The Future of the Electric Industry

Is the electric industry entering a death spiral? How can consumers be protected? There was a time when local wireline telephone service was affordable (and pay phone calls were a dime), as long as one avoided luxury services such as long distance, fancy telephones, voicemail, and call forwarding. These luxuries were way overpriced, with the regulated proceeds helping keep the costs of local service within reach. Now we are seeing the story repeat itself in the electricity arena. In 1990, electric service was priced at cost, with contributions built in for energy efficiency, low-income support, and other public policy goals. Competition entered the picture in the mid-90s, starting with the generation portion of the service; this has already raised the total bill and now competition for the local part of the service is on the horizon, starting with luxury services such as self-generation, rooftop photovoltaics (PV), combined-heat-and power cogeneration (CHP), so-called microgrids, fuel cells, demand response (DR), and smart homes. The pressure for building the infrastructure that these competitive services need (but dont want to pay for) is much of what the Grid Modernization debate is about. The pressure for luxury and off-grid services, and the associated infrastructure paid for by all ratepayers to the greatest extent the regulatory structure will allow comes from such economic players as big industry, "clean energy" technologists, Distributed Generation (DG) promoters, DR promoters, alternative generation manufacturers (e.g., PV, fuel cells) , storage promoters (e.g., fuel cells, flywheels), the computer industry in all its breadth (Google in the DR business), the telecommunications industry (smart homes brought to you by your local cable TV provider), electric vehicle (EV) manufacturers and dealers, infrastructure builders (e.g., undergrounding, GIS mapping, electronic switching), and meter guys. Ultimately this price pressure could squeeze out the energy efficiency and low-income contributions, just as they did the local telephone service contributions, unless public policy intervenes. Public policy should include enforcement of existing bedrock principles, such as requirements that expenditures be prudent, used-and-useful, least-cost, cost-effective, and allocated in accordance with benefits. Public policy goals should include affordability and cost containment. It should be recognized that not everything desirable can be installed on the public network at once for a cost that people can afford. Consideration might be given to a Universal Service Trust supported by new regulated and unregulated services.