Why Is Utility 2.0 Only About Electricity, Adventures in Data and Flying Blind

I had a simple question. And, as with many simple questions, the answer was not simple to find and searching for it led me into an interesting journey that I might otherwise not have taken. What I found after the journey was an old concern of mine: we are busy making policy for retail energy utilities from a utility (or fuel) centric, not customer centric, perspective and we are largely flying blind.

My question was this: Why is everything that I read about the “utility of the future” or “utility 2.0” about electric utilities? There are a lot of retail natural gas utilities in this country and households and businesses use quite a bit of natural gas for the big two: space and water heating. My instinct was that, perhaps, we were assigning the reinvention of the retail natural gas industry because, in the grand scheme of things, it just wasn’t as important. To give some magnitude to the “grand scheme of things,” I thought I would go look for annual spending on end-use electricity versus on end-use natural gas.

Finding the electricity number was the proverbial piece of cake. The Energy Information Agency (EIA) had it right there within a couple of clicks. The most interesting thing about the 2007 to 2013 series was the impact – or, rather, lack thereof – of the recession on electricity revenues. In the two-year period 2007/8, electricity end use revenues were $707.3 billion. In 2012/13, $735.9 billion. Low to no load growth and revenues still rose about 4 percent. Back to basics indeed!

The search for the equivalent natural gas number, however, was fruitless. It doesn’t exist. EIA provides a price per type of customer, although the commercial price reflects only about half of commercial deliveries and the industrial price only about 5% of deliveries, depending on the state. Generally, the residential price reflects over 90% of deliveries. And EIA also provides volumes and numbers of natural gas customers by class, by state.

Why is this? I suspect it has to do with who must report what. It would appear that the coverage of who must report what is better for electricity than for natural gas. Still, with a bit of work and by focusing on the one class for which EIA had the most coverage of natural gas data – the residential class – I was able to pursue at least a partial answer to my question. I chose five states, aiming largely for geographic diversity. The table below reflects what I found.

Of course, the story the chart tells has a lot of gaps. First of all, among these five states, the penetration of natural gas for space heating use varies significantly. California and Illinois are the highest, at 71% and 81% respectively. For those two states, as well, the total actually tells a significant portion of the story on household energy use because the use of electricity for space heating means that the two combined account for 93% of households in both states. In New York, on the other hand, while natural gas provides space heating for 52% of households, electricity accounts for only another 6%. The total bill, therefore, is probably too low because it does not include what New York households are spending on fuels other than natural gas or electricity for space heating. While only 43% of Texas households use natural gas for space heating, 49% use electricity so, again, the total is probably close to household energy spending, as is Georgia with the two fuels accounting for 87%.

What did I learn from my journey? Particularly in states with a high penetration of natural gas use for space heating, it makes no sense to exclude natural gas utilities from the reinvention effort. We must take a customer-centric view and a customer centric view requires that we consider all of the major energy sources for a household or business, not just one. But I also renewed a conclusion I reached some time ago: we either do not have or do not take the time to get the data we should have in front of us when we seek to understand what is happening and devise policies to change it. We don’t know where we are and, hence, when we try to get somewhere else, it is extremely unlikely we will arrive. If we need more data to achieve a solid view of what is happening, let’s be about collecting it rather than just proceeding with our policy discussions. Let’s not fly blind.