The Business Model for Electric Utilities is Ending

Due to a variety of factors, the traditional business model for the nationâ??s investor-owned electric utilities, such as TXU or Reliant Energy, is in trouble. Deep trouble. In fact, these factors â?- led by a rapid movement away from the decades-old system of generating electricity from large, centralized power plants and distributing it to customers over an interconnected grid â?- is rapidly giving way to a new, decentralized structure that features varying types of distributed energy resources (DERs), most notably rooftop solar. In utility parlance, distributed generation technologies are â?'disruptive.â'' Along with the growth in energy efficiency measures and other technologies, DERs have significantly slowed electric load growth and â?- though it may not be recognized as such quite yet â?- could ultimately sound a death knell for utilities that have historically made money based on the volume of electricity they sell. Put another way, utilities may soon face a future in which they will have trouble recovering fixed costs and making a profit. It remains to be seen how utilities will react to these developments, and how the changing landscape will pan out for consumers. But we all have an interest in a stable model that keeps the lights If a local distribution company goes bankrupt, customers would no longer be able to switch electricity providers, even in areas that allow competition.