Technical Assistance on Utility Business Models

Technical Assistance on Utility Business Models

States are setting new goals for the electricity sector, including grid modernization, resiliency, customer empowerment, and environmental improvement. EMP provides technical assistance to states considering possible changes to regulations and policies to advance these public policy goals.

Consumer and third-party investments in energy efficiency and customer-sited generation can support these goals. However, these distributed energy resources are contributing to stagnant, or even declining, retail electricity sales in some regions. Reduced retail sales—at a time when utilities are investing in infrastructure to meet increasing demands on the electric system—may affect their bottom line. That’s because retail rates for most customers are designed to collect large portions of utility fixed costs in volumetric charges. When sales decline, revenues drop without equivalent reductions in costs, resulting in the potential for earnings erosion.

Many states are asking whether incremental approaches to address previous disruptions to the regulated utility business model (such as energy efficiency) are effective, while others are considering more fundamental changes to regulating utilities and their role in the ownership, management, and operation of electricity systems.

EMP provides analysis support to help regulators and stakeholders quantify the impacts of incremental changes to the utility’s business model in response to high penetrations of energy efficiency and other distributed energy resources. EMP also provides information about design and implementation issues associated with both incremental and fundamental changes states may be considering.

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