CPS Energy CEO: embracing disruptive change makes business sense

By on April 30, 2014

When leaders from our industry gather, conversation inevitably turns to the changing business model of the energy utility industry.

No one knows today what that model of the future might be, but we know what’s driving us there: an evolving competitive wholesale market, where price spikes can trigger sudden increases in customer bills; an abundant supply of natural gas; federal carbon regulations that are triggering limits on the use of coal plants; disruptive technologies like rooftop solar and demand response that reduce energy use; and maybe most importantly, customers’ changing expectations of service.

No one can tell us today what the model for serving customers will look like in 10 years, or 20. And while we could sit back and wait to see how these forces play out, we’re opting to embrace as much of the change as we can, leveraging these new technologies to shape our customers’ experience and expectations as much as possible.

For us at CPS Energy, that’s meant being among the first to advocate demand response for residential customers. We began with smart thermostat devices back in 2007 and expanded in 2012 to home area networks that manage multiple devices like air conditioners and water heaters. This year, we’re working to introduce a host of new pilot programs, with devices like Nest thermostats and controllable window air conditioning.

Today, almost 100,000 customers—mostly residential—have signed up to participate in CPS Energy demand response programs. Customers receive free devices that help them manage their energy use and their monthly bills every day, and we signal their devices to conserve energy — about 60 hours each year, when the demand for electricity is at its peak and power costs are highest.

In addition to using demand response to reduce electricity use, we’ve incentivized customers to replace older appliances with high-efficiency models, to reduce air leaks in their homes, and even to install solar in their homes through a portfolio of rebates offered since 2008. The aim is to reduce peak demand by 771 megawatts—enough energy to power about a quarter of the homes in San Antonio—by the year 2020. This reduction slows our need to build power plants, which saves all customers money over the long-term, and it’s helping customers control their bills.

It’s certainly not typical for a company like ours to work so hard to sell less of its product. But the benefits to our customers and community are obvious: lower bills; reduced air pollutants; fewer power plants and the corresponding debt to build them; happier customers; and even the possibility of aggregating all the energy saved in our community and sending it back to the grid at times when the grid is in danger of running short.

One benefit rarely discussed outside our own walls: we are learning how to operate all of these technologies in unison, to make the most of our infrastructure (from poles and wires to power plants and information technology) in a way that will prepare us for that utility business model of the future.

While some call it disruptive change, for us, it just makes good business sense.

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