Some Environmentalists Want To Save Utilities From Death Spiral

The Natural Resources Defense Council, known for slapping lawsuits on big polluters, thinks power utilities are worth saving from a solar-powered death spiral, an NRDC official said in Chicago Monday. An Exelon executive welcomed the help.
Solar panels have become cheap enough, and enough people have begun to adopt them, that utility experts can see the end times for the business model of the old power companies. But the old power companies can remain useful, said Becky Stanfield, deputy director for policy for the Midwest Region of the National Resources Defense Council, if they adapt to changing times.
"It doesn't serve anybody if the utilities are caught in a death spiral," Stanfield told about 50 people, mostly law students, at the University of Chicago Law School. "That's not a situation that is tolerable for the utility or its customers or for the environment."
The "death spiral" refers to a highly anticipated scenario in which the utilities' wealthiest customers increasingly adopt rooftop solar systems, as solar systems continue to drop in price. That shifts more of the burden of paying for grid infrastructure onto the utilities' remaining customers, making solar more attractive to them as well.
But NRDC doesn't see a day, at least in the near future, when distributed generation replaces utilities.
"We don't really see a scenario where the grid becomes irrelevant. Maybe there are some organizations out there that think people are going to do distributed generation and boom, leave the grid. That's really not happening. The vast majority of people who are doing distributed generation are still grid connected, including me."
Sitting beside Stanfield, an Exelon executive endorsed nearly everything she had to say.
"As a utility we agree with 95 percent of what NRDC is trying to do in terms of changing the regulatory model, changing the dynamics so we can make the customers get value without crippling an economic engine like ComEd," said Tom O'Neil, senior vice president for regulatory and energy policy and general counsel for ComEd, an Exelon company.
"We're faced right now with words like death spiral, and what that really means to ComEd is—it's not going to happen soon, but think Eastman Kodak, think Smith-Corona, and you can go down the list of industries that didn't adapt technologically."
Stanfield and O'Neill agreed that the regulatory structure is partly to blame, because it treats utilities like commodity merchants—the more electricity they sell, the more money they make. That structure discourages efficiency, discourages distributed generation, discourages cooperation with customers.
"It's just nonsensical given that customers just want safe and reliable and affordable and clean electricity," Stanfield said.
Moments later O'Neill defined ComEd's core principles as "reliable, affordable, safe, now clean electricity."
In February NRDC and the industry-funded Edison Electric Institute released a joint statement agreeing on eight key recommendations for regulators.
"We have spent a lot of time really for more than three decades now trying to come up with solutions to change the way utilities are regulated," Stanfield said. "Now we find there is a lot of interest in the utility sector itself in finding solutions to this problem, some of which may be driven by the increased penetration of distributed generation."
Asked about the change in culture at their organizations, Stanfield said NRDC has been delivering the same message for decades. O'Neill acknowledged that the culture has changed at ComEd and Exelon.
"Cultural change at ComEd and at all utilities right now is transformative," he said. "It is upheaval like tectonic plates shifting. We have a 100-year-old company using 100-year-old technology, and I'm not really exaggerating that much. If you want to go to some vaults downtown I can show you some stuff that Tom Edison would recognize and maybe even that he put in."
"We have a challenge and an opportunity to adapt to the world as it is today and to the world that our customers want…. We've got to think about a different way to properly align incentives the way Becky was talking about."
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