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Investor-owned utilities expected to help drive smart grid deployments

SUBNET Solutions Inc | Tuesday, June 26, 2012

Although the U.S. Energy Information Administration (EIA) states that only about 6 percent of all utilities in the country are investor-owned utilities (IOUs), such companies serve 68 percent of U.S. energy customers.

What's more, IOUs accounted for 76 percent of all smart grid deployments in the U.S. in 2010, suggesting this small minority of companies could continue to drive smart grid development, writes Jason Rodriguez, CEO and director of research at Zpryme.

According to Fierce Smart Grid, IOUs are subject to regulations and rules that have been drafted, which have a major influence on the operations of the company and its investment decisions. Before utilities invest in smart grid modernization, they must be certain they can recoup those expenses. But even before IOUs feel confident enough to make those investments, a regulatory foundation must be laid to promote efficient operations and mitigate the risks associated with smart grid deployments.

"Several utilities have been able to take advantage of a supportive regulatory environment to not only make improvements to their electric systems, but also develop a plan for future smart grid deployments," Rodriguez wrote. "By carefully reviewing smart grid implementation lessons learned from their peers, other utilities can create an effective plan to enable future smart grid investments, as well as improve their [return on investment]."

As utilities look to build profits, new systems will be developed that will increase efficiency of operations. These improved systems first started with Advanced Metering Infrastructure installed in homes, but have since evolved into several innovative smart grid technologies, including better transmission lines, substation automation, demand response programs and advanced software. However, these systems will need to be installed at a lower cost in order for companies to ensure a return on their initial investment, the media outlet stated.

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This, Rodriguez says, will be helped in part by regulators.

"State regulatory agencies govern the operations and investment activities for IOUs.  In addition, the rate of return for transmission projects is set federally by the Federal Energy Regulatory Commission (FERC).  Individual states also govern the cost recovery for distribution projects, as well as the maximum rate increases available for investment projects," he wrote.

Utilities can use SUBNET products and software to ensure their smart grid technologies are installed efficiently and run optimally, allowing companies to securely collect and organize huge amounts of data. 

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