Black & Veatch Utility Report: Reliability, Aging Infrastructure, Environment and Long-term Investment are Top Issues
Black & Veatch issued its annual electric utility report which surveys the nation's utilities on the top issues facing them in the areas of operational efficiency, profitability and regulatory compliance. The findings of this years report were fascinating on a number of levels, but one major thing stood out to me: the top four issues are definitively linked by a single problem.
According to the survey, reliability, aging infrastructure, environment and long-term investment are the top four issues, in order, on the minds of electric utilities. After reading the survey, I can't help but think that we need to ignore the order in terms of emphasis and focus on the third and fourth issues.
Reliability and aging infrastructure are both significant issues, but symptoms of the lack of long-term investment. Unfortunately, long-term investment is being hampered by the third issue, the environment, due to uncertainty around environmental regulations.
So what's the conclusion? Utilities need long-term regulation that isn't subject to the whims of campaigning politicians and short-term economic cycles in order to drive the type of long-term capital investment that is needed to upgrade its aging infrastructure and fix reliability issues. Period.
There is only one thing that regulated industries hate worse than regulation and that's regulatory uncertainty. Asking utilities to make long-term business decisions and capital investments (for some, the primary mechanism for securing rate increases) when they are unsure what regulatory burden they need to factor into their long-term projections is not fair.
While utilities wonder, for example, whether or not we'll have a price on carbon within the next five years, they are being asked to make long-term decisions on new generation (natural gas, solar, wind, etc), energy efficiency (i.e. smart grid) and other programs that will reduce exposure to carbon. Uncertainty with regards to tax incentives around renewable energy and electric vehicles is also hampering the ability of utilities to plan out new generation capacity that is supposed to provide electricity to its customer base for the next 30 years.
On the consumer side, there is a major lack of awareness and education on the different programs that utilities have put in place. This isn't helped by the fact that nearly half of all utilities have made no attempt to market their smart grid programs according to the survey. That lack of marketing is likely driven by the fact that a lot of the incentives for smart grid rollout and adoption are short term incentives.
The utility industry members need and want regulatory certainty in order to better run their businesses. Consumers want utilities to offer programs that help them become more efficient. Renewable energy, smart grid and energy efficiency companies want customers incentivised to adopt cleaner technologies.
So isn't the only thing left to do to encourage the federal government and state regulatory bodies to give everyone what they want?
Posted by Jason Morris on June 11, 2012 at 11:15 AM