In their annual Wall Street briefing Feb. 7, Edison Electric Institute officials pointed to a growing focus on securing regulatory support at the state-level for utility investments in smart grid technologies.
The industry group, which represents investor-owned utilities, took a victory lap in New York in front of an audience of investors and bankers after realizing its largest policy priority from 2017: tax reform.
"It was a major win," EEI President Tom Kuhn said, pointing to the retention of several key provisions carved out for regulated utilities, including interest expense deductibility on corporate debt, deductibility of state and local taxes, and the retention of tax normalization.
And while EEI said it is "highly engaged" with regulatory agencies including the U.S. Treasury on implementing the technical aspects of the new law, the group now is pivoting its platform toward smart grid and energy infrastructure investments at the state level. The ongoing roll-out of advanced metering infrastructure across the U.S. appears to be the first step for EEI's members as the group pushes for what would be increased capital allocation into the distribution segment focused on digital energy platforms.
One approach may be by linking consumer electronics and other wireless home devices together, creating an "internet-of-things" platform that can respond in real-time to electricity demands at the distribution level. Modernizing distribution assets dovetails with EEI's steady message of reliability and resilience, the group said. For now, state regulators' reception to investments in smarter energy infrastructure likely will vary across regions, but they primarily will resonate with those with deeper penetration of distributed energy resources in some coastal territories.
One possible outcome of the EEI push, and something that could make its way to the fore of the group's regulatory agenda in the year ahead, might be the creation of a visible two-way market that accounts for inputs at the distribution level, in the same vein as a real-time wholesale energy marketplace used by independent system operations.
"We need that kind of visibility at the distribution level," said Phil Moeller, EEI executive vice president for business operations group and regulatory affairs. "I believe our friends in the state regulatory community are really starting to realize that."
The distribution segment of utility capital allocation is not lacking for investments. EEI pointed out that distribution has increased its share of overall industry capital expenditure, hitting about $35.7 billion in 2017, up from $31.1 billion in 2016, and is likely to see its share of the capital allocation stake rise. That equates to roughly 29% of the total CapEx in 2017 of about $122.8 billion.
"We're starting to see a much greater focus on distribution and a lessening on generation," said EEI's vice president for energy supply and finance, Richard McMahon. "That's a trend that seems to be continuing and supports the dialogue we're having on where regulation is going and the evolving distribution grid."

