EnergyBiz - September/October 2007 - (Page 57) For example: � Consumers want lower prices, higher quality service and absolutely expect the power to flow 24x7. � Some regulators impose long-term rate caps in an attempt to please consumers. � Regulated rates are not tied to wholesale markets where utilities purchase all or a portion of the power they sell. � In some wholesale markets, prices are set based on the rate of the high-cost producer. � Incentives for consumers to conserve are not significant enough to change their behavior. � Regulators impose conservation program requirements on utilities, and as a result, utilities suffer from decreased revenues which are directly tied to consumption. Despite these current realities, a number of factors are converging. These will enable and provide the right types of incentives for utilities, regulators and consumers to adopt innovative approaches to demand management and market efficiency. Convergence in the Marketplace Utilities face a range of converging issues that will have a profound impact on their futures. Regulation and Legislation Governments around the world are making energy conservation, energy independence and global warming topof-mind issues. A wide range of taxes, legislation and other policies designed to reduce the combustion of fossil fuels are being considered across the globe. Global Climate Change As a society, we increasingly recognize how burning carbon-based fossil fuels adversely affects the environment. Momentum is building on many fronts to limit carbon emissions. Government, major corporations, citizen groups and utilities alike are promoting 1 environmentally-friendly, green solutions. Many are insisting that behavior must change and that adoption of a conservation culture is critical. Customer Expectations As household electricity consumption increases year over year, peak loads are increasing and changes in consumption patterns are causing load factors to decrease. At the same time, consumers expect higher quality power to operate the increasing number of digital devices that we amass each year. Finally, consumers are demanding this improved quality at the low, stable price levels of the past while, at the same time, wanting a voice in how the power they consume is generated. Aging Infrastructure Much of the transmission and distribution infrastructure in North America is more than 50 years old and was designed to provide power in a different era. For many years, utilities typically underinvested in the grid infrastructure or neglected to make the significant, ongoing investments required to sustain the infrastructure over the next decade. As a result, most utilities are now at a crossroads—facing a decision that will be crucial to their futures. The Opportunity Make smart metering programs the foundation of Smart Grid or Intelligent Network initiatives. Look beyond the meter-to-cash process to generate value for all participants in the electrical energy market (including generators, system operators, transmission and distribution service providers, retailers, energy service companies, consumers, regulators and legislators). The investments required to implement smart metering are substantial. They usually cannot be justified based solely on the benefits realized from the elimination of manual meter reading, efficiency improvements in the revenue management process, improved control over tampering and theft, and improved outage Platts/Capgemini Utilities Executive Study, 2006 2 58 E n E rgyB i z September/October 2007 ThoughT LEadErship – sponsorEd By CapgEmini
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