The Challenges of New Electricity Customer Engagement for Utilities and State Regulators

ICER Distinguished Scholar Award Paper

Growing customer engagement has been a driving force behind transformation of the U.S. electric industry. It has triggered actions by both electric utilities and their regulators. The combina­tion of technology, public policies, and economics should stimulate additional customer engagement in the future, although the jury is still out on how fast it will grow in retail electricity markets over the next several years. After all, the overall enthusiasm over electric customer empowerment may be “more noise than sound.” To date, the vast majority of residential customers have exhibited much inertia, whether it is participating in retail competition programs or a new pricing scheme like time-varying pricing. Even with the hype over rooftop solar, an extremely small percentage of U.S. households have taken advantage of this technology. In any event, utilities will increas­ingly operate in an environment with a distinct line between engaged and traditional customers. They will face additional costs and risks. The major chal­lenge for state utility regulators is to protect tradi­tional customers while encouraging utilities to serve engaged customers. Regulators have various tools to achieve these objectives.