Used and Useful, time to make some changes?
- Jul 28, 2022 11:34 am GMT
A concept that is used by regulators for new investments is used and useful. Which means the new investment must be commissioned and in use. That is not an issue in most cases, but some parts of it in some locations are for the energy transition.
In some jurisdictions a minimum percentage of the new investment must be used to serve load. This is the issue that may need to be changed if the industry is to prepare for the transition.
Decarbonization of buildings can double the need for electricity, and the move to electric vehicles can double it again.
If the requirement for used and useful is a 70 or 80% load requirement on the new investment, then some utilities will have to rebuild not once but as many as 4 times.
In each case, the labor fraction of the work is a sunk cost and can’t be leveraged in a new location, only the equipment can be moved. Labor can be as much as 60% of the total cost of a rebuild or new infrastructure project.
Moving the requirement to as little as five percent and pushing regulated utilities to overbuild to support the transition for distribution and transmission should be encouraged to minimize the re-work on the grid.
When a utility starts a project to rebuild, underground, move infrastructure from the back lot to the front lot, regulators should be pushing for at least three times the capacity of the load today, if not four or five.
It is going to be expensive to make this transition, having to rebuild portions of the grid multiple times is not the right answer. Any new projects should be upgraded to support the transition. It is only best practice.
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