonization.

Hydrogen’s flexibility and dispatchability present opportunities not yet fully understood or appreciated by utilities or regulators. To achieve the goals of decarbonization, it is time to start bringing hydrogen into the conversation. With the Infrastructure Investment and Jobs Act (IIJA) allocating $9.5 billion towards hydrogen[ii], this energy source represents a potential solution which brings many substantial investment and growth opportunities across the entire value chain, from transportation to storage solutions. Utilities can unlock the potential of hydrogen by collaborating with sister utilities to create dialogues with key industry and regulatory influencers around hydrogen-based decarbonization strategies and initiatives.

Utilities can unlock the potential of hydrogen by collaborating with sister utilities to create dialogues with key industry and regulatory influencers around hydrogen-based decarbonization strategies and initiatives.

4. Prioritize utility resilience and response to cyberattacks by segmenting internal networks and communications.

As of November 2021, there were 976 cybersecurity breaches across 20 energy companies, on track to meet or surpass the number of breaches in 2020[iii]. Utilities should invest in recruiting and training the next generation of cyber analysts and build a roadmap to effectively segment and isolate attacks when they occur. Attacks are inevitable, but breaches are not. Consider different hosting models including what role does the cloud serve in prevention or mitigating a cyber-attack. Work with experienced and proven professionals in the utility industry for the safety and security of customers and the utility alike.

5.  Enable more utility fiber on the market to close the digital divide.

During the pandemic, people became much more reliant on internet access for work, study, and to connect with friends and family. However, this new increased reliance on high-speed internet highlighted an important societal and equity issue. Rural and urban areas with limited to no internet access were exposed at the height of the pandemic when it was needed most for medical and educational needs and overcoming isolation. Utilities are uniquely positioned to address the lack of high-speed internet access due to their unique position in the market. With a glut of fiber and public internet service provider (ISP) companies providing little to no support, now is the time to redress the rules with regulators, open competition, and support entrepreneurs including the utilities to enter the ISP space. The last mile of connectivity remains a business conundrum. The IIJA’s $65 billion[iv] allocation towards improving broadband access is a move in the right direction, but current regulations and lack of utility inertia have left large pockets of society behind the broadband connectivity divide. In 2022, utilities should work with regulators to continue to reform the regulations and grow into a new space, while providing much needed societal benefits.        

6.   Modernize utility telecommunications to meet increased technological automations and climate adaptation

The distribution grid is becoming far more sophisticated with intelligent devices and DER assets moving to the grid edge. Existing telecommunication infrastructure at the utility level does not meet the challenges of tomorrow’s grid. Without a reliable telecommunication platform, utilities will never achieve the performance and operational metrics necessary to maintain the reliability and resiliency of the energy system required. Utilities and regulators need to consider retiring outdated technology, remove redundant costs and reduce general reliance on third-party carriers. With support from the IIJA, now is the time to broaden the options that will underpin the utility of the future through new options offered in the telecom utility space.

Without a reliable telecommunication platform, utilities will never achieve the performance and operational metrics necessary to maintain the reliability and resiliency of the energy system required.

7. Advocate for customer relief and build a relationship with struggling customers.

Utilities face mounting arrears from the pandemic which will only increase as the energy burden rises due to inflation. For example, as of September 2021, National Grid in New York reported bills worth $387.1 million that were in arrears or had gone unpaid for more than 60 days, a debt level for 237,622 customers[v]. The utility industry is uniquely positioned to influence change, whether through legislative channels or within its own operations. Utilities can consider measures such as introducing a pre-taxed income deduction program (similar to a Health Savings Account) that enables customers to budget and use its dollars toward discretionary energy-related expenses[vi]. Instead of an all-or-nothing approach and face disconnect situations with struggling customers, utilities should consider introducing payment plans that empower customers to pay what they can, as they go. Explore solutions which assist customers in paying smaller quantities that are within their means. Engaging and advocating for customers is the right step forward in building a one-to-one customer relationship.  

8. Collaborate with public transportation systems to accelerate transportation electrification for the masses.

As regulators push utilities to increase their green initiatives, electrifying transportation is key to achieving those goals. Modernizing how we travel and transport goods must be a priority as it opens the path to decarbonize many public services such as buses, service vans, and even emergency response vehicles. Collaborating with public transportation sectors creates opportunities for increased utility revenues, further decarbonization, and job creation. Utilities can capitalize on this public-facing opportunity and demonstrate their commitment to promoting green alternatives.

9. Define data governance and reimagine the customer data journey.

The utility industry is going through a complete transformation of data and analytics. The continued push towards smart meters, with hourly or even more granular energy usage reads, opens a huge amount of possibility for targeted customer programs aimed at reducing carbon emissions. Capitalizing on the spread of advanced metering infrastructure (AMI) will require new ways of analyzing, processing, and digesting data to get meaningful and actionable information. Now is the time to build from the ground up, an enterprise-level data governance.  Defining a governance structure on how to capture, cleanse, and manage data will provide the clarity necessary to build a customer-driven data strategy. Even those utilities mature in their data journey can benefit from new insights to improve operational efficiency, enhance the customer and employee experience, and better enable the low carbon energy transition, further reducing operations and maintenance (O&M) costs.

10. Grid modernization is incomplete without a pledge to ESG – for the workforce, for the community, for investors, and for the planet.

The pandemic brought the global community together to act unselfishly and work towards a common goal of fighting the Covid-19 pandemic. Regulators, policy makers and customers expect utilities to do the same in battling global climate change.

The pandemic brought the global community together to act unselfishly and work towards a common goal of fighting the Covid-19 pandemic. Regulators, policy makers and customers expect utilities to do the same in battling global climate change. ESG criteria must be the underlying driver behind all utility decision-making. To operationalize ESG, utilities must identify leaders who will spearhead the effort of exploring solutions which allow for sustainable and equitable longevity. It is vital to reflect internally on what improvements can be made but also to encourage initiatives to cascade to the entire utility ecosystem, from partners to subcontractors to suppliers. Utilities should empower more minority and women-owned businesses by including them in utility programs. Emphasize accountability by collaborating with an external partner to create a road map with measurable goals to quantify the progress being made. It is in the utility’s best interest to help all communities that they touch and build robust programs and operations that can be continued for generations to come.

Conclusion 

Reflecting on the past year we’ve seen horrific weather events around the globe, Texas suffer a major power crisis, and a high-profile cyber-attack cripple a gas pipeline, among other events including a global pandemic. We also saw the world come together in Glasgow for the 2021 United Nations Climate Change Conference (COP26) and set international goals to support one another on meeting climate commitments. Here in the US, as already mentioned, we have unprecedented financial commitment and federal leadership move the country in a new direction and this includes curbing greenhouse gas emissions. Decisions made today will shape how we live in the future. When our children inherit a better earth, we can reflect on our actions in the year 2022 that helped make this possible.

Biography

Jason Price is a director of in West Monroe’s Energy and Utility practice, based in New York City. He is a graduate of the NYU Clean Energy program and host of Power Perspectives podcast on Energy Central. Niki Shah is a consultant of West Monroe’s Energy and Utility practice, advising investor-owned utilities on grid modernization strategies. The authors would like to thank Paul DeCotis for his contribution to this article. The views are those of the authors and not of West Monroe.  Please contact the authors for questions and comments at [email protected] and [email protected].