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The Future State: Part II

Paul A. DeCotis's picture
Senior Partner, Head East Coast Energy & Utilities West Monroe

Paul A. DeCotis is senior partner and east coast lead for West Monroe's Energy & Utilities practice, based in New York City. He leads the firm’s executive advisory and regulatory offerings...

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  • Jan 25, 2022
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Abstract: Communication devices and controls, cloud hosting and computing services, and grid-edge technologies are challenging the utility industry business model as we know it today. Many utilities are considering merging information technology (IT) and operations technology (OT) departments recognizing that current siloed organizational structures are not agile nor responsive enough to meet rapidly changing needs. Utilities experimented with running “IT as a business” in support of business needs over the last decade, but because of continued departmental and leadership separation, little changed. Separate budgets, priorities and governance of large transformational projects continues to impede implementation of the end-to-end digital product solutions necessary to improve operations and the customer and employee experience. Cost-of-service rate regulation, concerns over energy affordability and equity, and aggressive climate and clean energy goals give regulators pause when considering utility requests to invest billions of dollars in capital to modernize the electric grid and grid operations. Under current cost-of service regulatory paradigms, most all risk is transferred from investors to customers for all prudently incurred investments and costs. Competitors offering commodity services shield customers from some risks and expose them to other risks. The low-cost of market entry for competitors offering electricity as a commodity or as a service are challenging the industry’s business model and regulatory paradigm’s, creating some confusion among constituents. No market or industry model is perfect in allocating risks and returns but variations of the current cost-of-service paradigm might offer some advantages to both investors and customers.

 

DeCotis, Paul A. (February 2022). “The Future State: Part II.” Climate and Energy Journal. 38/7, ©2022 Wiley Periodicals, LLC. a Wiley company.

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