Fat or Skinny?
Dr. Ren Orans is the managing partner at Energy and Environmental Economics (E3), a San Francisco-based energy consulting firm. For more than three decades he has advised a broad range of clients on critical issues in the electricity industry. Dr. Fredrich Kahrl is a director at E3. He has extensive expertise and experience in many facets of the energy sector, from utility finance to electricity markets to energy systems modeling. Dan Aas is a graduate student in Public Policy and Energy and Resources at the University of California, Berkeley. Prior to graduate school, Dan worked as an energy consultant and on the program staff of the Energy Foundation. He will be joining E3 in mid-2017.
The last decade has seen a resurgence of discussion on the future of electricity utilities, driven largely by technological developments on the customer side of the meter.
Much of this discussion has focused on familiar themes. These include threats to existing utility business models, new utility business models, performance-based regulation, and, in the extreme, the possible demise of utilities and the electric grid.
However, debates over utility business and regulatory models have sidestepped a more fundamental question: What do state legislators and regulators want the electricity utility of the future to do?
Do they want "fat" utilities that play a larger role in implementing public policy and delivering energy services to customers? Or "skinny" utilities that are more narrowly focused on the ownership and upkeep of the grid? Are they willing to accept the tradeoffs between these two paradigms?
We argue that state lawmakers and regulators need to begin tackling these questions sooner rather than later. This argument rests on a few key building blocks.