Becoming the Utility of the Future - Risks and Opportunities

IEEE Power and Energy Magazine

August 25, 2016

Dr. Richard Brown and co-authors published "Becoming the Utility of the Future - Risks and Opportunities," in the September/October 2016 issue of IEEE Power and Energy Magazine.

Electricity became a household necessity with the advent of broadcast radio in the 1920s. There were no nonelectric sub­stitutes for the radio; it served a strong public interest for the govern­ment to be able to quickly send information to its citizens, and it was therefore desirable to electrify as many homes as possible.

By the mid-1930s, electricity was considered a public utility. The Public Utilities Holding Act of 1935, among other things, gave electric utilities (hereafter "utilities") the exclusive right to provide electricity to custom­ers within a franchise service territory. In exchange for price regulation, utilities were given monopoly status to generate, transmit and distribute electricity. 

From 1935 through the mid-1970s, electricity consumption grew at an astounding rate, averaging between 7 and 10% per year. Consequently, utilities had to double their infrastructure capacity every seven to ten years. Each and every year, utili­ties increased their generation capacity by 10%, their trans­mission capacity by 10%, and their distribution capacity by 10%. Due to this, it was said that "electric utilities are con­struction companies that happen to sell electricity."

Rapid growth in electricity usage led to innovation and economies of scale. Each year, utilities had robust revenue and profit growth, even as rates declined. Investors were happy, customers were happy, regulators were happy, and utility employees were content with the security of lifelong stable employment. The energy crisis of the 1970s changed everything. In­stead of 10% load growth, most utilities experienced about 1% growth, with many areas experiencing negative growth. Major construction projects kept utility employees busy for a while, but by the mid-1980s, most construction had ceased, and utilities found themselves dramatically overstaffed.

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