Legislation and Regulation

Light Bulbs
In a little over a month, 100 watt incandescent bulbs will be phased out. Last year we wrote, "Watch for growing momentum for repeal…" of the ban on 100 watt incandescent light bulbs. In July 2011, Representative Barton (R-TX) submitted a bill to the House of Representatives and it failed to pass by the required 2/3 majority. Verdict: Momentum was not great enough for Congress to pass repeal.

Subsidy Reduction
At the beginning of last year, there appeared to be momentum to reduce energy subsidies both to renewables and for fossil fuel derived energy. These got tied up in the Congressional debate over cutting the deficit. They were under consideration in the so-called super-committee, which was supposed to offer substantial cuts to the deficit by last week (week of November 20) or automatic cuts across the board would take effect in 2013.ⁱⁱ The super-committee failed to provide any proposals to Congress and if no action is taken, across the board cuts will begin in 2013. However, recent political media speculation and talk in Congress indicates growing bi-partisan support for continuation of renewable subsidies. Verdict: Subsidies are still in place.

Greenhouse Gasses
On September 15, 2011, the U.S. Environmental Protection Agency (EPA) delayed issuance of a plan to curb greenhouse-gas emissions from power plants. The plan was to be published in July, but was delayed until September. The September announcement did not include a date for future issuance. It is believed that this delay was caused by intense political pressure on the EPA from Congressional Republicans, business and the White House as an election approaches and economic recovery has stalled. In addition, according to the International Energy Agency, the United States is now cutting carbon emissions faster than Europe (a 1.7 percent reduction over the last 10 years). Verdict: Multiple interests did in fact succeed in delaying U.S. greenhouse gas emissions regulations.

Smart Grid
We wrote of several Smart Grid issues that would need to be addressed in 2011. These included:

• Data security—Many smart grid utilities did begin or accelerate the hiring of data security experts. Experts have been drawn from the financial services industry and recruited from retiring military security personnel - two groups with a long history of addressing data security issues. Additionally, NIST and CIPS standards are well along the implementation trail. Expect the Data Security Audit business to grow in 2012. Verdict: Data security for smart grid utilities was and will be a growing concern.
• Data storage—Data storage costs have dropped dramatically over the past few years. This has reduced dependence on independent data storage companies. Verdict: Rather than data storage companies and utilities working together, utilities have developed their own data storage capabilities in-house.
• Cost management—Early adopters provide models of cost management. Many utilize contractors for implementation while also retraining and redeploying some of their existing meter to cash workforce. And indeed, off the shelf systems such as Meter Data Management, Outage Management systems are being implemented. UtiliPoint will be publishing several sourcebooks in 2012 detailing and comparing technical specifications, and alternatives in the meter to cash systems space.
• Managing customer expectations and education—At SmartGridPoint's meeting at CS Week this past May, we heard directly from James Barnes of Tallahassee's municipal electric utility about the transformation of their customer care function. Bob Triana of FPL also spoke at the workshop about lessons learned from customer engagement. In addition, Seth Kiner of SCE spoke of SCE's customer segmentation approach to customer engagement. For more information please see www.utilipoint.com/2011/05/smart-grid-best-practices-may2011-sgp_workshop/ . Verdict: The smart grid customer experience increasingly gained in importance over the past year and will continue to do so.
• Social Media—There has been some increase in the use of social media such as Facebook, You Tube and Linked In by utilities. SCE uses You Tube as a method of communicating with customers. Most utility HR departments and recruiters have greatly increased their use of Linked In, not to mention user groups as well. The use of Facebook by utilities is less clear. Xcel Energy and Austin Energy have an excellent presence on Facebook, but many others are unsure of Facebook's value to their business. Verdict: Importance of social can be ranked roughly as Linked In: very important; You Tube: somewhat important; and the verdict is still out on Facebook.

Natural Gas
As a fuel used increasingly for power generation and which sets the marginal price for electricity in many wholesale markets, natural gas prices are essential to power generators and their customers. The following figure indicates how, starting in August, actual spot prices diverged from beginning of year futures prices. The sharp fall of actual prices away from futures prices may have been due to the U.S. economy and increases in shale gas production.

Figure 1
Spot Prices Fell Dramatically Away from Beginning of Year Curve
Source: U.S. Energy Information Administration

Verdict: Concerns expressed last January failed to appear or affect natural gas prices. In fact rather than rising, prices have fallen since July.

Conclusion

Despite the shift in power in the U.S. House of Representatives, many energy regulations and all subsidies have remained as they were. No new GHG rules were published. However, one major regulation that we did not foresee was the release of EPA's Cross-State Air Pollution Rule (CSAPR) and the extended reach added to the scope of the Clean Air Interstate Rule it replaces. See www.utilipoint.com/2011/11/epas-csapr-rules-expected-to-roil-electricity-markets/ for more information on CSPAR.

The Smart Grid predictions we foresaw have partially occurred. Security has risen in importance as has customer education and engagement. Many of the deployments begun 2-3 years ago have completed or are fast approaching completion, which is the reason that the issues of managing security and customer expectations have become so important. While data storage has not become as important as we predicted, the increasingly fast rise in the importance in data analytics became much more apparent.

It's been an interesting year for the U.S. utility industry and 2012 offers to be another fascinating year for our changing industry.

ⁱwww.utilipoint.com/2011/01/what-does-2011-hold-in-store-for-the-utility-industry/

ⁱⁱwww.utilipoint.com/2011/08/will-the-recent-budget-deal-affect-the-u-s-energy-industry

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