What To Know About Your Electric Utility’s Costs And Reliability Challenges

Many years ago, a comedy group posted a video featuring actors as average Americans in a slick faux commercial satirizing coal energy. Turns out the coincident target of this mockery was the rest of us and how little we understand about what powers our lives. [emphasis, links added]

“What if the power to sustain your world was right inside a mountain?” asks the narrator. He continues, “What if you could power an entire city for a hundred dollars?”

A man in a hard hat says, “Cheap power is clean power. The future is later.” A woman looks soberly at the camera, “Electricity comes from the walls in my home where I live.”

It’s quite funny. Even my former co-workers at an investor-owned utility where I worked 18 years thought it was.

But the reality is your electric utility is a bit conflicted on exactly how much esoteric understanding they’d like their customers to have about their business.

Of course, it’s good for folks to value energy efficiency and conservation, and how they can be safe around power lines.

But, when it comes to understanding how utilities produce and deliver power or make money? Well…

The fact is, the world of utilities has changed quite a bit in many ways, and hardly at all in others. It’s an industry that has a natural resistance to change, mostly because what’s often called the world’s largest machine – the electric grid – has served us well for more than a century.

It underlays the entirety of our industrialized economy, powering everything. Yet, for a couple of decades now, efforts to clean it up and make it smarter have often conflicted with the grid’s primary directive to deliver reliable, affordable, safe power.

And today, this conflict remains mostly unresolved.

So, here are six things about utilities that I think everyone should understand:

1. Power For All Restricts Innovation – And That’s Not Necessarily A Bad Thing

Let’s start with a simple concept – you wouldn’t want your electric utility to fail and go out of business. At the same time, that utility must serve any customer within its service area. No choice.

This “obligation to serve” often motivates utilities to make their proposals for rate increases quite urgent; it also means a utility is probably not an organization you’d want taking an undue risk on unproven new ideas.

In the world of multi-billion-dollar investments, any failure means wasted money from customers’ bills.

Some notable examples of near-misses or outright turkeys: smart grid, vehicle-to-grid, microgrids, in-home controls, clean coal, carbon sequestration, smart meters, hydrogen fuel cells, wave energy, offshore wind, and creative pricing strategies.

Some of these projects just languished, while others lost billions, but all were pursued with the best of intentions – thanks to regulatory mandates, customer demands, and even managerial misjudgment.

While many argue our utilities should be investing in R&D, others want to hold their reins and let them buy only proven technologies, limiting the risk of a bad bet.

2. “BANANA” is the New “NIMBY”

Nothing is more challenging for a utility than expanding its infrastructure because no one wants to look at it and live near it. In fact, community opposition has grown so strong and sophisticated that NIMBY – Not In My Backyard – has been rebranded BANANA – Build Absolutely Nothing Anywhere Near Anything.

The people who are responsible for delivering your energy would generally prefer to go about quietly building power plants, stringing wires, and hooking up customers without any complications like regulatory approval, county permitting, and public open houses.

But that’s not how it works, because when it comes to spending large amounts of money as a regulated utility does, it must get the okay from countless people at the local, state, and federal levels.

Adding complexity is the reality that each group has parochial priorities that might not align with those of the others.

For example, FERC, the Federal Energy Regulatory Commission, recently voted to give state utility commissions a larger role in shaping the development and cost allocation of electric transmission systems. Hey, more local control – what’s wrong with that?

Well, according to some observers, an individual state could push back on projects they see as benefitting other regions. If states leverage their enhanced involvement to oppose certain projects, this could create hurdles for transmission designed to move electricity across state lines.

Communities have historically tried to stop utility-scale projects for fears of EMFs, reduced property values, and interruptions to their mountain views. But ultimately, higher authorities have decided a project’s success is mostly based on the greater good. Do we now want this to change?

3. AI And Data Are Eating Us Alive

Every time you text a selfie to a friend, that photo is duplicated among multiple data centers in acres of solid-state computers, cooled around the clock.

And now, artificial intelligence – which can write a term paper or produce a movie in seconds – is generating a record surge in demand for electric power, which utilities are struggling to meet.

Not only is the generation not there, but also in short supply are transmission engineers who are needed to perform complex grid studies to serve the load.

AI is driving new demand in some regions to the point where they are contracting for nuclear power, which produces an enormous amount of energy at a near-fixed cost in a relatively small size.

The Honest Broker is written by climate expert Roger Pielke Jr and is reader-supported. If you value what you have read here, please consider subscribing and supporting the work that goes into it.

This is a guest post by Craig Eicher. Craig recently retired after more than 20 years in the regulated U.S. utility industry. Craig’s primary roles included negotiating and maintaining gas and electric franchise agreements, managing the integration of community stakeholders into large projects, such as transmission service expansions, renewable energy and regulatory proceedings, and leading the wholesale electricity business.

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