e21 Phase 1 Report
December 1, 2014 | Integrated Systems Planning, New Rates, Products, and Services, Performance-based Regulation, Reports
Authors: Mike Bull, Rolf Nordstrom
A growing and fundamental misalignment exists between the traditional utility business model (and the regulatory framework that supports it), and the realities of today’s marketplace and Minnesota’s public policy goals. This is unsurprising since we have regulated utilities more or less the same way since roughly 1900, when the ﬁrst state regulation of electric utilities emerged, just 20 years after Thomas Edison established the ﬁrst centralized electric utility in New York.
The e21 Initiative (“e21” stands for 21st Century Energy System) is a highly diverse and collaborative group of Minnesota leaders assembled by the Great Plains Institute to recommend ways to ﬁx this misalignment and update the way we regulate utilities in two fundamental ways:
- Shifting away from a utility business model that provides customers few options (everyone gets the same grid electricity produced largely with coal, natural gas, or nuclear power at large central stations) toward one that oﬀers customers more options in how and where their energy is produced and how and when they use it; and
- Shifting away from a regulatory system that rewards the sale of electricity and building large, capital-intensive power plants and other facilities toward one that rewards utilities for achieving an agreed-upon set of performance outcomes that the public and customers want (e.g., energy eﬃciency, reliability, aﬀordability, emissions reductions, predictable rates, etc.).
In short, new customer expectations, public policy goals, and the changing utility marketplace are driving the need for a modern electric system that can support new ways for electricity to be generated, delivered, and used. These and other drivers will require the electric system to continue to be reliable, as well as become cleaner, more ﬂexible, secure and resilient against attack and natural disaster, and able to empower customers to manage and reduce their energy costs. It will also become more distributed, ﬂexible, intelligent, eﬃcient, real-time controlled, and open to more participants. These technology, market, and policy forces are inexorable and will continue to transform the energy economy and technology landscape, impacting utilities and their customers in profound ways, both in Minnesota and elsewhere.
In the face of this rapid change, e21 presents Minnesota with an opportunity to act in advance of any particular crisis and lead the nation in demonstrating how a new customer-centric, performance-based regulatory approach and utility business model can enable both economically viable utilities and achievement of public policy goals.
Readers should view the consensus recommendations in this Phase I report as a cohesive package of ideas rather than as disparate options from which to pick and choose. In other words, the recommendations relate to and support one another, and only as a package do they reﬂect the consensus recommendations of e21 Participants.