Electric utilities fear they cannot recover needed capital-investment and operating costs through their rate bases, says a new survey of more than 600 U.S. utility-executive respondents. That concern rose to third from ninth place among the top-10 issues cited by executives in consultant Black & Veatch's 2012 industry report, issued on May 8.
Investor-owned utilities "are under tremendous pressure" to complete capital-intensive programs to boost reliability and environmental compliance, says Dean Oskvig, CEO of B&V's energy unit. Regulated rates greatly influence their ability to reinvest in infrastructure, he notes.
The B&V survey also found that 60% of respondents reported no impacts from last year's drought despite multiple reports of powerplant curtailments due to water shortages or high water temperatures. Oskvig attributes this to excess generation, with energy demand not fully back to pre-2008 levels. But as the economy recovers, "a repeat of the summer of 2012 could have much greater impacts to service levels across the industry," he says.
While most utilities will start or expand smart-grid programs this year, executives still struggle to justify costs to regulators. Nearly 60% of execs said their business cases do not provide strong enough financial justification. Almost half said large, up-front investments needed to implement the programs can't compete with other spending priorities in generation, transmission and distribution because there is no way to allow for rate recovery for projects focused on energy efficiency and conservation. "Business cases for smart-grid programs largely depend on projected benefits," Oskvig says.
Many respondents (57.3%) noted concern over potential business impacts of the Federal Energy Regulatory Commission's Order 1000, which would facilitate transmission-line construction. "A key area to watch will be the balance FERC must achieve concerning open access to the transmission grid and the rights of local government to define their generation mix, transmission ownership and market structure," Oskvig tells ENR.