In light of the trend of utility customers establishing their electricity service independence with distributed generation technology, utility companies have expressed fears of a “death spiral” as they lose money from those customers and face a diminished capability to maintain their transmission systems. However, Moody’s Investors Service said those fears are premature.
“Distributed generation poses a threat under traditional ratemaking, but it’s premature to call a ‘death spiral’ for the sector,” writes Mihoko Manabe, Moody’s senior vice president, in the report “U.S. Utilities: Regulatory Response Looks to Stay Ahead of the Distributed Generation Curve.”
Even more comforting, Moody’s said a disturbance to the utility structure would be unlikely, citing its importance as justification for the assessment.
“The electric grid is a critical piece of infrastructure, and its value could be even greater in the future,” Manabe writes. “Consequently, we believe utilities will continue to receive reasonable regulatory treatment.”
However, Moody’s found that utilities that own generation assets and operate under a traditional structure may need to evolve. Moody’s reported that distributed generation poses the biggest threat to these utilities. However, utilities that don’t own generation assets and have decoupled rates are more likely to have distributed generation promoting policies.
“Lessons learned from these early initiatives will set precedents for others in the sector,” Manabe writes.
Essentially, the Moody’s report suggests that a “death spiral” is unlikely because utilities are too important to let fail, and Moody’s expects utilities to evolve supported by regulatory action, barring technological distruptions.
About The Author
Timothy Johnson is the former digital editor for ELECTRICAL CONTRACTOR magazine.