ORIGINAL REPORTING: National Regulators Push For Utility Move To The Cloud

Why NARUC wants state regulators to incentivize utility cloud computing; Allowing utilities to earn a return on cloud-based software could help them better serve customers and operate the modern grid

Herman K. Trabish, Dec. 7, 2016 (Utility Dive)

Editor’s note: This initiative is now before the Illinois Commerce Commission.

Those who got upset when Microsoft Office shifted to a cloud-based subscription service may not like this story. A new resolution passed by a national association for state utility regulators encourages commissions to allow power companies to rate base investments in cloud-based software as a service (SaaS) technologies and earn a regulated rate of return — just as they do with other software platforms. Utilities may prefer the SaaS option because, like Microsoft’s Office, it can offer cost and operational advantages over hosting information in onsite servers, argues the resolution from the National Association of Regulatory Utility Commissioners (NARUC). Cost constraints preventing a move to cloud computing should be removed.

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“Utilities best serve customers, society, the environment, and the grid by making software procurement decisions regardless of the delivery method or payment model,” declares NARUC’s “Resolution Encouraging State Utility Commissions to Consider Improving the Regulatory Treatment of Cloud Computing Arrangements.” The resolution “encourages state regulators to consider whether cloud computing and on-premise solutions should receive similar regulatory accounting treatment.” Most state regulatory regimes now define in-house, on-premises software as a capital expense, meaning that like a power plant or transmission line, utilities can earn a regulated rate of return on the investment. But cloud-based SaaS is typically defined as an operating expense that utilities can pass through to ratepayers, but cannot earn them a profit. That gives utilities a financial incentive to take an approach that may be less efficient and reliable… click here for more

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