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Report/Paper

Reimagining the Utility

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Electric utilities must modernize to serve new economic and policy objectives, including managing an increasingly distributed and decarbonized power system. A fundamental question for this future system is: What is the appropriate scope for utility functions (and associated earnings opportunities) versus those that should be provided by a competitive marketplace?

Illustration of balance between utility functions and competitive functions

The scope of utility functions can be either expansive or limited. Meanwhile, the total size of economic activity in the electricity sector may be larger in the future, providing growth opportunities even where proportional market share is less.

Countless individual decisions and compromises will ultimately determine the course of the utility. At every turn, utility program designers and regulators can evaluate proposals against key variables.

Key decision variables for evaluating utility proposals and market reforms

Based on the path being pursued and market conditions for specific programs, the best design can move left or right for each variable. Experience shows that the utility business cannot be remade overnight. But this is no excuse to not get started. Delaying action is to accept path dependency on the legacy business and regulatory model, which was built for different infrastructure investments and operating structures than where the grid needs to go today.