Staid power Industry is branching out
Selling electricity was once a relatively simple proposition.
A utility fired up a power station with coal, natural gas, oil or some other fuel, and sent electricity down a wire to customers.
But the business model for the electric power industry has changed dramatically in the U.S. over the past 25 years, with deregulation opening markets to competing sellers of electricity, and new technologies offering a dizzying array of options for consumers.
The latest sign of change in the industry is the announcement by Edison International of a new subsidiary called Edison Energy that sells ���energy as a service” to commercial and industrial customers throughout the U.S.
“It’s an interesting time for Edison and an interesting time for the whole industry,” Allan Schurr, the president of Irvine, Calif.-based Edison Energy, said following the company’s unveiling on Tuesday. “It was just time for us to make this move.”
Schurr’s company is set up separately from Edison International’s regulated company, Southern California Edison, one of the largest electric utilities in the U.S., with more than 15 million customers in the Golden State.
Edison Energy markets its services to big-box retailers, factories, data centers, hospitals and other large entities, including assessing customers’ energy needs and interests, finding the most cost-effective options for them, and delivering on those choices.
The alternatives include arranging long-term contracts at set prices for electricity, providing systems for generating solar power on a customer’s property, and installing programs to monitor and control energy use.
“Energy as a commodity is what the utility business was really built on, with a very standard set of products delivered in the same manner to every customer” Schurr said in an interview. “It’s very apparent now that many organizations and even individuals don’t like the standard way anymore. They want things customized in some manner.”
In designing its plans for Edison Energy, the parent Edison International commissioned research that highlighted challenges facing large energy users, including increasing complexity and cost, greater price volatility, multiple regulatory jurisdictions, evolving technology choices, and increasing environmental concerns.
Among their findings, researchers said 25% of companies surveyed did not have an accurate account of their energy spending, and only 6% believed they had taken advantage of all the energy opportunities available to them.
“The conclusion was they do appreciate the complexity of energy, but they really don’t have the wherewithal – at least most of them – to really understand what it means to them across their whole enterprise,” Schurr said. “And they don’t know whom to trust.”
Edison Energy began to take shape with Edison International’s earlier acquisitions of several energy consulting and renewable energy companies, and Schurr plans to keep an eye out for promising technology start-ups that can augment his company’s portfolio.
Just how big might Edison Energy become within Edison International, whose revenue totaled $11.5 billion in 2015?
Schurr won’t say, nor will he disclose Edison Energy’s current and projected revenues.
“It’s certainly our ambition to grow into a leader in this space,” he said. “We don’t want to be confined to North America, either. The companies we want to serve in many cases are global companies, and we want to provide the same sort of services outside North America.”
Edison Energy is hardly the only investor-owned power company moving beyond its traditional boundaries. Others including Duke Energy and Exelon sell energy services as well as electricity outside of their regulated territories.
Outside of the power sector, the industrial giant General Electric launched a $1 billion energy-services business called Current last fall, and more such ventures are likely.
Bill Loveless – @bill_loveless on Twitter – is a veteran energy journalist and podcast host in Washington. He is a former anchor of the TV program Platts Energy Week.