Back in 2016 Gartner predicted that by 2020 the largest electric power company will be an Uber-like behemoth that will not own assets but will simply manage energy suppliers and energy consumers in an open market.
At that time I blogged about three large Las Vegas casinos' plans to leave the NV Energy utility grid. MGM Resorts left the grid in 2016 even though required to pay $86.9 million in exit fees to do so. This trend has accelerated. In 2018, 10 companies began efforts to leave Nevada’s utility monopoly, NV Energy.
Regulators in some jurisdictions have recognized that the traditional business model for electric power no longer works in this age of decentralized power generation. New York's REV initiative and Texas' ERCOT deregulation initiative have become models for other states for modernizing power generation, transmission, distribution, and retail. The central tenet of modern utility regulation is to restrict traditional utilities to owning and maintaining power transmission and distribution lines. Matching power generation and consumption power is through an open, unregulated transactive energy market. Open markets tend to encourage decentralized, renewable energy generation.
In 1999, the Texas Legislature began restructuring the state’s electric industry which allowed consumers to begin choosing their retail electricity provider. As of Dec. 31, 2001, deregulation of the ERCOT electricity markets required investor-owned utilities to unbundle their operations. The provision of service to end-use retail customers became competitive. There are over 100 retail electricity providers of which more than a quarter offer a 100% renewable plan to their customers as an option. Since 2002, approximately 85% of commercial and industrial consumers have switched power providers at least once.
In Illinois in 1997 the Customer Choice Act mandated that state utilities could no longer own generation facilities. During the Mandatory Transition Period 1997–2007, utilities were required to sell their electricity generation assets to other energy companies. Utilities no longer sold power and became responsible for delivering electricity only. Since 2002 in the deregulated market, customers were permitted to buy electricity from competing retail electric providers. In 2006 the Retail Electric Competition Act encouraged residential and small business customers to switch to alternative electric providers.
in July 1999, Ohio restructured its energy market to give consumers choice with their energy provider. The law took effect on January 1, 2001. Customers could now choose to buy energy from retail electric suppliers instead of automatically receiving it from the utility company (primarily AEP Ohio, Dayton Power & Light, Duke Energy, and FirstEnergy) in their area. In May 2008, each incumbent utility was required to shed its power generation operations and become a purely electric distribution utility.
All of the big technology players (Google, Apple, Amazon, Facebook) are already indirectly disrupting the electric power generation industry with commitments to billions of dollars of renewable power generation which has driven over $15 billion in investment in wind and solar power generation.
The latest battleground is Virginia where Costco's and Walmart's requests to leave Dominion Energy's grid have been rejected by the Virginia's State Corporation Commission (SCC) Division of Public Utility Regulation. Kroger, Harris Teeter, Target, Albertsons and Cox Communications all currently have exit applications pending at the commission.
The Virginia Energy Reform Coalition (VERC) includes policy experts from across the ideological spectrum aimed at breaking the monopoly held by two utilities, Dominion Energy and Appalachian Power in favour of a deregulated energy market. VERC cites ERCOT as an inspiration, for restricting utilities to owning transmission and distribution lines and no longer selling electric power.
I remember back in 2013 John Wellinghoff, then Chairman of FERC, saying that these changes in the electric power industry are driven by power consumers - industrial, commercial and consumer. "People are going to continue to drive towards having these kinds of technologies available to them. And once that happens through the technologies and the entrepreneurial spirit we are seeing with these companies coming in, I just don't see how we can continue with the same model we have had for the last 100 or 150 years...You need whatever you do need - it may be a wind system providing power remotely, it may be a battery system for storage, it may be a local generation system, solar PV or natural gas, or a combined heat and power system. But whatever it is, it is what the consumer needs at the cost level that is appropriate and the reliability level they think is appropriate based upon their choices."
Consumers wanting to be in control of their energy, corporations wanting to reduce their power costs and reduce their emissions, the world wide drive for more sustainable energy, and dropping wind and solar energy costs are all making the traditional business model unsustainable. Regulators who see the future as a transactive energy market with traditional utilities providing infrastructure such as New York and Texas are prepared for the future. Others are going to experience increasing pressure from consumers and corporations who want the freedom and flexibility of going off the grid.
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