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As a follow up to the GMH post Low cost power?, here's another valuable interchange under the EnergyPulse article, What to do when customers like gas rationing and politicians better than their utilities?, by Mark Gabriel, where Greg Tinfow wrote on 12.6.12 that:

Here in California, we generally have to beat a 2/3rds threshold for votes on any tax increases. Despite that high hurdle, people do vote to tax themselves--to the tune of $7 billion/year just a few weeks ago--when they know what they are getting for their money. The utility industry needs to catch up to the needs of the future, not the 1930s regulatory policy that they've operated under for 80 years. Hurricanes, renewable energy, and global warming provide the industry with an unprecendented opportunity to remake themselves into what they should have been all along, energy service providers rather than monopoly power producers. As tempting as a "tough love" strategy may be to those who believe IOUs are the root of all our energy problems, the reality is that they behave exactly like any other profit-oriented business, despite regulatory restraints stronger than just about any business. 
 
The future is going to require both a smarter energy infrastructure and a different kind of energy company than in the past. The transition is not going to happen overnight, and the cost of bringing the under-funded distribution infrastructure up to speed will not be cheap or easy. It is doable however, and the better utilities are at communicating both the costs and the benefits, the sooner we'll get moving forward.
That future of electric utilities is not at all doable. Jesse Berst SmartGridNews.com post Get ready! FERC spotlights 3 major challenges for utilities is introduced with “The bad news – there are big, big challenges looming for the electric utility industry. The good news – agencies and regulators are increasingly aware of these painful truths and, therefore, increasingly willing to discuss solutions. That was the message from FERC Chairman Jon Wellinghoff during a briefing on Capitol Hill this week.” But that good news is not at all for the utilities.
 
Instead what’s doable for utilities is in the third prediction of the EWPC article Three Smart Grid Predictions for Initiating the Global Power Industry Transformation: “Repositioning the utilities that missed the opportunities to learn the lessons of other industries is bound to be in a restricted T&D Grid space that will sooner or later be ‘painfully consolidated.’"
 
This is why! Ever since the 1980s, utilities have had an "... unprecedented opportunity to remake themselves into what they should have been all along, energy service providers rather than monopoly power producers," as Mr. Tinfow said. Please take a look at the article Why the Current Smart Grid Process Doesn’t Let the New Steve Job Connect the Dots in two key events where they lost that unprecedented opportunity: the Energy Policy Act of 1992 and once again in the development of the Integrated Energy and Communication Systems Architecture (IECSA) project, circa 2003.
 
The situation that utilities face today were clearly anticipated in 1982 in chapter 4 of John Naisbitt’s bestseller Megatrends: Ten New Directions Transforming Our Lives, on the "Law of the Situation: the railroads did not understand."
Suppose that somewhere along the way a railroad company, sensing the changes in its business environment, had engaged in the process of reconceptualing what business it was in. Suppose they had said, "Let’s get out of the railroad business and into the transportation business." They could have created systems that moved goods by rail, truck, airplane, or in combination, as appropriate. "Moves goods" is the customer-oriented point. Instead, they continued transfixed by the lore of railroading that have served the country so well - until the world change. 
 
Of this phenomenon Walter B. Wriston, chairman of Citycorp, in 1981 said: "The philosophy of the divine right of kings died hundreds of years ago, but not, it seems, the divine right of inherited markets. Some people still believe there’s a divine dispensation that their markets are theirs - and no one else’s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else. All the king’s horses and all the king’s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard." 

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member photo Len Gould added a comment on 12.8.12 that says:

I think its foolish to expect a regulated monopoly business to voluntarily give up its monopoly simply to increase their likelihood of staying modern, or even of joining the current century. They'll need to be forced into their future by regulators and legislators, no doubt kicking and screaming.
# Posted By Jose Antonio Vanderhorst-Silverio | 12/10/12 7:59 AM | Report This Comment as Foul/Inappropriate
member photo My comments are certainly aimed to federal and state governments, as well as for entrepreneurs. The history of railroads is a great example to emulate.
# Posted By Jose Antonio Vanderhorst-Silverio | 12/10/12 8:00 AM | Report This Comment as Foul/Inappropriate
member photo Malcolm Rawlingson wrote on 12.9.12:

Jose,

Very good observations regarding companies not changing with the times. Kodak has got to be the outstanding one of recent years. They were the kings of the film camera until digital electronics, i-photo and computers wiped them out in an entirely predictable way.

Utilities are NOT providers of electricity - although they think they are. They are providers of ENERGY and energy services and they seem incapable of amalgamating the distribution of electrical energy with the distribution of all forms of energy to provide the customer with the cheapest combination.

In an era of cheap natural gas utilities still cling to the notion of burning the gas in power plants at 60% efficiency or less to make electricity, sending it along power lines and through distribution transformers to be converted into heat in hot water tanks or electric heaters.

It is better to pipe the gas into the home and make electricity there through a methane fuel cell. That technology is getting to a mature stage and will wipe out electricity only distributors. Why pay for two service charges when you can do it all with one.

Those days are not far off and it is highly probably that electricity distributors ws we known them today are done like a dinner - but they don't know it yet.

Malcolm
# Posted By Jose Antonio Vanderhorst-Silverio | 12/10/12 8:03 AM | Report This Comment as Foul/Inappropriate
member photo Malcolm,

Thank you for your kind appreciation and an interesting comment. I guess the in-home electric generation market is to utilities, what cars were to railroads. But, a customer orientation is better served when customers are able to have also competitive central generation electricity, for example, backup through a T&D wires only utility in order, as you say, "to provide the customer with the cheapest combination" to in-home distributed generation.

Unlike Kodak, which was in a competitive market, utilities are being protected like railroads were. In order to do that, federal and state government's actions are required as soon as possible to open the power industry, as they did to railroads.
# Posted By Jose Antonio Vanderhorst-Silverio | 12/10/12 8:05 AM | Report This Comment as Foul/Inappropriate
 
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