Regulatory Incentives and Disincentives for Utility Investments in Grid Modernization

Abstract

is principal and chief economist at Seventhwave, a think tank in Madison, Wisconsin, and senior fellow at Michigan State University's (MSU's) Institute of Public Utilities. He has worked in the field of utility regulation for 36 years, including 21 years at the Wisconsin Public Service Commission. He has appeared as an expert witness in utility proceedings across the country, published reports and journal articles, and is co-author with Janice Beecher of the book, Risk Principles for Public Utility Regulators (MSU Press). Kihm holds a bachelor's degree in economics and master's degrees in financial economics and quantitative methods from the University of Wisconsin. He is a Chartered Financial Analyst.Janice Beecher has served as Director of the Institute of Public Utilities at MSU since 2002, bringing more than 30 years of applied research experience to the position. Her areas of interest include regulatory institutions, governance, and pricing, and she specializes in the water sector. She is a frequent author, lecturer, and participant in professional forums and Editor of Utilities Policy. She recently coauthored the book, Risk Principles for Public Utility Regulators. She is presently serving on the U.S. Environmental Protection Agency's Environmental Finance Advisory Board and recently completed service on Michigan's 21st Century Infrastructure Commission. She previously held positions at Ohio State and Indiana Universities and the Illinois Commerce Commission. Beecher has a Ph.D. in political science from Northwestern University and faculty appointments in MSU's College of Social Science, where she has taught graduate courses in public policy and regulation. Ronald L. Lehr practices law and consults for clients on energy regulation and business matters.Current assignments include foundation-funded consulting work on a variety of topics related to increasing the amount of clean energy in electric systems, including system, operations, integration and transmission planning for the Western Interconnection and new utility business models and regulatory reforms that support them. He has worked for private firms, nonprofit advocacy groups, national energy laboratories, and foundations on renewable energy policies and commercialization strategies. He represented the wind industry in the Western United States on regional transmission and related issues for over a decade. He served for seven years (1984 to 1991) as Chairman and Commissioner of the Colorado Public Utilities Commission. He has served on corporate and foundation boards of directors and boards of advisors, including as President of the Denver Board of Water Commissioners.

Case Studies of the Economic Impacts of Power Interruptions and Damage to Electricity System Infrastructure from Extreme Events

“…Additional research, including interviewing utility staff, could contribute to understanding the circumstances in which utilities are or are not motivated to conduct economic studies associated with past disruptions. Kihm et al (2017) discuss these issues in more detail. An important topic for research is to study what factors determine whether utilities, regulators, and other stakeholders may be willing to adopt economic information associated with LDWIs into existing regulatory and planning processes.…”

Opportunities and Challenges to Capturing Distributed Battery Value via Retail Utility Rates and Programs

“…Presently, NWA programs are not pervasive in the electric utility industry, but rather are just now being pursued for a number of reasons (Satchwell and Cappers, 2018). The biggest hurdle has been that traditional utility rate of return regulation incentivizes increased capital expenditures as opposed to programming for non-utility-owned assets (Kihm et al, 2017). Other notable challenges include the time and uncertainty required to enroll customers, execute contracts, and interconnect all DERs necessary for a NWA when compared to installing a traditional T&D solution.…”

Expanding the Scope of Commercial Opportunities for Investor-Owned Electric Utilities

“…Technically, utility managers and executives are focused on creating value for their shareholders, not just in promoting higher earned returns. This is a subtle, but important distinction that is discussed in more detail inKihm et al (2017). For purposes of this paper, we use the term "profit-generating commercial opportunities" as ones that, on net, have the opportunity to create value for shareholders, which is the motivation for utilities to pursue them.…”