Alighting Innovation in the Utility IndustryThere are 3,200utilities that make up the U.S. electrical grid that sell $400billion worth of electricity per year. However, that’s slowlychanging. Companies such as Comcast, NineStar Connect, and Vivinthave started selling their customers electricity along with theirservices. Comcast offers its XFINITY customers in Pennsylvania theopportunity to purchase electricity as well as phone, Internet, andTV services. NineStar Connect offers electricity, phone, broadbandand home security to customers in central Indiana. Vivint, an alarmsystem company on the East Coast, installs solar panels on alarmclients’ homes for free and then requires the homeowner to purchasethe electricity that is generated. Any excess is sold to the localpower company. Google, while it has not formally entered themarket, has its own wholesale power license and has purchased Nest,which makes a “learning thermostat.” Industry experts speculatethat it will only be a matter of time before Google formally entersthe market.
With this influx of new competitors, utilities will have tostart learning to compete. Michael Peevey, the president of theCalifornia Public Utilities Commission, states that these daysutilities “hold their own fate in their hands. They can do nothingbut complain or moan about technological change or they can try toadapt.”56
Utilities lose revenues when businesses and residentialcustomers switch to solar and wind power and lose additional moneyfrom having to buy any excess electricity generated. Utilities haveto maintain the power transmission lines across the grid. Customersoften are assessed fees in their bills that help cover linemaintenance, but those who are selling back power don’t pay thesefees while still using the power lines.
Further, utility companies face a number of regulations and arelimited in their actions. For instance, utilities in Louisiana,Idaho, and California want to impose fees or taxes on solar usersbut have been rejected by regulators. It is unlikely that U.S.regulators will ever completely do away with electric companies asthere will always be a need to have a secure supply of power. Thus,these companies will always have to incur the expense ofmaintaining the power lines with a dwindling customer base.
Additionally, most utility companies are behind the times ontechnology. While there are smart meters, most utilities have alimited presence in customer homes with programmable thermostats.They could have a greater presence if they were to invest indeveloping better in-home energy management tools (like thethermostats offered by Nest). Nor have many utilities looked intoapps for phones or tablets that can help consumers manage
Finally, the utilities themselves have been getting in the wayof their own success. Over a decade ago, Peevey recommended to theCalifornia utilities to enter the solar power business. Hesuggested they put solar panels on people’s homes and then buildthe cost of installation into the rate base. CEOs of the utilitycompanies balked at Peevey’s calls for change. Most CEOs repliedback to his innovative ideas: “It’s not our culture.” This is true,as most electric companies didn’t have a need to innovate itsproduction processes or products for decades.
4. What cna you do to help overcom employees' resistance tochange both before the changes are implemented as well as duringthe change process? Is it simply behavior that will need to chnage,or will attitudes need to change as well?
