IEEE Power & Energy Magazine - September/October 2016 - 62

In terms of payment, the historical volumetric rates
of utilities seemed to be increasingly unrelated to
cost of service.
to this end, greater visibility to both dispatchable and nondispatchable resources will require a rethinking of traditional
control center capabilities and a further reconfiguration of the
connected infrastructure to ensure safe and reliable operation. as a core future consideration, until regulators determine otherwise, utility operators will continue to be stressed
by their ongoing reliability mandate, even given the fact that
they will control a smaller and decreasing share of dispatched
energy during normal operations. designing efficient methodologies and contractual frameworks to enable ongoing reliability in these circumstances will be an ongoing challenge.

Economics
operating economics, even in a nonchanging environment,
pose a significant challenge to utility operations. the initial build-out of the system was aided by rapid consumption increases from new adopters, allowing for ubiquitous
consumer connections over a declining cost environment.
unfortunately, the refurbishment of the system is burdened
by a declining consumption environment and heightened
price sensitivity. with utilities currently investing in excess
of us$90 billion annually for system improvements,
upward consumer price pressure continues to be quite real,
although the full impact continues to be mitigated due to
the low fuel cost environment in which utilities are currently operating. while absolute costs clearly are challenging, an even greater risk to be managed is to equitably
distribute costs across consumer classes. this challenge is
amplified by the transition to wide-scale distributed energy
adoption, where those who use the most have the greatest
incentive to shift to coproduction (either to lower costs or
to better control costs) and to take advantage of the benefits
of distributed energy.
managing and allocating the true cost of these coproducers to the system will require substantively new pricing
models, actually looking more like insurance pricing than
traditional pay-for-service models. indeed, one can envision
a future scenario where pricing for coproducers is directly
linked to the proven reliability of their chosen cogeneration
platform. beyond appropriate pricing, greater reliance on gas
has introduced a substantial new financial risk associated
with commodity price volatility. while gas prices remain at
historic lows today, it is highly unlikely that the commodity's
price volatility has been truly tamed, especially as markets
continue to evolve for gas provisioning. modeling, understanding, anticipating, and communicating this risk should
begin now. while the future models are not yet apparent, it is
62

ieee power & energy magazine

clear that the economics and cost recovery for the utility of
the future will not be a carbon copy of today's models.

Customer Engagement
while many speak of the "utility of the future," less has been
said regarding the "customer of the future." customer expectations of service and reliability are changing and trending
toward a more collaborative model in which information
and control serve the heart of the relationship. in a world in
which instantaneous status and consumption information is
universally available for certain services, electricity largely
remains an anachronism. with few exceptions, most customers still discover what effect their electric energy consumption choices had on their bills 30 days after their decisions
were taken. outage updates, while better than ten years ago,
remain woefully inaccurate, and service choices generally
remain nonexistent. additionally, while greater engagement
is desired, customers are also highly sensitive to price, both
level and consistency.
as the rate of technology availability and adoption increases, consumers will increasingly expect their utility to
be able to offer greater service and flexibility. one fact about
the utility of the future that has not been widely discussed is
that it may no longer be able to exclusively offer a "one-sizefits-all" service platform. indeed, service customization,
while anathema to today's traditional utility operations, may
become the tool that enables utilities to engage more fully
with customers, maintain appropriate reliability, and manage delivered cost seamlessly. setting and managing customer expectations, and then delivering to those promises
made, will require a new tool set to be developed.

Regulatory
Given the ongoing rapid changes in technology and customer
expectations, the regulatory model requires significant attention. as with the utility, the current regulatory role has been
optimized for an environment where the utility is "pushing" service onto the customer. as the utility transitions to a
more collaborative customer enablement model, the regulator needs to share in this transition by enabling appropriate
experimentation, boldly reconsidering existing restrictions,
and thinking through the new regulatory agenda that enables
a transition to a future model where the customer is "pulling"
service forward. of course, some elements of the role will
remain largely unchanged, but maintaining full controls over
the regulated utility, while letting all the other market forces
run unbound, will only serve to weaken the utility.
september/october 2016



Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - September/October 2016

IEEE Power & Energy Magazine - September/October 2016 - Cover1
IEEE Power & Energy Magazine - September/October 2016 - Cover2
IEEE Power & Energy Magazine - September/October 2016 - 1
IEEE Power & Energy Magazine - September/October 2016 - 2
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IEEE Power & Energy Magazine - September/October 2016 - 91
IEEE Power & Energy Magazine - September/October 2016 - 92
IEEE Power & Energy Magazine - September/October 2016 - Cover3
IEEE Power & Energy Magazine - September/October 2016 - Cover4
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