EEI and NRDC Find Common Ground within Utility Business Model Debate
On February 12, 2014, the Edison Electric Institute (EEI) and the Natural Resource Defense Council (NRDC), an environmental advocacy organization, released a joint statement to state regulators outlining shared principles focused on the evolution of utility business models.
Key recommendations from the two groups include:
- Recovery of utilities’ non-fuel costs should reflect their costs of maintaining and improving the electricity grid and should not be tied to levels of retail commodity sales
- If regulators break the linkage between cost recovery and commodity sales, they should provide for reasonable and predictable annual adjustments in utilities’ authorized non-fuel revenue requirements
- Net-metering programs have allowed distributed generation to gain traction and improve performance, but additional approaches are needed now
- Utilities deserve assurances that recovery of their authorized non-fuel costs will not vary with fluctuations in electricity use; customers deserve assurances that costs will not be shifted unreasonably to them from other customers; rate designs will continue to develop that reward customers for using electricity more efficiently
- It is appropriate to consider expanding investor-owned utilities’ earnings opportunities to include performance-based incentives tied to benefits delivered to customers
- We agree to work together to ensure that energy efficiency services reach underserved populations
- We agree to help electricity users pursue cost-effective energy efficiency opportunities through a combination of financial incentives and minimum standards for building and equipment
- Regulators should support enhanced utility investment in smart meters and a smart grid when presented with a reasonable business case
Despite a contentious national debate, organizations representing diverse constituents are beginning to find common ground around the outlines of future utility business models. Regulators, who must ultimately approve any reforms, are likely to seek opportunities within these areas of common agreement. Therefore, the items identified by EEI and NRDC may represent low-hanging fruit and provide an early blueprint for more specific business model discussions to pursue with regulators.
Joint Agreement: http://docs.nrdc.org/energy/files/ene_14021101a.pdf
This report is part of the Clean Tech & Sustainability Minute series. To view all featured Minutes, please click here.
Welcome to ScottMadden!
Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.