By Michael Kuser

CARROLL, N.H. — Residential customers installing behind-the-meter generation are just the latest factor stretching electric power utilities far beyond their original role as vertically integrated monopolies, speakers said Tuesday at the 70th Annual Symposium of the New England Conference of Public Utilities Commissioners (NECPUC).

“The most intermittent resource could be the customer,” said Barbara Tyran of the Electric Power Research Institute, part of a panel that explored the future of regulation and utilities by looking at parallels between the telecom and electric sectors.

Tyran said the electric industry’s data analytics are not sufficient for the changes coming. “It’s almost like we’re on a freeway driving 55 mph, but we’re only allowed to open our eyes once every 15 seconds,” she said. “That’s how much situational awareness is occurring. We need sensors throughout that system; we need to understand what that data is generating and what the value of it is and how to use it to improve the system performance, enhance the customer experience and also create new efficiencies.”

“Over the past 30 years, we as a region have shifted away from vertically integrated, economically regulated utilities, the ones that were envisioned by the foundational regulatory standards of just and reasonable rates for monopolistic utilities,” said New Hampshire Public Utilities Commissioner Kathryn Bailey, who moderated the panel. “However, I think in New England, we haven’t gone as far with the transformation of the electric industry as we have with the telecom industry.”

Janet Gail Besser, executive vice president of the Northeast Clean Energy Council and former chair of the Massachusetts Department of Public Utilities, said customer adoption of solar and other distributed technologies is the latest step in a process that began with competition in the generation sector following the 1978 Public Utility Regulatory Policies Act and grew with restructuring in the 1990s and the adoption of energy efficiency. She also pointed out that further changes are coming with the electrification of transportation and buildings.

Restructuring and Social Policy

One cause of the restructuring of the electric industry was the disparity between retail and the wholesale prices, according to consultant Louise McCarren, former chair of the Vermont Public Service Board and former commissioner of the state Department of Public Service.

“State regulators thought they could load anything onto” retail prices, McCarren said. “Social programs, conservation programs, you name it. And that price went up, way above the wholesale price.”

Nonetheless, McCarren said that her experience in Vermont has shown that regulatory frameworks can provide valuable public benefits, such as increased rural access to broadband service.

Hawaii Public Utilities Commissioner Lorraine Akiba said that “in the distributed energy resources paradigm shift of the future, we’ll actually be able to [support rural populations] more cost effectively because microgrids, and putting generation closer to the load saves all that transmission expense. In our jurisdiction, we require you to at least look at non-transmission alternatives.”

Regulators need not only to look at what markets can do, but also at what they can’t do, such as addressing social policy needs, said ISO-NE Director Kathleen Abernathy, a former Federal Communications Commissioner. “But don’t decide not to do something because it’s too expensive for low-income customers … you can fix that later or provide the necessary supports,” she said.

Competition forces companies to do things that might not be in their own economic interest but that benefit the public, said Abernathy, who cited unlimited cellphone minutes as an example. “Way back when in the wireless world, we used to pay per call,” she said. “It was only when the FCC allocated additional wireless licenses that all of a sudden you got unlimited minutes. That never would have been mandated by regulators; that happened in the market place. So embrace this kind of disruption and go with the flow on it.”

As with the telecom industry, technology preceded regulation, Besser said, giving customers an alternative to using incumbents’ landline phones. One question is whether some entity other than electric distribution companies will find ways to provide customer and system data to customers, third parties and the EDCs themselves, she said.

Electric Utilities Need to Add Value

“If you shift the risk away from the customer and to the utility, in theory you should shift the reward structure,” McCarren said. “And that is really hard to do, because when the wheels come off you still have to provide adequate and reliable services to all your citizens.”

In 1970s Vermont, hot water heaters were radio controlled in an effort to smooth the load curve. “The only problem was when you had an outage and you had to go reset them. But that was load control,” McCarren said. “Now the customer can do that, so if the utility wants to stay relevant, they have to add value.

“It’s Darwinian. If [companies] can’t change, they’re going to be roadkill,” she continued. “Is it your job as a regulator to create incentives or disincentives that encourage them to participate, or is [it] their job to figure it out?”

Akiba and others highlighted the importance of utilities’ ability to use big data analytics to operate the energy networks of the future.

“I feel sometimes we’re like the Oracle, that very sage character” in the 1999 movie “The Matrix,” Akiba said. “She has to make correct decisions, and she gives cryptic advice to Neo as he navigates the Matrix. … But we do have to keep our eye on the future trends and actions transforming the energy industry.”

Abernathy said that “sometimes a corporation’s addiction to a framework that guarantees certain revenue flows actually prohibits the kind of risk-taking that is essential for survival. … There’s no question that traditional regulatory frameworks actually prevent creativity and innovation, and people who are creative and innovative, they leave those companies for other ones who are doing more interesting work.”

McCarren said the regulatory solution “isn’t just one-size-fits-all, but going back to consumerization, localized solutions and keeping very flexible. … A very simple but effective rate design, that may or not require smart meters, can get you really far. The issue now is will we have to increase the charge to cover this fixed cost. … As long as it’s adequate, efficient and fair, it’ll work.”