Utilities Should Embrace Change to Stay Connected with Customers, Writes LeClairRyan Energy Attorney

GLEN ALLEN, Va., Feb. 21, 2018 /PRNewswire/ -- Utilities stand to benefit by partnering with energy sector "disrupters" rather than resisting them, writes LeClairRyan attorney Roy M. Palk in a column for elp.com, the website of Electric Light & Power and POWERGRID International.

The Feb. 13 column focuses on the need for member-owned cooperatives and municipal-owned electric systems, in particular, to embrace the shift toward decentralized energy production, otherwise known as distributed generation. Palk is Senior Energy Industry Advisor for the national law firm and former CEO of the East Kentucky Power Cooperative.

"Co-ops and munis are better positioned than their larger, investor-owned counterparts to adapt to change, given that they have neither stockholders to appease nor quite as many regulatory restraints to consider," writes the attorney, who is based in LeClairRyan's Glen Allen, Va., office. "It is a bit easier, in other words, for them to acknowledge the reality of today's energy business—namely, that it is heading toward a greatly expanded, albeit decentralized grid, relative to the past."

Distributed generation hinges on the production and storage of electricity by smaller devices connected to the grid—batteries, solar panels and wind turbines, among them. In the column, Palk concedes that wariness of these changes is a natural impulse for traditional utilities. "In this age of Amazon, Uber, Airbnb and the like, it's easy to understand why so many of us in the utility business are ambivalent—to say the least—about the trend toward distributed generation," he writes. "After all, why should any established and profitable business welcome the arrival of yet another 'disrupter'?"

But other sectors of the U.S. economy have responded proactively to disruptive change. Palk cites Walmart going head-to-head with Amazon.com, as well as massive investment in driverless car technology by the likes of Toyota, BMW and Ford. "As I see it, the onus is on co-ops and munis to become faster and nimbler as an adaptive response to this trend," he writes.

Specifically, Palk encourages them to get even more aggressive about building strategic relationships with distributed generation startups. This will help cooperatives and municipal-owned utilities keep their existing customers and attract new ones, he argues. "Today, more and more big consumers of energy—in manufacturing, commercial real estate and other sectors—are clamoring for green power," Palk writes.

In particular, both power supply and distribution utilities should be proactive about reviewing legacy contracts in which they have agreed to work exclusively with each other, Palk writes. "The goal here should be to create carve-outs that allow them to buy a portion of their power from a wide array of distributed generation entities."

With each passing day, Palk cautions in the column, large industrial and commercial customers have more options with respect to renewable power. The likes of Target, Walmart, Costco, Apple and Prologis, for example, continue to top the megawatt rankings in solar energy. "These companies are savvy," Palk writes. "Just as Publix would rather partner with Instacart than get into the grocery-delivery business, operators like Walmart and Target prefer to partner with utilities rather than become energy companies themselves." However, if co-ops and munis fail to embrace such partnerships, some of their largest customers will simply explore behind-the-meter options. "Central power suppliers should therefore consider forming their own green-power co-ops," Palk writes, "or expanding their existing ones in partnership with distributed generation entities."

Subject to heavy due diligence with respect to both engineering and business model viability, partnerships stand to bolster utilities' bottom lines and the performance and stability of the grid, Palk writes. "We're all aware of the risk that customers could leapfrog utilities and engage in behind-the-meter energy production," the attorney concludes. "If we aren't in the vanguard when it comes to shaping the future of the power grid, then nimbler entities will be more than happy to go there in our stead."

The full article is available at
http://www.elp.com/Electric-Light-Power-Newsletter/articles/2018/02/distributed-generation-and-disruption-why-cooperatives-and-municipal-owned-electric-systems-should-embrace-change.html

About LeClairRyan
As a trusted advisor, LeClairRyan provides business counsel and client representation in corporate law and litigation. In this role, the firm applies its knowledge, insight and skill to help clients achieve their business objectives while managing and minimizing their legal risks, difficulties and expenses. With offices in California, Connecticut, Delaware, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Rhode Island, Texas, Virginia and Washington, D.C., the firm has approximately 350 attorneys representing a wide variety of clients throughout the nation. For more information about LeClairRyan, visit www.leclairryan.com.

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