This document summarizes the opportunities and challenges for municipalities taking over electric utilities from private companies. Key points include: - An increasing number of municipalities are interested in municipalization due to concerns over climate change and power disruptions. However, it requires substantial financial investment. - Smart grid technologies can help municipalities operate their own utilities more effectively, though currently only 5% have initiated smart grid programs. - Community choice aggregation is an alternative model gaining traction that allows municipalities to purchase power on behalf of residents from alternative suppliers. - Municipal utilities have advantages like lower rates, more renewable energy, and faster power restoration, but starting a new utility requires expertise private companies already have.

1. EXECUTIVE SUMMARY
Introduction
Current and developing smart grid technologies can enable municipalities to run their own
electric utilities. Even though only 5% of municipal utilities have currently initiated smart grid
programs, many cities are showing an interest in taking over the electricity business from private
utilities, primary due to concerns about climate change, responses to power disruptions and a
desire to pump more renewable energy into the grid. There is also a growing interest in
Community Choice Aggregation. Converting to either of these trends will require municipalities
to make more than substantial financial and time-consuming investments. IOUs are vehemently
opposed to these overtures, and are fighting tooth and nail against them. This report will discuss
this controversial movement, including methodologies that are available to assist utilities that
wish to attempt their secessions.
Major Findings
• According to a recent study by GTM Research, 70% of the approximately 2,000
municipal utilities, which serve about 13% of U.S. energy customers, could have smart
meters by 2017.
• GTM Research also estimates that municipal utilities will spend $4.5 billion to $9 billion
from 2012 to 2017 on smart grid technologies, with advanced metering and distribution
automation deployments leading the list of projects, followed by demand response and
consumer-facing services.
• Community choice aggregation (CCA) is a movement than is gaining traction.
• Only 5% of municipal utilities have initiated smart grid investment programs.
• Because investor-owned utilities are shrinking, vendors are giving more attention and
guidance to municipal utilities. The contracts are smaller, but there are thousands of
utilities to court.
• To date, meter data management (MDM) has been adopted primarily by larger investor-
owned utilities (IOUs). Now, many municipal-owned utilities are looking to implement
MDM systems as well.
• Cloud-based meter data management, which is being offered by various MDM vendors,
is also attractive to smaller utilities that cannot pay the large costs of servers.
• A number of municipal utilities are looking to break away for the IOU that is serving
their territory. Cities that mount the challenge to municipalize face an extremely uphill,
expensive and time-consuming battle as they will be vigorously challenged by IOUs who
are vehemently opposed to losing their assets.
• Navigant Research predicts that the global micro grid sector, of which the U.S. is 65%, is
expected to grow from $10 billion in 2013 to $40 billion by the end of the decade. If

2. recent forecasts for micro grid market growth prove correct, the United States could lose
the equivalent of one major utility per year (with approximately $25 billion in assets).
• Navigant Research also projects that the global energy storage market for solar and wind
will grow from $150 million today to $10.3 billion over the next 10 years, to the tune of
nearly 40,000 MW in total capacity by 2023 in its base scenario.
• A recent MarketsandMarkets study reported that emerging smart cities around the world
are expected to invest between $30 trillion and $40 trillion in infrastructure during the
next 20 years or so. In the near term, their analysts project the smart city market will
value more than $1 trillion by 2016, growing more than 14 percent annually.
Opportunities and Recommendations
• Municipal utilities can generate tremendous revenue streams if they offer add-on
products and services.
• Municipal utilities have the opportunity to move beyond the core business of energy
provider into diverse segments such as a transportation service operator by initiating
electric car and bicycle sharing programs.
• Vendors serving this space have an open market to sell and/or provide their services as
municipal utilities will spend $4.5 billion to $9 billion from 2012 to 2017 on smart grid
technologies.
State of Municipal Utilities
Municipalization
Municipal electric utilities power homes and businesses in nearly 2,000 towns and cities and
serve 47 million Americans. The remainder of the nation’s homes, roughly 70 percent of them, is
powered through private, investor-owned utilities (IOUs). IOUs are allowed to earn a set profit
on their investments through the rates they charge customers. However, government-owned
utilities, most of them formed 50 to 100 years ago, are nonprofit entities that do not answer to
shareholders. They have access to tax-exempt financing for their projects, don’t pay federal
income tax, and pay executive salaries that are on par with government levels. This type of
financial structure allows municipal utilities to enjoy a higher revenue stream than IOUs,
enabling them to make larger investments in maintenance and prevention which result in more
reliable service and faster restorations after power failures. In addition they are able to supply
cheaper electricity. According to data from the Federal Energy Information Administration,
municipal utilities offer cheaper residential electricity than private ones, not including electric
cooperatives, federal utilities or power marketers, a difference that holds true in 32 of the 48
states where both exist.

