It seems trite to say it, but the world around us is changing quickly and in some unanticipated ways. The venerable electric power companies invented by Thomas Edison over a hundred years ago are going through some tough times. In a seeming contradiction, demand for electricity continues to rise, but revenues and profits are declining as more alternative energy projects are coming on line.
As a former resident of Colorado, the Public Service company provided electricity and natural gas throughout the region. In Texas there are many power companies, Austin Energy being the company in the area where I live. In both cases the State Legislatures run the utility companies. So there is a strange mixture of a commercial enterprise selling a product in a broad commoditized market, with the assumed objective of making a profit. Utility companies used to be considered very secure investments, if somewhat low return.
But being a government run enterprise, they are subject to legislative regulation, and in recent times the mandated goals and balancing the books appears to be in conflict. Both Colorado and Texas have passed legislation requiring that the utility companies put up wind farms and solar projects. In spite of studies that reported the cost for alternative energy would be greater than the cost of coal fired electricity. In addition, the legislators have required that the utility company pay customers rebates to help underwrite the cost of solar installations. And the utility companies are required to buy the excess generated electricity from the customer. How are the utility companies supposed to survive under these conditions?
The cash squeeze got so bad that Austin Energy had to notify over 150 customers with solar projects that were already approved that they didn’t have the money to pay for them. And further, the utility company said it projected a need to increase rates over the next few years as the cost of wind power and solar power projects that were being added to the electric power mix are coming on line. Exactly as predicted by the industry consultants.
Utility companies are in the business of providing reliable, low cost energy. Utility companies are not typically in the business of developing new power generation technology. This has lead some several companies to look at their opportunity to fulfil the operation and management role across all the power technologies available. And initial projections support the idea that this is a direction that will sustain the role of the utility.
Our standard of living and our manufacturing base depends to a certain extent on a low cost of electricity, just as transportation costs are dependent on the cost of fuel. Maintaining good supplies of both and keeping costs low are foundational to a strong economy.