Regulators should presume all advocates of a technology desire to gain unfair advantage over competitors.
Kenneth W. Costello has over 25 years of experience working at the National Regulatory Research Institute, which is the research arm for all the state utility commissions around the country. He has written extensively on a wide range of topics covering regulation of the electric and natural gas industries, from the perspective of the public interest.
For both an industry and the economy, technological change is vital for growth and long-term prosperity. It enables society to enjoy new products and improved quality of existing products in addition to higher efficiency of production processes. Economists generally agree that technological change is the primary factor for economic growth.
In the public utility sector, technological change has the special benefit of advancing policy objectives, namely, safety, reliability, energy security, affordable energy services and a cleaner environment. Technological change can therefore improve the long-term performance of public utilities, which after all is the prime objective of regulation. It is driving today's dialogue on utility business models, the regulatory paradigm and ratemaking, market developments and public policy.1 In revamping their business model, for example, utilities could embrace, accommodate or invest in new technologies to better their customers.
An increasingly important function of regulated public utilities will be to act as a conduit in filtering the benefits of new technologies developed by third parties to retail customers. After all, the genesis of most new technologies benefiting utility customers lies outside the utility space. Utilities' ability and willingness to play this role depend importantly on regulation, especially in establishing a favorable risk-reward environment.