Dealing with Government Energy Confusion - Harnessing Disruption
As utilities prepare for an unprecedented round of investments – and as they are being hit by some of the most costly environmental rules ever imposed by the federal government, uncertainty abounds.
To assess the risk and address possible solutions, I will be convening a panel discussion next Wednesday with three leading energy consultants - Mark Gabriel, senior vice president strategy and business process with Black & Veatch’s Management Consulting Division, Branko Terzic, executive director of the Deloitte Center for Energy Solutions and Kelly Gallant, North American managing director of Accenture Utilities Industry Group.
We will convene noon ET on January 25. Click here to register for the free event.
The webcast is one of a series helping to set the stage for the fourth annual EnergyBiz Leadership Forum, March 19-21 in Washington, D.C. To learn more and register - click here.
Below is a preview of the ground to be covered during the webcast, based on comments the three participants have made in reply to two key questions.
What are the major disruptive challenges facing utilities?
Mark Gabriel:
The single greatest threat is the unrealistic government expectations concerning coal generation in terms of timing and cost. The EPA assumes that only 15 megawatts of coal will close; the industry 65-80. This may have the perverse incentive for companies to close coal plants which will cause energy prices to rise, forcing out other critical investments.
Kelly Gallant:
The current balance of power between federal and state regulators continues to be a disruptive force for the industry. FERC, NERC, and EPA regulators on the federal side and multiple PUC regulators on the state side often have conflicting agendas, which makes it difficult for utilities to find optimal outcomes. Many utilities today have operations in multiple jurisdictions, but are prevented from optimizing their operations across the jurisdictions due to direct regulatory concerns or indirect “fear” of regulatory issues. A simplification of the regulatory construct, with more power at the Federal level, will reduce structural impediments to many changes in the industry.
Branko Terzic:
The biggest disruptive threat is that of an ill-conceived federal carbon policy or “national energy plan” established by legislation. This is especially likely if driven by a single external “Black Swan” event which is misunderstood or inadequately studied.
What is the most important strategy for utilities preparing for the future?
Mark Gabriel:
The single most important strategy is for utilities to actually have a strategy. Hope is not a strategy, nor is waiting for regulations to be sorted out or policy to be clarified. To me the strategy for all parties should be aligned: Have great regulatory relations, operate best in class and invest in technology with no regrets.
Kelly Gallant:
The private and publics sectors working together creatively to formulate innovative mechanisms to modernize the grid, while maintaining to keep ROEs stable, or developing incentives for utilities and consumers to encourage energy efficiency and conservation will help accelerate a state or nationwide goal. The recent Illinois Grid Modernization Plan (SB1658) is an example of an approach by the incumbent utilities to build-out a smart grid while guaranteeing a steady ROE and rate increases in exchange for meeting performance goals
Branko Terzic:
The single most important competency of a regulated energy company, a public utility or merchant power plant, is the ability to manage successfully under regulation.
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