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July 01, 2015
William Zarakas Authors Article on the Shift in Utility Business Models for The Electricity Journal

Brattle principal William Zarakas has authored the article, “Growth Prospects and Shifting Electric Utility Business Models: Retail, Wholesale and Telecom Markets,” appearing in the June 2015 issue of The Electricity Journal.

The article outlines an analogy between the evolving electric distribution industry and the competitive telecom industry, and the way in which monopoly providers responded when their infrastructure was opened up to competitors and the subsequent rapid development of intermodal competition.

Mr. Zarakas points out that the telecom industry analogy is not fully applicable because electric customers will not completely disconnect from the grid the way that some telecom customers broke their relationships with telephone incumbent providers for new relationship with competitive providers. Instead, , under most scenarios, electric utilities will continue to provide some level of service to customers that use rooftop photovoltaics or some other distributed resources as a main staple of electric service – although this may change if storage technologies become more cost competitive and prevalent.

The article also points out that incumbent telephone companies offered wholesale or platform services to competitive rivals (as required by regulation), but over time competitors opted to bypass the platform and use their own technologies and infrastructure. The success of the incumbent companies in thriving in the evolving telecom market was due to their ability to leverage new services (such as broadband and video) rather than making platform connections available to rivals. Here, too, the case may be different for electric utilities. Effective intermodal competition in the electricity industry will require that competitive rivals connect into the grid and will require that they receive (and most likely pay for) platform services. Mr. Zarakas suggests by facilitating the expansion of the electricity market, utilities can grow the size of their platform business, and that the new applications for electricity (enabled through platform services) can provide considerable value to consumers and benefits to society as a whole.