The macro operating environment for power companies has changed dramatically in recent years. Renewable energy is increasingly competitive with fossil fuels. Distributed energy (behind-the-meter resources) is unending the economics of the grid. Climate change is presenting new threats to power systems and their regulatory models. Further, companies that outsource supply management face billing surprises through third parties. The standard rate-making regime, with a predictable tariff structure, is being asked to integrate new performance-based metrics into utility revenue models. Examples include standards or metrics for energy efficiency, customer engagement, and sustainability.
Public Power Impact
While Public Power may be somewhat insulated, given its non-profit structure, both Generation & Transmission and Distribution companies are still subject to internal and external changes and threats. This is true for those who take an active or passive risk approach to supply management and for those who manage risks internally or outsource externally. Most importantly, opting for third-party load management doesn’t assure sound risk management by the selected vendors because settlement data is not made available. Significantly, all this is happening against a backdrop of stagnating electricity demand and during a period of weak commodity prices.
Risk Exposures/Impacts by Category
Managing supply and demand in a rapidly changing environment is much more than a daily system and load-balancing challenge. The old adage, you can’t manage what you don’t measure is more applicable than ever. Whether it’s the competing regulatory dissonance between Federal and State mandates, the necessity of carbon transition, the competition for and retention of customers threatened by new entities (community choice aggregation), or customer demand for higher green content, an active approach both to internal and external management of power distribution requires constant vigilance.