THE GREAT REINVENTION OF THE ELECTRIC UTILITY

The report examines the 'death spiral' facing traditional U.S. electric utilities caused by falling costs of renewables, energy efficiency, and declining demand. It proposes a regulatory shift by Public Utilities Commissions (PUCs) toward 'performance-based regulation,' where utilities are rewarded for meeting reliability, affordability, and environmental goals rather than the volume of electricity sold. The author suggests that utilities, given their infrastructure and market reach, are the ideal vehicles for decarbonization if incentivized to prioritize system optimization over electron supply.

• Three primary drivers are forcing the reinvention of the electric utility: rapid technological improvements in renewables and efficiency, a decline in electricity demand, and increasing regulatory pressure to reduce CO2 emissions.
• The traditional utility business model is threatened by a 'death spiral' where rising fixed costs for grid modernization and declining revenues lead to higher rates, which in turn encourages customers to switch to cost-effective self-generation like solar PV.
• The author proposes 'system optimization,' where utilities are tasked with choosing the most cost-effective method to meet customer needs—whether through supply-side power plants, demand-side efficiency rebates, or distributed generation—rather than simply supplying electrons.
• To implement this, Public Utilities Commissions (PUCs) should adopt performance-based regulation, setting quantitative goals for reliability, affordability, and environmental performance over five to seven year periods, with profits tied to meeting or exceeding these benchmarks.
• Electric utilities are uniquely positioned to lead decarbonization due to their 100 percent market penetration, billing efficacy, communications reach, and ability to deploy large amounts of capital.
• To prevent utilities from gaming new incentive systems, PUCs should implement a step-by-step design process and use 'collars' or safety valves to limit excessive profits or losses.

APA

Harvey, H. (n.d.). THE GREAT REINVENTION OF THE ELECTRIC UTILITY. Energy Innovation. https://energyinnovation.org/wp-content/uploads/Reinventing-the-Electric-Utility.pdf

Chicago

Harvey, Hal. THE GREAT REINVENTION OF THE ELECTRIC UTILITY. Energy Innovation, n.d. https://energyinnovation.org/wp-content/uploads/Reinventing-the-Electric-Utility.pdf.

Wikipedia

{{cite report |last1=Harvey |first1=Hal |title=THE GREAT REINVENTION OF THE ELECTRIC UTILITY |publisher=Energy Innovation |url=https://energyinnovation.org/wp-content/uploads/Reinventing-the-Electric-Utility.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{harveyndgreat, author = {Harvey, Hal}, title = {{THE GREAT REINVENTION OF THE ELECTRIC UTILITY}}, institution = {Energy Innovation}, url = {https://energyinnovation.org/wp-content/uploads/Reinventing-the-Electric-Utility.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }