With emerging energy technologies, electric utilities face disruption to their long-established business model of selling kilowatt-hours to customers. This case study is one in a 5-part series that shows how public power utilities across the country are innovating in the face of this disruption and responding to the desires of their communities. Learn how they are becoming nimble, customer-focused and respected 21st Century utilities.
SMUD began serving the Sacramento region in in 1946 and currently serves approximately 1.5 million people. Its annual revenues for 2018 were $1.55 billion. This public power utility employs about 2,300 people.
Electric utilities of all types are experiencing significant change on many fronts — increasing competition and business complexity; flat or declining traditional kilowatt-hour sales; growing customer expectations paired with reduced energy consumption from the grid; mounting legislative and regulatory mandates/constraints, rising costs; and expanding revenue opportunities.
In response to these rapid changes, SMUD created a 5-year strategic plan in 2016, to maintain our position as an industry leader and customers’ provider of choice. We are moving away from a monopolistic business model to one where customers have control and choose to do business with SMUD — even when they have other options for energy-related products and services. Retaining the public power framework is critical to SMUD’s success in this new landscape, allowing us to act in the best interests of our customers and community.
SMUD’s vision is to be the trusted partner for customers, providing innovative solutions to ensure affordable and reliable power supply, reduce the region’s carbon footprint and enhance the vitality of the community.
Putting customers first
To meet the ambitious goals laid out in our strategic plan, SMUD is developing innovative programs and services for residential and business customers, such as:
- Launching the SMUD Energy Store, an online marketplace for energy-related and smart home products.
- Developing a digital-first approach that includes a mobile app for customers to review and pay their bills, view and report outages, and see their monthly energy usage.
- Making time-of-day rates standard for residential customers.
- Reimagining rates for economically disadvantaged customers, including funding efficiency updates and offering discounts on their monthly bills.
- Improving outage restoration and reducing distribution system losses.
- Partnering with homebuilders to incentivize the construction of all-electric homes.
SMUD is using data analytics to gain greater insight into customers’ preferences, operations and systems to develop additional targeted products and services to meet customers’ dynamic needs.
Part of SMUD’s vision for success is to advance its position as an innovative and environmentally progressive thought leader. As a community-owned utility, SMUD can consider utility-specific emissions reduction efforts and invest in local community measures that reduce our community’s carbon footprint.
By 2040, as noted in the 2018 integrated resource plan, SMUD committed to achieve net zero greenhouse gas emissions through expansion of our renewable portfolio (with a preference for local renewables as practical) and significant investment in electrification of vehicles and buildings. While state and local policy is needed to achieve the state’s long term GHG goals from electrification, we are doing our part to transform these fossil-fuel end uses to clean low-carbon electricity.
SMUD is advancing Sacramento’s goal for 100 percent of new car sales by 2035 to be zero emission vehicles and 100 percent of electric new water and building space heaters through rebates and other programs to incentivize purchases. (As of 2018 there were approximately 10,000 electric vehicles on the region’s roads).
SMUD’s GHG reduction goals go above and beyond mandated requirements and incorporate a holistic view of source emissions in the region. SMUD is focusing on expanding our renewable portfolio, clean distributed resources such as rooftop PV and battery storage, energy efficiency, demand response programs and investing in disadvantaged communities where environmental burdens may be more pronounced.
Technology supports efficiency
SMUD increasingly relies on technology in all areas of our operations — from enhancing customers’ experiences to integrating more technology into the distribution system.
Significant technology and infrastructure investments over the next several years demand operational efficiency. SMUD is improving the speed and execution of technology programs to reduce the cost of doing business and free up budget dollars to fund needed investments.
SMUD received a patent for an improved method of detecting an electric vehicle charger at a customer’s residence. SMUD plans to invest in additional technology and infrastructure to support load-serving projects, enhanced reliability, grid modernization, and new lines of business.
New business opportunities
SMUD recognizes that when customers add their own technologies such as solar and storage systems, they’ll need a two-way relationship with SMUD, where energy and supportive services flow between SMUD and the customer. SMUD plans to integrate and optimize customer, third-party and its own assets so the community benefits from a more comprehensive, managed electric system.
Over the next 20 years, SMUD plans to invest $1.7 billion in the electrification of buildings and transportation and $4.8 billion on renewables such as wind and local solar and on local reliability resources such as battery storage. Under this investment plan, SMUD will help incentivize a 64 percent reduction in GHG emissions in Sacramento economy-wide. SMUD’s plan will greatly improve regional air quality for all residents while providing economic opportunities.
SMUD is continuously exploring new opportunities to share its resources and expertise and generate revenue. In 2018, it earned several million dollars of additional revenue by selling excess transmission capacity. The utility also joined the California Independent System Operator’s Energy Imbalance Market and provides support services to community choice aggregators serving other communities in California.
The public power utility formed a strategic technology partnership with Open Systems International, Inc. to implement and deploy an industry-leading distributed energy resource management system solution.
Being a public power utility gives SMUD the foundation and agility to build the right workforce, culture, business processes, technology, and financial strategies to drive operational excellence and leverage new revenue opportunities.