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Forward-thinking power companies transform “disruptions” into opportunities

power_lines_webThe Edison Electric Institute has warned that “disruptive challenges” caused by recent technological and economic changes could result in considerable impacts to the electric utility industry. But forward-thinking power companies will be able to transform ‘disruptions’ into opportunities that will result in earning a reasonable rate of return, said Steven Scheurich, vice president of service delivery for Entergy.

The utility industry is facing an ever-changing business environment, driven largely by changing customer expectations, slow electric demand growth and increasing capital and compliance costs relating to its infrastructure.

“The unprecedented increases in capital spending are driven by a number of factors including aging infrastructure, an evolving set of environmental regulations, and nuclear safety regulations,” Scheurich said. “At the same time, consumer, regulatory and technology trends have resulted in low or sluggish growth in electric demand across the industry. These factors combined with the continued integration of ‘disruptive technologies,’ if not effectively addressed, could result in increasing pressure on customer rates and could impact realized equity returns in the future.”

But the combination of new technologies and changing customer expectations provides opportunities for Entergy, Scheurich said.

“We are closely monitoring emerging technologies, analyzing options and making sure we proactively adjust our strategies and tactics when appropriate,” he said. “For example, there may be opportunities in energy efficiency, in providing timely energy information to help customers save money, and in investing in new technologies to create more reliable, ‘intelligent’ distribution systems.”

Scheurich said Entergy is being proactive to prepare for the future by executing a number of strategic imperatives:

*Lowering costs for customers with the move to the Midwest Independent Transmission System Operator (MISO) that is expected to save Entergy customers approximately $1.4 billion over the first decade. The proposed spinoff and merger of its transmission system with ITC Holdings is anticipated to lower delivered cost of power to customers over the long term by improving reliability and expanding access to low-cost generation. The company is also driving cost-efficiencies throughout the organization and grid to ensure service levels and price remain competitive.

*Growing the utility business through economic development.

*Developing efficient and effective regulatory constructs that allow Entergy to attract capital at competitive rates.

Consumers have the ability today to invest in alternative energy sources, such as solar, at a premium to generate electricity to partially meet their energy needs. However, limitations in new energy technologies result in consumers continued reliance on their utility to meet their energy needs, Scheurich said.

“Dependence energy and consumers demand for ‘hyper-reliability’ result in very few making the decision to disconnect completely from the grid,” he said. “Entergy believes regulatory policies should be put in place to avoid cross-subsidization, but the policies should be flexible enough to put these new technologies on a sustainable path going forward while simultaneously helping protect the interests of all consumers, particularly those who cannot afford or do not want to adopt these new technologies. As technology advancements become economic, there may be opportunities to create value for customers and the utility alike.

“The rapidly evolving energy service market will include new players such as non-traditional companies, some with powerful, well-known brands, competing to serve consumer energy needs. Embracing the global customer and technology trends positions Entergy to take advantage of future growth opportunities as the new marketplace evolves. It’s important that regulatory processes evolve with the industry, to find ways to encourage and promote sound policies providing benefits to consumers while recognizing the realities of the utility business model.”

 

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