Bill Loveless asks this question in a special for USA Today. It certainly has changed over the past one or two decades and will continue to evolve. Can they make money selling less? What do you think?
Huh? Utilities spur power savings, see profits
For nearly 125 years, electric utilities have operated according to one basic business principal: the more power they sell, the more money they make.
But the industry founded by Thomas Edison in 1882 now faces the potential for the kinds of upheaval that have transformed telecommunications, transportation, TV programming and other industries.
Will the utility as we know it disappear?
Executives with investor-owned utilities across the U.S. say their companies are here to stay. But they also acknowledge that their business is changing significantly, with new technologies like rooftop solar systems giving them stiff competition and regulations forcing them to shut down big carbon-emitting coal plants.
All this comes as consumers rely increasingly on electricity to power cell phones, computers, and the countless other devices that make up the Internet of Things.
As strange as it may seem, many utility leaders say one of the best solutions would be to allow their companies to make money selling less electricity — in other words, enabling them to earn a profit when they provide products and services that help their customers save energy.
“It’s not pixie dust,” Ralph Izzo, the chairman president and CEO of Public Service Enterprise Group, said of the potential benefits of energy efficiency for utilities’ investors as well as their customers.
PSEG is the holding company for New Jersey’s largest utility, Public Service Electric and Gas Co., which has invested $300 million in energy efficiency for certain types of customers, like hospitals, apartment buildings and government facilities — and lost money doing so, as those customers curtailed their electricity use.
“We were willing to do that to see whether or not the customer wanted us to provide this service, and we found that the answer was a resounding ‘yes,’ ” Izzo said in an interview.
Now, with state government approval, PSE&G is beginning a similar, $95-million program that includes the opportunity for the utility to recover some of the revenue lost from lower electric and gas sales based on how efficiently it administers the program.
“We’d love to do not millions of dollars but billions of dollars doing this,” said Izzo, who maintains that utility companies are in the best position to integrate new technologies throughout their service areas.
“We have a relationship with the customer and a desire to deploy capital into those technologies,” he said.
Such claims from big utilities draw criticism from purveyors of green energy such as SolarCity, Vivant Solar and Sunrun, which are installing rooftop solar systems at a record pace in the U.S. They see utilities as trying to block competition.
Not surprisingly, Izzo sees it differently, saying utilities can provide energy-saving measures, as well as renewable-power systems, on a “universal” basis, without the extensive government tax incentives and policies designed to promote green energy.
“This notion that the world is becoming much more eager to have distributed resources, I just don’t see it happening,” he said of the perception that rooftop solar systems, microgrids and other alternatives to central power plants will displace utilities or cut deeply into their business.
“In fact, I see people going in exactly the opposite direction. Folks are talking about how can they share their car with people, how can they rent their house when they go on vacation,” he said.
“So, I think what we need to do is find a way to have someone manage a network, just like Uber manages a network of cars, which would be a much more efficient use of assets. And a utility is in a great place to do that because energy, unlike telephony, unlike data transfer, unlike transportation, is not an end in and of itself. It’s a means. The only time that people notice their electricity is when it isn’t there.”