Karl Rabago, VP of Distributed Energy Services, discusses why Austin Energy is a strong supporter of having its customers take advantage of energy efficiency and renewable energy programs.
|Karl Rabago:||I’m Vice President of Distributed Energy Services. I hold the position that oftentimes is distributed itself among a lot of other functions in many other utilities. Basically, I provide all the customer facing services associated with energy efficiency, green buildings. I perform market research and product development. We manage the key accounts. We’re all the stuff on the customer side. Green power. So, oftentimes, like I said, these are distributed around a bunch of other utility functions in other utilities. What makes it nice about having them in all in one place is I get a chance to see that constellation of new events, if sort of new effects and new drivers that are facing the utility sector.Let me say that fundamentally, what the utility does today or has to do in the future is not changing. Ultimately, we’re still providing energy services. But no longer can we hide behind the fiction that all we’re doing is selling kilowatt-hours. New technologies, new service providers, and essentially, new competitors are quickly moving into this space. When Google can get into your space, when the Home Depot can get into your space, when Costco will sell you a solar panel, the utility needs to be nimble enough to redefine what energy services means. For us energy services is: “How do I make my building more efficient? How do I make my energy bill more affordable? How do I take advantage of new information technologies so that I can understand my use of energy and improve it according to my own preferences?”
The utility comes at this from two places. First of all, it’s the place that faces the cost of maintaining the infrastructure, the networks, securing the power, ensuring the delivery of that power to customers. Second of all, we have the potential with all these smartness to orchestrate this for the benefit of our shareholders. As a municipal utility, that’s the citizens of the city of Austin, Texas. If we get smart about taking advantage of smart technologies, we can make smart cars, smart buildings, and a smart grid all work together for the benefit of customers. And again, since we face those costs, we’re the ones who maintain the infrastructure, who make sure that the electricity is on all the time, we have the chance to leverage those smart options for the benefit of all of our customers.
Some customers today already enjoy the opportunity to manage their electricity. Anybody that pays a demand charge, of course, knows that they can control their demand and manage their bills. With information technologies deployed to the smart grid and other smart things like smart buildings and smart cars enables this more and more customers to do that. For the utility, that means either that your revenues are going to erode as customers take more control and become their own generators, their own energy managers, their own energy suppliers, their own energy brokers; Or facilitate that, maintain a role in it by not just selling them naked kilowatt-hours, but also focusing on comfort and other benefits. What this opportunity of things like demand-response, dynamic pricing, time differentiated pricing, distributed generation, the whole range of distributed energy services — my title, — allows the utility to do is to meet the customers’ demand for energy services with new tools. If we get smart about them, we can figure out which ones deliver the greatest value at lowest cost that should be more profits. If we don’t get smart about it, somebody else will look at that difference between cost and value and try to close it on behalf of the customer themselves.
In my energy efficiency group, when I arrived at this job a couple of years ago, I sort of gave them a bit of a, I guess you’d say, a Cohan or a rhetorical question. I said: Imagine that our transfer to city hall, which today is X million dollars. Imagine that we could get a deal from city hall to hold that number flat and just adjust it for inflation. Imagination also that we sold our electricity by the square foot, say, 10 cents per square foot per month, and then, what kind of services would we provide. Well, certainly we provide low cost supply, stuff like the wind energy blowing out west, and our cost effective older fossil lines including our coal units and our natural gas units that are very efficient. But we’d also start doing things like looking at maybe retrofitting airconditioners, adding insulation, delivering a range of energy services that would allow us to maximize our profit, if you will, with that 10 cents per square foot number, while delivering the full range of comfort that the customer is satisfied with. And it’s that kind of mental exercise and originality that will lead to the business exercise of redefining the way we sell and price our product. This idea is not new. The idea of selling comfort, of selling energy services has been around for a while. But it seems like now we have the information technology tools and the economic imperative to begin solving these problems. And the utility is a logical place to start.
Clean energy is extremely reliable. If the sun shines, solar cells make electricity. If the wind blows, wind turbines generate electricity. What happens is that some resources aren’t more intermittent than others. And that makes the job of the power scheduler more difficult. It increases the opportunity for demand-response. It adds complexity to our pricing curves, not just a sort of simplistic high at 4PM, low at 2AM kind of scenario. It increases the value of things like storage, especially storage on the hoof, plugged in electric vehicles. So, it makes for what we have to do a bit more complicated. But, it doesn’t mean necessarily that it’s a problem for the innovative utility person. What this is is being surrounded by abundant opportunities.
I think about it this way. Here in Texas, a lot of wind comes on at night, right? So does our coal. So, already here in Austin Energy, wind purchases which are very cost effective are backing down our use of coal. That’s great! To continue that trajectory, however, we have two choices. We either try to get our customers to run their air conditioners at night, which we do practically, with ice making technology, which makes ice at night and allows them to use that thermo storage during the daytime. Or, we usher in this era of plugged-in electric vehicles and charge these vehicles at night, which we’re also doing at Austin Energy. So, we have now, and if we add in sort of control and management and price signals to managing all those technologies, then we have more options than we’ve ever had before. We get more value out of the least expensive resource, the most environmentally friendly one, as well. We deliver our local benefits and we encourage industries that are even better for the local environment, as well. So, there are win-win solutions, win-win-win solutions, in triple bottom line talk. And the utility that focuses on them whether they do it for the environment, they do it for the economy, or they do it for society is going to win if they do all three.
I’ve surprised myself because I’ve been in this business long enough that I was a real champion of the so-called deregulation movement. I thought it was essential that we break, if you will, in some fundamental way the old vertically integrated monopoly so that we can introduce clean energy technologies and different thinking. But I would tell you that public power municipally owned utilities that are vertically integrated perhaps offers our best hope for rapidly advancing clean energy technologies, smart grid technologies, and more customer friendly energy services.
We did a calculation recently because of the way things run here, and the way we purchase energy, and the way we are directly accountable to our customers. We have a pretty aggressive system of managing costs. It starts with energy efficiency, but it continues through things like sophisticated fuel purchasing strategies. As a result to that, in 2009, which is the most recent year for which EIA data (Energy Information Administration data), is available. In 2009, even after gas prices fell substantially, we were outperforming virtually all the rest of the major electricity providers including those in the so-called competitive areas. We were doing it because not only were our rates stable, but our bills were substantially lower. Bills of Austin Energy customers are 15% lower than the average Texas electricity bill because our consumption is low. Because for 25 years we focused on energy efficiency. In fact, if all the customers of the top 17 electricity providers in Texas have been Austin Energy customers in 2009, they would have saved almost $4.6B, including competitive utilities.
Why am I here? First of all, the electricity business is the biggest industry in the world. It’s the most polluting. I am a vowed environmentalist. Second of all, with an industry that big, I’m also a grandpa. My granddaughter was born in the year 2000. As I tell many people, I remember when I first saw her I realized that with modern medicine and good luck, she’d likely live to be a hundred. And there it was in the year 2000 I was given a lens that was a century long. And I realized that professionally the things I ought to do, ought to try to benefit my granddaughter and everyone else for at least that hundred years. Here at Austin Energy, as the VP of Distributed Energy Services, I have an opportunity to do that in a lot of ways. I get a place to sort of carry up obligation to myself and the future generations, I’m accountable to local citizens on a daily basis because I’m part of the municipal utility, and I am supported by a bunch of leaders in our city council, in our city management organization, and here in the utility who want to make this stuff happen. Who want the good result, or at least at the very worse one that is a hedge against the uncertainty. And that’s good enough for me.