Distribution Utilities: The Last of the Natural Monopolies

Big changes are coming to electric and natural gas distribution industries. In electric distribution, technology advancements are changing the way businesses and consumers procure and use electricity. These changes are modifying the roles electric distribution utilities are being asked to play, how they plan for the future, and how they are paid for their services. In natural gas distribution, high-profile accidents have brought focus to aging infrastructure while stakeholders struggle to evaluate the benefits, costs, and risks of remediation alternatives.

Communities are now recognizing the critical role electric and natural gas distributors play in their economic and environmental sustainability. Without reliable, cost-effective, safe, and flexible energy distribution, quality of life suffers. In the face of unprecedented change and increased community and stakeholder engagement, state regulators are beginning to ask tough questions about how the last of the so-called "natural" monopolies should be regulated and compensated:

  • How can we better align distribution utilities' economic incentives with the wants and needs of the customers and communities they serve?
  • What capabilities will customers expect from utilities in the future, and how can we secure these capabilities at the lowest possible cost?
  • How can we ensure customers and communities are getting maximum value for the money they pay distribution utilities? 
  • Is there a better way to approximate the beneficial aspects of market competition in a monopoly distribution utility context?

Performance Measurement and Benchmarking in Utility Regulation & Compensation

Performance measurement and benchmarking can play a role in helping regulators, utilities, and stakeholders address these questions. Performance measurement and benchmarking can:

  • Serve as a mechanism to administer performance-based compensation programs
  • Help evaluate the reasonableness of operations and capital spending
  • Calibrate the value utilities deliver relative to costs
  • Add a semblance of utility vs. utility competition where none actually exists

One Potential Solution: The Utility Evaluator

The Utility Evaluator simplifies credible utility performance evaluation and benchmarking. It's an internet-based software application that combines publicly-available utility performance data from a variety of reputable sources into a single data repository. Aided by an intuitive interface, users access pre-defined performance queries or customize their own, producing valuable data for further analysis or compelling charts that can be used to tell a story. Relying on data reported by Investor-Owned Utilities on FERC Forms 1 and 2; EIA Forms 176 and 861, and regulatory filings, as well as data from JD Powers and Associates, the ACEEE, and other reputable sources, the Utility Evaluator enables users to quickly identify performance improvement opportunities. Significantly, users can define peer groups for benchmarking purposes, using utility characteristics such as size, customer density, aggregated customer energy usage profiles, and many more to deliver credible analyses that control for factors likely to impact a particular distribution utility's performance. 

Who is the Wired Group?

The Utility Evaluator is offered by its original developers, the Wired Group, a consultancy that helps its clients unleash latent value in distribution utility businesses. Inspired by its experiences conducting objective, comprehensive evaluations of large smart grid deployments, the Wired Group continues to develop the software to meet the needs of users interested in maximizing or understanding distribution utility value propositions, including consumer and environmental advocates, state regulatory staff, distribution utilities, utility suppliers, industry associations, researchers, and Wall Street equity analysts. For more information on the Wired Group, please visit www.wiredgroup.net.

Request a complimentary trial subscription to the Electric Utility Evaluator by e-mail to info@wiredgroup.net.

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