lunes, mayo 03, 2010

Will Utilities develop the Next Big Thing?

First update, These are the original EWPC Blog comments


Last night, I tried to add the following comment under Mr. Hunts POWER PLAY post to update him about this EWPC post, but were unable to do so. Today I am still having trouble. After removing the links, this is how it started:

Using the entire above comment (as you will see, placed at the end), I wrote the EWPC post "Will Utilities develop the Next Big Thing?" that says [see the main post].
Jose Antonio Vanderhorst-Silverio

Without yet considering this whole article, this is what Mr. Hunt wrote:


Thank you for your thoughtful comments. I do not disagree that the States should bear some responsibility for the outcomes of their ratemaking and legislative decisions, but alas, those consequences are, in fact, more often born by the public as taxpayers or the public as ratepayers. In the case of smart grid and other regulatory decisions the burden will fall on the utility to remedy any problems, pay the cost of that remedy and plead with the regulators to recover the costs in rates.
Jose Antonio Vanderhorst-Silverio

In the meantime, making a parallel of utilities and railroads, for the benefit of state governments, customers and taxpayers, I will respond Mr. Hunt with a quote from Megatrends on the "Law of the Situation: the railroads did not understand."

Suppose that somewhere along the way a railroad company, sensing the changes in its business environment, had engaged in the process of reconceptualing what business it was in. Suppose they had said, "Let´s get out of the railroad business and into the transportation business." They could have created systems that moved goods by rail, truck, airplane, or in combination, as appopriate. "Moves goods" is the customer-oriented point. Instead, they continued transfixed by the lore of railroading that have served the country so well - until the world change.

Of this phenomenon Walter B. Wriston, chairman of Citycorp, in 1981 said: "The philosophy of the divine right of kings died hundreds of years ago, but not, it seems, the divine right of inherited markets. Some people still believe there´s a divine dispensation that their markets are theirs - and no one else´s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else. All the king´s horses and all the king´s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard."
Jose Antonio Vanderhorst-Silverio

As a follow up to the post Isn't the Next Big Thing About Business Model Innovations?, I first add as an introduction a comment I posted under it saying that:

There are 6 interesting comments since April 22nd under Mr. Carson's article. In addition, some of those comments have been fed back as reinforcing comments among the 8 comments under the Knowledge Problem commentary "More smart grid insight," written by Michael Giberson.

The main story is that I responded an article that suggests how utilities may have an opportunity to develop the Next Big Thing themselves:

Hello Mr. Hunt,

As a result of my comments to what you wrote about the threats to the traditional utility business model, I read with a lot of interest your follow up article POWER PLAYS: How the Utility Empire can Strike Back!

From what I have gathered so far on the discussion, you are certainly a very intelligent and important person. As I follow the generative dialogue principle that “we are not our opinions,” I wonder whether the opinion displayed in the POWER PLAYS’ article may be partially flawed, by being made under the assumption that utilities should be responsible for the damage in the making. My opinion, on the contrary, is that the full responsibility should rest on state governments, as explained in the article Is the Smart Grid that is Being Pushed a Costly Mistake?, whose summary states:

The main argument is that, by inaction, each State Government should be responsible to their constituencies for a very costly mistake that is being made by letting the smart grid process continue without giving State Regulators the proper mandate.

In addition, utilities' business model are based on the century old regulatory trick of winning rate cases to the regulator, whether for the traditional energy rates or recently for adding smart meter costs to the rate base. Based on the urgent need for business model innovations, please correct me if I am wrong as it seems to me that the opinion in “POWER PLAYS…” can be generalized in that it is still possible to tell old utilities competitive tricks?

Best regards,

José Antonio Vanderhorst-Silverio, Ph.D. - LinkedIn

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