David Crane: No, you fool, utilities are not “shockingly stupid”

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Quick Take:  CNBC is out with a loooooonnnnnngggg article about the "dirty clean energy battle." In it, NRG Energy CEO David Crane calls utilities "shockingly stupid."

 

Now you could certainly call utility CEOs (as a group) conservative or slow-to-react or even timid. But they're not stupid. Crane and others like him often complain bitterly about utility behavior. But they forget that this behavior is a result of regulation. For instance, many observers believe utilities should get in the business of rooftop solar (me included). Yet many utilities are forbidden to do that. Other utilities are allowed to do so, but only through a non-regulated subsidiary, which also requires permission.

 

In other words, Crane and his ilk complain that utilities are stupid because they follow the rules. Really? Obeying the law is stupid? Now who's the fool? If we want to change utility behavior, we should simply change the rules they play by. Hello.

 

The CNBC article does a good job of summarizing the rules that result in the behavior Crane detests. Brief summary below, but click the link above for the full article. – Jesse Berst

 

Industry consultant Karl Rabago believes there is "something in the utility person that makes him want to own machinery. It's in their bones." (No. No. No. It's in their regulations. – Jesse)

 

There's a business reason for the reluctance of utilities to embrace renewable energy. The business model of the regulated utility bases earnings on the level of capital invested in infrastructure. The more the utility builds, the bigger its rate base.

 

This "own and control" mentality is being threatened. And it's not just about solar. As other distributed generation technologies become popular, utilities will need to adapt to customers being owners, lest they fall into a "death spiral." Costs will continue to go up, yet sales will go down as more and more customers produce more and more of their own power.