Hold the phone — does telecom provide the right model for power?

By Edward Klump | 03/30/2015 08:16 AM EDT

AUSTIN, Texas — David Crane didn’t make it to last week’s Energy Thought Summit, but one of his favorite analogies did. The CEO of NRG Energy Inc. has compared the potential for sweeping changes in the power sector to those seen in the telecommunications industry.

AUSTIN, Texas — David Crane didn’t make it to last week’s Energy Thought Summit, but one of his favorite analogies did.

The CEO of NRG Energy Inc. has compared the potential for sweeping changes in the power sector to those seen in the telecommunications industry.

Take a speech he gave in January, when Crane said companies such as AT&T Inc. and Verizon Communications Inc. were in a position to succeed with new technologies as they straddled an old system (EnergyWire, Jan. 16).


Or his memo last year that praised the work of technology companies such as Apple Inc. and Google Inc. for their ubiquity and usefulness (EnergyWire, March 31, 2014).

So as thought leaders gathered on the University of Texas campus here to talk about electricity last week, a question from David Dollihite of Deloitte Consulting likely would have been right in Crane’s sweet spot.

"When I look at [the] customer experience in the financial world, the customer experience with telecom or Apple, and then I look at the current customer experience around energy, there can be a little bit of a gap," Dollihite said Thursday as a panel moderator, adding: "Why is there such a broad gap between what I can do on my iPhone and what I can with my utility?"

Patty Durand, executive director of the Smart Grid Consumer Collaborative, quipped: "I like that understatement — a gap."

One of the biggest issues, Durand said, is that regulatory structures don’t create an incentive to develop what another NRG leader called "raving fans." Durand made a point of saying she no longer compares telecom to electricity after being reminded by a consumer advocate of how vital power can be to a person’s life.

"We have a regulatory compact, which says that the electric industry must provide lowest-cost service to every single person in their territory," Durand said. "And that’s because there are low-income people; there are seniors."

She noted the role electricity can play in heating and cooling homes, as well as its importance to the economy.

Don Clevenger, a senior vice president with Dallas-based Oncor Electric Delivery Co., was perhaps more direct in a talk Wednesday evening.

"Comparing the electric industry to the telephone deregulation or to airline deregulation or to — thankfully not savings and loan deregulation — is a complete misnomer," he said. "It’s a completely different system with a completely different functionality."

Decentralized and regional

Clevenger described the large scale of electric infrastructure, while touting its role in the well-being of residents and businesses. For Oncor, which has regulated operations in Texas, the system involves roughly 105,000 miles of distribution line and about 16,000 miles of transmission line.

Now, Clevenger said, there needs to be a focus on making the grid flexible and adaptable.

"That’s like telling an elephant to learn to tap dance," he said, but noted that such flexibility could help with everything from electric vehicles to distributed generation.

A common talking point during the energy summit was finding ways to get consumers more involved in their energy choices and, where possible, use technology to help reduce consumption or generate power through solar panels.

Graham Richard, CEO of a group of businesses known as Advanced Energy Economy, said regulation of power isn’t approached the same way as telecom, hampering the possibility of a national solution for electricity.

"There isn’t one national 1996 telecommunications act that could be passed because the complexity of our wonderful system of electricity production and distribution and use is … decentralized and regional," Richard said.

The Telecommunications Act of 1996 was meant to allow anybody to go into the communications sector and have any business compete in any market, according to a Federal Communications Commission website. It was seen affecting areas such as phone service and cable programming.

Meanwhile, utility commissioners in states around the country oversee billions of dollars of energy investments each year, according to Richard, even if some don’t arrive steeped in electricity knowledge.

"Ratemaking is very difficult and has been the purview of a fairly limited number of specialists and consulting firms and others," Richard said. "We have to find ways to build a sense of trust and collaborative effort between the energy innovation companies large and small, the regulated electric utilities, the governors’ offices, legislators and these regulators."

And while an entity such as CPS Energy, San Antonio’s municipal electric and natural gas utility, can offer its version of the future, Richard said the approaches likely will be different in other locations.

"It isn’t going to be the same thing in each community and each state," he said.

‘We deserve better’

Still, Elizabeth Killinger, president of NRG Retail and Reliant, said the telecom comparison for an electric customer remains relevant, even if there are differences.

"If you think about at the macro level, the concept of it was all one company and it was a monopoly and there were no customer choices," she said in an interview.

Killinger said players such as Apple and Google are providing an experience that’s different, but added that AT&T and Verizon also have had to bring innovation to consumers.

As she looks toward a distributed energy future, Killinger said, "it would be really unfortunate if we kept a purely regulated structure that didn’t inspire innovation in these markets."

She pondered the familiar scene of a person who is sitting on the ground next to a plug in the wall to charge up a device. NRG works in competitive retail markets and also is involved with mobile power devices, which could help consumers have electricity when and where they need it.

"When did we say it was OK to sit by a bathroom and an outlet?" Killinger said. "We deserve better than that."

While different markets have different rules, Killinger said, customers also have different sets of needs. She said the regional model has certain appeal, as it could be easier to seek changes instead of making a federal push.

Jon Wellinghoff, a former chairman of the Federal Energy Regulatory Commission, said telecom is similar to electricity in a sense.

"We certainly went to more choice and more competition in telecom, and we have now multiple ways to communicate, and we’ll have multiple ways to provide energy services to our homes and businesses, as well," Wellinghoff said in an interview after speaking to the conference about areas such as solar power and smart technology.

But he said there are differences, too, including "more opportunities for end-use consumers to acquire resources to provide themselves with energy services, but to control the costs of those acquisitions by using those resources to also provide services out to the larger grid."

While fiber backbones remain for Internet and telecom communication services, Wellinghoff said, many people have gotten away from landlines for phones. Such a future hasn’t necessarily been sorted out yet with power.

"I think we’re going to need those distribution grids, and so that does cause a problem in the sense that … there always will be some level of local regulation over that monopoly distribution grid and how it’s structured," Wellinghoff said.

Creating ‘raving fans’

He applauded Texas’ work in carving out a competitive retail segment in much of the state and said people with less means receive electricity even in a restructured market.

"If you have a competitive wholesale and retail market for these energy services, there will be mechanisms to ensure those people that are in the lower income of the spectrum are adequately served," Wellinghoff said.

Yoav Lurie, CEO of Simple Energy, which works on digital customer engagement, said it’s important not to lose track of the value consumers receive from smartphones even as some people suggest the costs are high.

"We don’t just sign up for a $100 plan with AT&T because we’re dumb and AT&T’s got us all hooked," he said during the conference.

The Thursday panel mentioned New York’s plan to review and reshape approaches to electricity in that state (EnergyWire, March 16). Lurie said the move for change is positive but added that major utilities there haven’t been as bold as some other companies.

"It’s come time for the regulator to do it," Lurie said. "And so if you’re waiting on your regulator to be the innovative party in the regulatory conversation, you will be waiting for a very, very long time."

Killinger told the crowd that the customer must be the center of attention, going beyond any focus on revenue.

"It’s really about: Are we really making raving fans with every customer experience we give customers?" she said.

Durand of the Smart Grid Consumer Collaborative said the function of an electric utility remains different than other companies in the realm of telecom and technology. She said the New York proceeding will be important to see how new products and services may become available to consumers to help close the gap people now see.

"While telephones are important and Apple is important — I’ve got Apple products myself — they’re not under regulatory compact," Durand said.

"And so as the regulatory scenario that has been successful for the last 100 years changes, I think consumers will start to move more into the forefront," Durand said, adding that utilities will think "about creating raving fans and creating new products and services that delight customers."