“The business model that has worked for utilities for decades is under great stress as consumers become prosumers, smart digital technologies deepen their penetration and add complexity to planning and managing the network, and pressures rise to decarbonize the generation of electricity,” noted Brattle Principal Bill Zarakas, leader of the firm’s Retail Energy Practice. “While the UoF can provide growth opportunities for utilities, it can also raise questions concerning how and when to modify, or completely change, long-standing regulatory practices.”

Brattle’s Retail Energy Practice Briefing Series analyzes the UoF from an integrated perspective by examining linkages among the financial, technological, strategic, and regulatory dimensions. The series addresses several issues, including:

  • When and how the UoF could represent a threat to the traditional utility business model, and when and how it could represent opportunities.
  • The issues that are likely to make a material difference to the future of utilities, and the issues that are likely to be hype.
  • How regulatory and business initiatives can be coordinated to maximize the likelihood of a financially successful outcome for the utility and an economically beneficial outcome for customers.

The first brief in the series, “Evolving Business and Regulatory Models in a Utility of the Future World,” provides a view of how utilities and regulators should prepare for the transition to the UoF. It examines whether the conventional business model is obsolete, such as whether considerations pertaining to an obligation to serve, cost-effectiveness criteria for investment planning, and cost-of-service pricing are becoming irrelevant, and if so, what can or should replace them. The brief also introduces a new approach for dynamic modeling of UoF developments that may better capture the feedbacks and possible tipping points arising in a bi-directional, network-interactive architecture with new participants.

Future briefs in the series will explore the viability of the traditional regulatory compact, evaluation of distributed energy resources (DERs), rate innovations coordinated with service design updates and other system modernizations, and long-term growth opportunities.

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