Collaboration is vital for utilities with an eye on tomorrow
When it comes to the most pressing issues the industry is facing, utilities, regulators, and customers generally have the same interests, but often fail to recognize it.
Each stakeholder understands there is an urgent need to address decarbonization, affordability, modernization, community growth, equity, and resilience. That underlying alignment of values, however, is often lost in discussions over regulatory processes and practice. Each party has become so accustomed to serving as watchdogs and critics of each other that they have found themselves in an unproductive environment of suspicion, distrust, and, in some cases, hostility.
Disagreements over means, in other words, are paralyzing progress toward common goals. Solving these major problems will therefore require each to view the others as partners in a shared effort to achieve a mutually beneficial outcome.
While building that kind of coalition requires each party to display a willingness to work together, it’s important to acknowledge that this is not the typical dynamic shared by stakeholders. After all, these parties have been trained to view each other as adversaries.
Utilities are accustomed to bringing fully baked, data-driven ideas, and regulators are accustomed to poking holes in such proposals. Disagreements can and do happen in situations when all parties don't start with a shared vision of a desired outcome, stalling or even stopping meaningful progress.
But given the unprecedented circumstances of the global COVID-19 pandemic, there is no time to waste disagreeing on the best way forward. Especially within the last year, residential and small business customers could owe $35 billion to $40 billion dollars to their utilities by March 2021, bringing additional urgency to uniting on a call to action.
Utility providers need to accept some degree of flexibility, in addition to demonstrating a willingness to diverge from their standard practices and tactics in order to make real progress. After all, this isn’t just about data and proof points; it’s about winning over hearts and minds, balancing scientific analysis with emotional investment. Doing so tactfully is as much an art as it is a science.
In practical terms, that may require a convening of local or regional utilities and stakeholders to talk about the big challenges the system faces, and an acknowledgement of a shared vision for the future; similar to the confidence building phase of diplomatic negotiations. There are also a number of examples where this has been done successfully that industry leaders can draw from.
In 2018, the utility industry in Hawaii was butting heads over the growth of solar adoption. Providers felt the renewable energy was cutting into their bottom line and were concerned about a significant change in the regulatory structure. Through extensive negotiations facilitated by the state’s Public Utilities Commission, the parties eventually came to the realization that they wanted the same outcome, even if they disagreed on how to achieve it. After years of negotiation, in December 2020, the commission approved the nation’s first performance-based regulatory framework that promotes the adoption of clean energy while reducing utility costs for consumers.
According to the Public Utilities Commission’s announcement of the initiative, that decision represented, “the culmination of over two and a half years of dedicated work by a broad spectrum of key stakeholders, including Hawaiian Electric, the State Consumer Advocate, local governments, clean energy companies, and environmental groups.”
Other examples of similar agreements include a multi-year transformation of Maryland’s electric grid, the adoption of performance-based regulation in Minnesota, and the Reforming the Energy Vision initiative in New York State.
The utility leader’s job is now one of consensus-building across stakeholders, moving the conversation from a gridlock toward a mutually beneficial path forward. Utilities are well positioned to bring everyone to the table and collaborate on solutions, but still have much work to do in building trust between stakeholders. Reinforcing those shared beliefs and goals for the future is a great place to start, but they will also need to demonstrate a willingness to listen and be truly collaborative in order to make any meaningful progress towards achieving them.
To hear more from Val on this topic and other utility-of-the-future considerations, read his latest paper: Building the 22nd century utility
