Today’s column will discuss utility deregulation and the technological trends sweeping the industry and forcing change, topics of such potentially mind-numbing, eye-glazing arcaneness as to send you racing for the Sunday ad inserts in relief.
But it needn’t be as painful as all that. Here’s a simple assignment that will help illustrate the points to be made in the paragraphs to follow.
Go find your telephone directory. The White Pages book, the one with residential and business listings.
Can’t do it? Can’t remember the last time you saw it, much less used it?
That’s not surprising. With the stunning drop in the number of land lines — phones physically connected to a network — and the huge shift of customers to mobile devices, the telephone directory loses its, you should pardon the phrase, utility. There’s no common, widely distributed directory of cellphone numbers.
So dramatic has the shift been that it prompted the Utilities and Transportation Commission, in a decision announced in April, that Washington telephone companies were no longer required to deliver printed White Pages directories to all customers.
The decision didn’t get a lot of attention at the time in large measure because many consumers had stopped using, or looking for, their phone directories. To carry out the assignment mentioned at the beginning of this column, you first have to know what a telephone directory is or looks like. Increasingly, people don’t.
But directories are just one manifestation of trends reshaping utility regulation, as illustrated by several additional releases from the UTC in recent weeks, concerning a proposal to grant CenturyLink even more freedom to set rates it charges to customers.
For decades the structure of utility regulation in this country and the philosophy behind it have been widely understood and little changed.
The theory: Essential basic services such as electricity, natural gas, telecommunications and water require huge amounts of capital to provide service to homes and businesses, and so much of it that it would be too expensive to build multiple, competing delivery systems.
So instead we’ll grant monopoly operating territories to service providers. In exchange for exclusivity, those companies agree to regulation on the prices they charge, the services they offer and the rate of return they can earn for their owners (publicly owned utilities such as Tacoma Power are somewhat different animals, so we’ll put them aside for the moment).
You can choose to deregulate an industry, as has happened in transportation sectors including trucking and the airlines, or you can have it thrust upon you. In the case of telecom, the breakup of AT&T coupled with technology advances that have made wireless communications affordable and ubiquitous has introduced competition into the industry and rendered the existing regulatory model obsolete.
This past summer the commission granted Frontier Communications (the former Verizon land-line service territory) price-setting freedom, reflecting the competitive reality of its industry. Now CenturyLink (the former Qwest, which used to be US West, which used to be Pacific Northwest Bell), is seeking expansion of the deregulation granted to Qwest in 2007. CenturyLink, by the way, serves Tacoma, Olympia, Seattle and Spokane.
The commission’s final ruling (there’s a proposed settlement out for public comment) might attract as little notice as the phone-book decision did. Regulators and regulated companies are catching up to a reality consumers and businesses are already comfortable with.
But of course, telecom is a different species of utility than energy. There’s no such thing as wireless natural gas; electricity still has to get to your home through a physical connection to the grid. Maybe you can have competition for the providers of electrons and gas molecules (and some parts of the country now do), but the delivery of that energy through pipes and wires is still a natural monopoly.
Not exactly, and if you want a front-row seat on the next big battle in the utility industry, one that will directly and emphatically affect you, here’s one to watch.
In this case, the competitor to the utility company is you.
Those solar panels you’re installing on the roof, the small wind turbine you have at your place in the country, the fuel cell array you might someday have in the basement, all those represent generating sources that displace the electricity you buy from the local utility. One industry official has even suggested that electric and natural gas utilities might compete with one another (far more than they do now on water and space heating), through the development of basement gas-powered generators.
Already there’s a fight in Arizona over the issue of who charges whom and how much for electricity generated from home-mounted solar panels that can be sold onto the grid as well as the cost of maintaining that connection for homes that are sometimes on, sometimes off the system and sometimes a provider, sometimes a taker of power.
Expect to see more questions like those arise as technology makes it more practical and affordable for businesses and homeowners to be their own power plants. The question is not whether those changes and advances are coming, but how we deal with the effects and consequences of those changes, many of which we’re just now discovering. Consider one more time the case of the disappearing phone book. With the demise of the directory, especially the thick metropolitan-area books, what will parents use for cheap, handy booster seats for their kids?
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at firstname.lastname@example.org.