ORIGINAL REPORTING: Common Ground In Texas On How To Drive Utilities To New Energy

Texas stakeholders find common ground in utility revenue recovery for DERs State power sector players say DER growth should not hurt utility finances, but consensus over rate design reform remains elusive

Herman K. Trabish, Aug. 2, 2017 (Utility Dive)

Editor’s note: This story is part of the national effort to reform the utility business model that makes the power system more New Energy-friendly.

A broad coalition of stakeholders in the Texas grid say investor-owned utilities (IOUs) should not have to risk their revenues to meet the demands of 21st century power consumers. Regulated utilities that advance energy efficiency and distributed energy resources (DERs) should have incentives or a rate structure that keeps them financially whole, according to a new consensus statement from the South-central Partnership for Energy Efficiency as a Resource (SPEER). SPEER members include top executives with Texas transmission and distribution (T&D) utilities, competitive electricity retailers, and advocates for efficiency, distributed resources, and energy management software. Though the group broke new ground by that regulated utilities have the right to financial protection, it could not agree on a specific remedies in the ratemaking process, SPEER CEO Bob King told Utility Dive.

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DERs — including demand response (DR), energy efficiency, storage and on-site generation like rooftop solar — can help relieve system congestion and avoid traditional infrastructure costs, King said. But because of a “complex and multidimensional” set of disincentives embedded in traditional ratemaking, “utilities have no incentive to invest in them, even if they reduce overall costs.” T&D utilities are obligated to their shareholders make investments on which they earn a rate of return by the hundred-year-old regulatory construct that was created to drive investments. Today, utilities need to use new, customer-owned energy efficiency resources that reduce customer costs and strengthen the system but on which they do not earn a rate of return that benefits their shareholders. There is no financial incentive for utilities to do that...click here for more

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