1. Utility Business Models in a Low Load Growth/High DG Future Andy Satchwell Lawrence Berkeley National Laboratory California Municipal Utilities Association Annual Conference April 2, 2014 1

2. Chicken Little Redux? 2 “…economic fundamentals and public policies in place are likely to encourage significant future disruption to the utility business model.” Edison Electric Institute – January 2013 “It’s a [business] model that hasn’t changed much since Thomas Edison invented the light bulb. And it’s doomed to obsolescence.” Bloomberg BusinessWeek – August 2013 “Alarmed by what they say has become an existential threat to their business, utility companies are moving to roll back government incentives aimed at promoting solar energy and other renewable sources of power. At stake, the companies say, is nothing less than the future of the American electricity industry.” New York Times – July 2013

3. Cumulative grid investments and decreasing utility sales put upward pressure on rates 3 Source: EIA 2012 Annual Energy Outlook; Faruqui (2013) Declining load growth… Substantial increases in PV capacity… Increasing utility investments… TWh new green energy from state RPS by 2030: ~$120B Total generation decarbonization: ~$1T New transmission to integrate renewables and maintain reliability: ~$250B Replace aging distribution system with smart grid: $600B

4. Continuum of Utility Business Models: Current Approaches 4 Assets Value Commodity Services Traditional IOU Ratemaking Variant Motivation Achievement Meters- & Wires- Only T&D Owner/Operator

5. Continuum of Utility Business Models: Performance Based Regulation 5 Assets Value Commodity Services Traditional IOU Ratemaking Variant Performance Based Regulation Motivation Achievement Meters- & Wires- Only T&D Owner/Operator

6. Continuum of Utility Business Models: Combining Existing Models 6 Assets Value Commodity Services Traditional IOU Ratemaking Variant Performance Based Regulation Motivation Achievement Smart Integrator Meters- & Wires- Only T&D Owner/Operator

7. Continuum of Utility Business Models: Fundamental Paradigm Shift 7 Assets Value Commodity Services Traditional IOU Ratemaking Variant Energy Service Utility Performance Based Regulation Motivation Achievement Meters- & Wires- Only T&D Owner/Operator