State and Future of Power: Rick Rodman

How has risk management changed for utilities? What can utilities learn from other industries? 

For the past century, utilities have effectively managed risks like asset performance and life cycle replacement by relying on sound engineering practices and efficient business processes.

However, utilities' risk management practices will need to change to address new evolving and emerging risks that increasingly threaten their strategy, business model, and operations. These include greater competition, emerging technologies, changing customer needs, and an increasing probability of significant risk events related to climate change, pandemics, and physical and cybersecurity.

Historically, utilities have managed traditional asset and regulatory risks well with controls-based processes managed by each business line. Increasingly, utilities are facing evolving risks related to technology, customer needs, and security, which need to be managed across business lines. Emerging risks related to business model and climate change are putting direct pressures on the utility's strategic objectives and must be addressed from the top.

Utilities must adopt a new risk management approach that marries the familiar, controls-based practices for risks that jeopardize day-to-day operations with new and evolving enterprise risk management methods that focus on addressing medium- and long-term risks to strategic objectives.

This new utility risk management framework addresses categories of risks holistically, which creates synergies to risk management by using common mitigations and focusing on whether the risks — collectively or individually — should be mitigated, transferred (such as through insurance), divested (sell the assets or the part of the business that houses the risk), or accepted and monitored.

PUF posed a baker's dozen questions about power's future to a similar number of the thought leaders at Guidehouse:

• Dan Hahn — You have a short elevator ride alone with the CEO of a major utility. What would you want to tell him or her?
• Karin Corfee — What major changes have we seen over the last year to the key opportunities and threats utilities are facing? What can utilities do to be better prepared for these changes?
• Erik Larson — Are utilities well-equipped for next generation Energy Cloud business models? What is your view on the industry's readiness? What can utilities do now to be ready?
• Dan Bradley — How will utilities' relationships with their customers change over the next decade? How can utilities get ahead of this?
• Ted Walker — We all hear of "as a service" offerings across many other industries. What does this mean for utilities? What does energy as a service look like?
• Shannon Graham — How are European energy companies positioning themselves in a quickly decarbonizing market? What lessons can be learned from them for U.S. utilities? 
• Derek Jones — Approximately one-third of energy use in the U.S. is for transportation. How can utilities tap into this market in a significant way?
• David O'Brien — What are the major regulatory changes you see in the next decade?  What is needed from regulators to optimize outcomes for all stakeholders?
• Margot Everett — What are the major changes to how utilities should approach rate design over the next decade to deal with challenging industry dynamics?
• Michelle Fay — What will the utility of the future look like in 2030? How will it be different from today's utility?
• Rick Rodman — How has risk management changed for utilities? What can utilities learn from other industries?
• Jenny Hampton — How can utilities use design thinking to develop game-changing innovations? What lessons can be learned from other industries?
• Danielle Vitoff — What role can utilities take in their customers' quest to decarbonize? How have we seen utilities shifting more decarbonization choices to their clients?