Black & Veatch report: Anxiety levels rising for electric industry leaders

OVERLAND PARK, KAN. — Key findings from Black & Veatch’s seventh annual U.S. electric utility industry report show rising levels of concern across the industry for a broad range of issues. Once again reliability was the top-rated industry issue.

"This year’s report reflects the views and outlooks of an industry in transition," said Dean Oskvig, President of Black & Veatch’s global energy business. "From the lack of clarity in energy policy to disruptive effects of unconventional gas supply, major shifts are occurring just as the industry embarks on a new round of unprecedented capital spending addressing concerns over aging infrastructure, reliability and resilience."

The 2013 Strategic Directions in the U.S. Electric Industry Report focuses on factors impacting utility operations, power generation and power delivery. Highlights include:
• Predictable recovery of operating and capital costs through appropriate economic regulation jumped from 9th to 3rd on the Top Ten Industry Issues list
• Carbon regulation is top of mind with more than 70% of respondents expecting action — either state or federal — within the next 8 years
• Most utilities are planning to start or expand smart grid programs in 2013. However, the industry continues to struggle with justifying program costs to regulators. Competing capital investment programs also represent a major challenge.
• Low Natural Gas prices are expected to stimulate significant new demand for the commodity. However, many industry leaders, particularly in the Northeast, remain concerned about local volatility in gas prices and long term price certainty. Gas transportation, its availability and reliability, is also seen as a potential weak link in the fuels value chain.
• Only 3.4 percent of respondents believe that meeting renewable portfolio standards (RPS) is not achievable due to technical considerations. However, opinions still vary widely on the ultimate rate impact consumers will have as a result of meeting RPS.
• Distributed generation; that is, power generating assets with a capacity of less than 20 megawatts often located close to end users, is growing in popularity. Low gas prices and rising conventionally generated electricity costs are improving the business case for industrial and manufacturing companies to produce electricity themselves on their premises.

"The Report’s findings show the industry is at a tipping point," said John Chevrette, President of Black & Veatch’s management consulting division. "Industry leaders must come to agreement on how to best manage the competing goals of delivering safe, reliable service while minimizing the cost to consumers. Sound asset management programs on the utility-side with predictable practices and decisions on the regulatory side can help bring down anxiety levels."