ComEd CEO eyes new ‘business architecture’ as demand declines

By Rod Kuckro | 06/06/2016 07:32 AM EDT

Commonwealth Edison Co. President and CEO Anne Pramaggiore is in the vanguard of electric utility leaders trying to pivot their business from one that manages fixed assets — transmission lines and substations — to one that offers services that customers demand even as they use less electricity.

Commonwealth Edison Co. President and CEO Anne Pramaggiore is in the vanguard of electric utility leaders trying to pivot their business from one that manages fixed assets — transmission lines and substations — to one that offers services that customers demand even as they use less electricity.

"Our load is flat to declining" by as much as 2 percent, she said. "We actually adjusted our model last year because our models weren’t matching what was really happening," Pramaggiore said during an interview.

The Chicago-based utility was "seeing more demand decline than we were modeling," she said. "We can gauge what our [energy efficiency] programs generate, but what we don’t know is what’s happening out in the economy — what’s happening in building stock.

Anne Pramaggiore
Commonwealth Edison CEO Anne Pramaggiore. | Photo courtesy of ComEd.

"So we adjusted our model to try to capture more of what we thought was happening outside of our programs, and our models are matching what’s happening much more closely than they have been for years."

Pramaggiore, 57, sat down with EnergyWire when she was in Washington recently for a meeting of her fellow Federal Reserve Bank regional directors. She is deputy chairwoman of the board at the Federal Reserve Bank of Chicago, a term she began in 2014.

Since 2012, she has led one of the largest utility systems in the nation. ComEd provides service to roughly 3.8 million customers across northern Illinois, or 70 percent of the state’s population. As an energy delivery utility, ComEd does not own power plants, but it manages more than 90,000 miles of power lines in a territory that spans 11,400 square miles.

"Basically, we’re running a grid that’s largely a fixed asset, largely fixed cost, and so we want to make sure to recover costs that are adequate to run this grid," even as customers use less of the utility’s product, she said. "As more and more distributed generation comes on the grid, it’s going to be a more complex machine."

Pramaggiore said, "Without fail, when we ask our customers questions about what they’re most interested in, what features of the electric system are most critical to them, clean, green environmental issues score at the top of the list every single time."

But evolving into the utility of the future may be more difficult for ComEd in the near term, as the Illinois Legislature adjourned last week without acting on the Next Generation Energy Plan legislation sought by ComEd’s parent, Exelon Corp.

Pramaggiore describes it as a "bridge bill" that would authorize millions of dollars for five microgrid projects, change solar net-metering rates, aggressively expand energy efficiency programs and usher in new rate design for residential customers that would be a first of its kind in the country.

"What we have done in this bill is accommodate what our customers want," whether that means more energy efficiency offerings or solar power, Pramaggiore said.

But if the utility is going to actively drive down demand for its power through efficiency and distributed generation, "you ought to be able to rate base something like that" and earn a return on the investments "to recognize that we’re making a shift from an asset-based model to a service-based model," she said.

As part of that shift, ComEd is looking at its "business architecture," Pramaggiore said.

"There may be a couple layers to this business that we now think of" as just a distribution utility, she said. "So one layer is you’re constructing, managing and maintaining infrastructure just like you always have.

"And then there is another layer that we talk about like a platform business, where people want to transact across the grid, and now you’re thinking about how do you facilitate those transactions, how do you price those transactions?" Pramaggiore said.

The 10-megawatt microgrid envisioned in Chicago’s Bronzeville neighborhood would be "a microcosm to test transacting power and understanding that a little bit better," she said (see related story).

An example of a transaction could be a customer selling distributed generation into the utility’s system, she said. "We’re going to facilitate you doing that, but there’ll a transaction fee."

"We think that the retail markets potentially sort of play around this platform, and it may be that the utility is offering some of those services, but maybe not. We’re not sure, that’s sort of an open question now. You could have this ecosystem of retail market providers who are providing different types of services and options to customers. So very preliminary thinking, but we’re seeing several layers of this business and trying to sort through that," she said.

Hardware for sale

In addition to creating a transactional platform, Pramaggiore said, ComEd later this year will roll out a web-based marketplace where customers could buy hard goods, such as smart thermostats, or services such as a demand management program from a third party.

"Right now, we’re just trying to get the concept up and off the ground. What we want to test is whether the platform idea makes any sense, what’s of interest to customers and what isn’t, and how will they transact with us. All those questions we want to test through this marketplace," she said.

Comparing the marketplace to eBay, she said, "We’ll connect buyers and sellers, and the reason that you come to us is because of our understanding of customers."

But introducing such a new layer of business to its customers will be a "real challenge," she said. "I think we’ve got a big education program ahead of us" similar to what the utility engaged in when it began installing up to 4 million smart meters several years ago.

ComEd’s future business also will involve partnerships with nontraditional electricity players such as Nest, Google and ecobee as the utility "invites people who have technology that can be beneficial to our customers, invite them to be part of the ecosystem," Pramaggiore said.

"We’re not out there on our own any longer. We need to be working with others. They bring ideas to the table and important benefits for customers."