March 21, 2012

Brattle Principal Peter Fox-Penner Featured in Fortune Discussing the Need for a New Business Model for the Utility Industry

Brattle principal Peter Fox-Penner has been featured in a recent Fortune article discussing the conflict between the business model of U.S. electric utilities and the desire to improve energy efficiency among consumers.

The article, “Why Your Utilities Bill is Backwards,” explains that the current model in place by the industry does not support energy efficiency because the majority of utility companies are incentivized to sell more power, which presumes that customers will continue to consume more energy. Not only is the business model dated, but the infrastructure that keeps the lights on is also aging. At the end of 2010, 51% of all generating capacity in the U.S. was at least 30 years old, the article states.

Although the pricing model for utilities varies by state, many still run off the old model of a completely regulated system that profits when customers use more energy. Dr. Fox-Penner, who specializes in electric regulation and planning issues, says that changing the regulatory model and the business model together will be very difficult to achieve. He specifies four critical groups with different needs that a new model will have to appease: customers who want reliable, affordable electricity; Wall Street, which wants to make a profit in investments in the companies involved; the utilities companies providing and transporting power; and regulators.

To read the complete article, please visit the Fortune website.

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Dr. Fox-Penner specializes in economic, regulatory, and strategic issues in network industries. His practice centers on energy and environmental policies and electric regulation, planning, and competition issues. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4