The smart grid and the regulatory barriers thereto

Michael Giberson

Bob Jenks of Oregon’s Citizens’ Utility Board, writing at EnergyPulse, explains “Why Smart Grid Advocates Should Learn About Utility Regulation.”

Reading between the lines a bit, the reason smart grid advocates should learn about utility regulation seems to be so that they will understand that their talent, inventiveness, and desire to make the world a better place will be wasted unless they trim their vision to fit the established way of doing things. Therefore:

Although Smart Grid advocates have brought something new to the industry, progress for the sake of progress must be discouraged. Let us preserve what must be preserved, perfect what can be perfected, and prune practices that ought to be prohibited.

No, I’m sorry that is not right, somehow Jenks’s text got mixed in with Dolores Umbridge’s introductory speech to the assembled students of Hogwarts.

Actually, Jenks argues a long history of regulatory practice has resulted in a body of established ways of doing things – for example, managing utility incentives through manipulating the rate base, doctrines such as “use and useful” intended to protect ratepayers. If smart grid advocates want to engage with customers of a regulated electric utility, Jenks says they’ll need to work within the established system.

In essence, smart grid advocates, the advice is to realize that any regulated industry is part of the broader political industry:

Look, you need to participate in our system. You need to participate at a personal level, you need to participate at a corporate level.

No, once again I’ve mixed it up a bit. That is Google’s John Schmidt talking about his experience dealing with politicians in Washington, DC.

All snarkyness aside, I actually agree with a great deal of what Jenks says. If smart grid advocates want to make headway in a regulated business like exists for electric power for most of the United States, then they better learn the rules of the regulated game. You want to sell into a regulated utility market? Then you better trim your vision to fit the regulators’ ways of doing things. It just turns out that neither regulators nor the regulated industry do innovation very well, at least not the revolutionary kind of innovation like some smart grid advocates have in mind.

And in recognition of that well-established fact, I’d like to invite all smart grid advocates with revolutionary innovations in mind to come on down to Texas and check out the dynamic potential of the state’s competitive retail market.

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2 thoughts on “The smart grid and the regulatory barriers thereto

  1. And by the way, one very very very nice thing about the Nest thermostat is that it avoids the regulated part of the world. Individual consumers can buy or not buy, and either way no one has to figure out how to rate base the expense and what to do if – heaven forfend – a consumer actually reduces energy consumption in a way that might just possibly diminish a regulated utility’s revenue.

    I’m looking for some innovated Texas power retailer to partner up with Nest or other home energy management device maker and work a package deal.

  2. I cannot envision any way in which a utility customer could reduce his/her energy consumption from that regulated utility without diminishing that regulated utility’s revenue.

    I can envision ways in which a utility customer could reduce his/her energy consumption from the regulated utility without diminishing the regulated utility’s net income, but they all involve monthly service charges which recover 100% of the regulated utility’s fixed costs.

    That very nice thing about the Nest thermostat is also a very nice thing about any other programmable thermostat.

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