New England Electricity
Restructuring Roundtable
The Electric Utility of the
(Near?) Future
David R. McHale
EVP, Chief Administrative Officer
Northeast Utilities
June 27, 2014
NU Overview
NU serves 525 cities & towns throughout
New England; Massachusetts, Connecticut
and New Hampshire
Providing reliable electric and natural gas
service to 3.6 million electric and natural gas
customers
Comprised of:
• Four electric companies
• Two natural gas companies
• One three-state electric transmission business
2
Current State
Delivering
Reliable Energy
Superior
Customer Service
3
Utility of the Future
The “utility of the future” will evolve to support an environment of clean
energy, an integrated grid and customer engagement
•
•
•
•
Generation
Cleaner, more sustainable energy
Distributed energy resources
Energy security and independence
Competitively priced
• More resilient
• Smarter
• Integrated
The Grid
• Knowledgeable
• Empowered
• Self-reliant
Customers
• More sustainable
• Decoupled and repriced
• Incentivized
Business
Model
4
Utility of the Future Drivers
Utility of the future is driven by a convergence of energy policies, market
shifts, technology advancements and rising customer expectations
Increasing
customer
expectations
Emerging
disruptive
technologies and
digital strategies
Shifting end-user
consumption
patterns
“Utility of the Future”
Drivers
Market changes
that will require a
“two-way” modern
grid
Rising energy
prices and delivery
constraints
Clean energy
mandates and
subsidies
5
U.S. Electricity Demand Trends
One key driver is the projected low growth in electricity
consumption in New England and the rest of the US
U.S. Electricity Demand — Rate of Growth
Source: EIA Annual Energy Outlook
6
The Quest for Cleaner Generation
The quest for low-carbon and renewable energy resources is driving
significant change throughout New England power markets
160
140
120
CT & MA Greenhouse Gas Emission Targets
Millions of tons of CO2
138
20% reduction
125
111
44
75% reduction
• Equally, the States have
aggressive renewable portfolio
standards; 22.1% by 2020 for MA
and 27% by 2020 for CT
41
100
40
80
60
40
94
84
71
20
28
9
CT
19
MA
0
1990
Actual
2010
Actual
2020
Target
• Massachusetts and Connecticut
have statutes which call for a
reduction in carbon emissions of
80% by 2050 (from 1990 baseline)
2050
Target
7
• There exists a significant gap
between installed renewables in
the region and longer term
requirements
Attributes of the Modern Grid
Development of a modern grid will require investments to make it
resilient, smart and integrated
Resilient



Asset hardening to
protected against weatherrelated events, particularly
flooding and severe winds
Smart


Integrated
Self-healing, line and
substation automation


Two-way power flows
Situational awareness
during outages and “blue
sky” events

Advanced metering
capability


Electric vehicles
Pro-active vegetation
management and tree
clearing

Enterprise-wide outage
management capabilities
Protected from physical
and cyber threats

GIS asset and locational
mapping; mobile workforce
technology solutions
Distributed energy
resources and micro-grids
New products, services,
market entrants
Underlying goal of increasing system and capital investment efficiency
8
Engaging and Empowering Customers
Leading-edge customer engagement capabilities through tailored
solutions, data analytics and digital/social media channels
The Launch of New Customer Engagement Platforms
Generate Actionable Customer Insights
Personalize Inbound Customer
Interactions
Personalize Outbound Communications
Resulting in…
“Personalized Ways to Save” and an Improved Customer Experience
Increased Energy Efficiency
Program Participation
Continuous Customer
Engagement and Satisfaction
9
Regulation of the Future
The “utility of the future” will require “regulation of the future” to ensure
alignment among policy makers, customers and investors
“Utility of the Future”
Modern
Grid
Smart
Technologies
Integrated
Solutions
Customer
Centric
“Regulation of the Future”
Operating Environment
• Modest sales growth
•
•
Price pressures
•
Increasing
expectations
•
•
•
Higher reliability
demands
Re-examine cost
allocation, subsidies,
rate-making principles
Rate design and pricing
Metering policies
Cost recovery
New market entrants
Grid independence
Security threats
10
Performance incentives
and metrics
Alignment
NU’s Solutions for the Future (and Today)
Investments in additional transmission capacity to
enable low-carbon and clean energy sources
Investment in additional gas pipeline capacity and
related infrastructure
Advance and modernize the electric grid to drive
reliability and situational awareness
Continued investment in energy efficiency with
emphasis on innovation, financing and tailored
customer solutions
Engage and empower customers through innovative
partnering, tools, analytics and social media
Explore new regulatory business models and
approaches, including pricing alternatives
Future State Mission – Reliable Energy and Superior Customer Service
11