It’s no fun to be an electric utility company. Much of what’s thought about them isn’t true, but it’s difficult to shake a reputation once it sticks to you. People mostly have had no choice but to get electricity from a local utility company. It’s that “I resent having no other choice” syndrome.
The explosion of technology and innovation has done away with many of the “no other choice” commodity suppliers in our lives. We don’t have to get a phone line from the telephone company. We don’t have to subscribe to the local cable company to watch this season of “Game of Thrones.” But, we still are dealing with the same big names in the electricity industry.
It’s no wonder that people keep asking when alternative energy sources like solar will come along and bring down the electric utilities.
That’s probably not going to happen—and the truth is, we probably don’t want it to happen. Here’s why.
What most of us get wrong
Over 60% of the country lives in areas where the industry has been deregulated. It creates two very important facts that play into the solar equation—or another energy source, for that matter.
- The entities you think of as the electric company don’t own any electricity generation.
- They are guaranteed—by law—to make a profit.
The company you write your monthly check to is now known as an electricity distribution company. It connects power to your business or home, but it doesn’t own or operate any electricity generators. It doesn’t make any money from generating power at all.
This utility’s business model is built around maintaining your connection to the electricity grid in your area. Where does that electricity come from? The utility goes out and buys it on your behalf—for the lowest prices it can get. It doesn’t even add to the cost.
In some areas, you have the choice of where to get your electricity. The utility couldn’t care less who you buy it from. For them, it’s all about the grid.
In exchange for agreeing to be deregulated, these distribution utilities have a guarantee that they will be profitable. So, if a large number of their customers switch to solar energy, they are allowed to raise the connection charges that keep those customers on the grid.
And very few residential are so reliant that it would be feasible to disconnect from the grid completely. Remember, the sun does set nightly. The logical choice is to stay connected to the grid and sell the solar power back to the utility so you can use it when your panels can’t generate power for you.
For that, you need to be connected. You need to be a part of the grid. We’ll talk about the grid and its key role next.