IEEE Power & Energy Magazine - September/October 2016 - 63

New Business Models
so the question becomes, "how do we get from here to
there?" more specifically, how do we move toward the utility of the future in a way that
✔ builds upon the current assets and operational value
of our electric system investments and organizations
✔ leverages the majority of our current asset base without a complete redo
✔ provides a reasonable amount of flexibility in our investment decisions that prevents stalling or no decision
✔ reduces risk in a more dynamic and transparent market place.
with the rapidly changing energy resource mixes to
include customer-side dErs and advanced grid visibility,
management, and control technologies, we see regulatory
public utility commissions, legislators, energy utilities, and
all other power and fuel market stakeholders increasingly facing significant and fundamental challenges. these challenges
call into question the traditional utility business: operating,
regulatory (rate making), and other organizational business
models. For example, in new york, a major effort is underway to define new distribution utility organizational models
and how they work with transmission and generation organization models. although this effort appears to be a little
heavily regulatory driven, we need to applaud these energy
market participants for their effort to rethink and modernize
new york's power grid. their efforts will result in new best
practices and lessons learned that will help others transition
other energy markets to the utility of the future.
conclusively, a shared theme developing in new york's
market and across many other u.s. energy systems is that
energy industry leaders and policy makers increasingly
agree that greater operational and business value is achievable through a holistic, collective development of dErs and
advanced grid investments as an "integrated grid" across
functions, systems, enterprises, and regional markets. when
directly compared to traditional utility system organizational
business models, based on functional silos separated by distinctive, nonintegrated cost decision hand offs up and down
the energy value chain, we clearly see the need to rethink
and adjust how we operate and conduct business in this new
market environment, the utility of the future.
the most significant change, as highlighted earlier in this
article, is the new potential values directly benefiting customers and redefining the traditional commodity-based utility
customer experience. in addition, the utility of the future not
only impacts individual customer's value, whether through a
pure commodity play or more specific commercial or quality-of-life benefits, but it also impacts overall system uses and
operational applications providing value to every customer of
the power system, also known as the universal service benefit. it is important to understand that the utility of the future
does not void the "universal service" compact governing
regulatory rate making. rather it enhances it by integrating
individual customer uses and benefits further to provide both
september/october 2016

direct customer benefit in conjunction with additional crosssegment and system benefits. this supports and enables more
granular, benefit-oriented rate making within and across customer groups that can be tied to basic customer benefits in
addition to system-based energy benefits, thus enhancing the
proposed grid modernization investment.
Examples of new customer benefit/value areas that can
also benefit power systems overall include
✔ increased information availability, clarity, and market-state visibility
✔ greater customer knowledge, understanding, and options providing a direct benefit to customers as well
as to the system
✔ more economic, environmentally aware resource choices and consumption efficiencies
✔ extended infrastructure life cycles and higher asset utilization, providing capital and operations and
maintenance savings
✔ a higher reliability and proactive event risk reduction
✔ faster field and customer service response with more
field service capabilities
✔ the expanded availability of convenient, user-friendly
customer end-use programs geared toward the customers' view of their own needs, which all provide
direct power system benefits whether or not it is recognized by the customer
✔ an accelerated adoption of environmental and sustainable practices that cohesively benefit both system and
retail customer levels
✔ modernized regulatory policy and rate structures that
reflect greater service flexibility and customer choices
while adequately funding all market- and system-level
operating and investment costs
✔ the further integration of energy market transaction structures to provide a seamless and full-value
transfer among customers, large suppliers, and other
value-add service providers participating across the
grid (e.g., distributors, microgrids, renewable energy
portfolios, dEr developers, and independent service
organizations/regional transmission operators).
to successfully identify and attain these new values as
holistically operating, but independent, power systems and
markets, collaborative organizational leadership/management
engagement and business model development is required.
these result in stronger, more cohesive, value-based investment cases that can be supported by modernized regulatory
rate policy providing equitable cost allocation and capital
recovery, reduced operating and business risk, and lower
capital requirements and financing costs. to achieve these
objectives as power system organizations, we must set in
place a repeatable, cross-functional approach to
✔ establish a comprehensive set of clear energy chain
use cases and value propositions based on new capital
asset investment, both traditional and modern, within
and across utility functional areas
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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 - 92
IEEE Power & Energy Magazine - September/October 2016 - Cover3
IEEE Power & Energy Magazine - September/October 2016 - Cover4
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