3. According to the World Health Organization, more than 6 out of 10 people worldwide will live
in cities by 2030, and by 2050 that proportion will reach more than 7 out of 10. U.S. cities will
experience unprecedented urbanization and budgetary pressures as the need to deliver advanced
services to their community increases. As a result, there is a developing and growing trend across
the country of municipalities wishing to take control of their own electricity business. In spite of
the odds and controversy, cities are showing an interest in taking over the electricity business
from private utilities, primary due to concerns about climate change, responses to power
disruptions and a desire to pump more renewable energy into the grid. Municipal control of
electric utilities allows cities to increase the use of renewable energy, lower prices, and ensure
local responsiveness, especially during severe weather events. In regard to the latter, after
Hurricane Irene visited Massachusetts in 2011, municipal utilities in some of the hardest-hit
areas were able to restore power in one or two days, while investor-owned companies like NStar
and National Grid took roughly a week for some customers. According to an advocacy group
called Massachusetts Alliance for Municipal Electric Choice, this was due, in part, because
government-owned utilities on average employ more linemen per 10,000 customers than the
private companies.
According to the American Public Power Association (APPA), there have been 16 municipal
electric utilities formed in the last ten years, 46 in the last 20 years, and 72 in the last 30 years.
Over the years, many localities have considered creating municipal utilities, especially around
the time their franchise agreements with private electric companies are to expire. But officials
and advocates are now more seriously considering municipal utilities as concerns rise over
carbon emissions from fossil fuels, especially coal, and as the ability to use renewable energy
sources like solar and wind increases.
It is important to note, however, that there exists a contrary conversion movement, as well.
Colorado Springs, Colorado, is contemplating privatizing its utility, while residents of Vero
Beach, Florida are debating whether to sell their utility to Florida Power & Light. And in New
York, where the Long Island Power Authority was severely criticized for its failures after
Hurricane Sandy, a commission handpicked by Gov. Andrew M. Cuomo, recommended
privatizing the public authority.
There are pros and cons to be cited for either case.
The American Public Power Association suggests the following advantages a municipal electric
utility can offer:
• Municipal electric utilities generally provide a profitable revenue source for the city,
which serves to both support the utility and to provide other benefits to the citizenry.
• Emphasis of long term community goals as demonstrated by investment in the local
infrastructure, energy conservation, renewable energy, pollution prevention, and safety.
• Lower electric prices by a national average of ten percent.
• Superior operational and customer service.
• Local ownership and accountability to the people served with no split allegiance between
customers and stockholders.
• Enhanced local control and local employment.
• Equal or greater reliability.

4. Edison Electric, the primary investor-owned electric utility trade organization, argues against
municipalization with the following points:
• Municipal utilities are not large enough or sophisticated enough to deliver excellent
service.
• A new municipal utility does not have the money and the expertise to hire and manage
crews, purchase and maintain equipment, or provide call center and billing services.
• Municipal utilities do not have the resources to provide reliable power in the event of a
major storm or outage.
• Utility businesses are always most efficient when operated on a larger scale.
• Municipalization efforts, for the most part, are overwhelmingly unsuccessful and those
that succeed may take many years.
LADWP, SMUD, and CPS Energy, in Los Angeles, Sacramento, and San Antonio, respectively,
are successful examples of well-managed large municipal utilities, and between 1980 and 1997,
at least 40 proposals for the municipalization of electricity assets were made in 17 states. While
these have slowed in recent years, Boulder, Colorado’s municipalization effort against Xcel
Energy is among the nation’s first in years, and is being closely watched by utilities,
environmental advocates and officials across the country. Minneapolis, Minnesota is also in a
battle with Xcel in an attempt to municipalize their electric utility. Other examples of this
movement include Davis, California, who is proposing to acquire the PG&E assets within their
incorporated boundaries, and Santa Fe, New Mexico, who is considering a split from their
private utility.
There is another movement afloat, that being one known as Community Choice Aggregation
(CCA), and the trend may be spreading. California is currently in the forefront of the movement,
due in part to regulations enabling such non-traditional power providers and the state's
environmental focus. While lower power bills are the primary motivation behind aggregation, a
cleaner energy mix is the second.
Today, only six states have laws enabling CCA: California, Illinois, Ohio, Rhode Island,
Massachusetts and New Jersey. According to Shawn Marshall, the Director of LEAN Energy
US, a non-profit advocacy organization for CCA, that may be changing. Minnesota and
Delaware have passed legislation to begin considering CCA, and there has been interest in Utah,
Connecticut and New Mexico as well.
Putting in place a community choice aggregation program is a long-term, multi-step endeavor.
First, jurisdictions must pass a resolution saying they intend to aggregate. Then, an energy expert
must be hired to analyze load data. The next step is to place a request for proposals into the
market for initial supply, and finally, to sign a utility service agreement.
By the end of this year, Sonoma Clean Power, a startup public power agency, will serve about
173,000 California with cleaner and cheaper power than the incumbent utility Pacific Gas &
Electric provides. Sonoma Clean Power is run by Sonoma County, California, and the
participating cities of Sonoma, Santa Rosa, Cotati, Windsor, Sebastopol and Cloverdale.

5. California's community choice aggregation law is structured in such a way that, once adopted,
the CCA becomes the default provider instead of the incumbent utility. For Sonoma Clean
Power, residents have to opt out of the program to go back to Pacific Gas & Electric. Sonoma's
original estimate was to retain 25% of its customers, but it now expects to hold on to 85% of
customers. Participating customers save between 4% and 7% over PG&E's rates, and in some
cases, up to 12%, on just the generation portion.
Today, Sonoma Clean Power is sourcing 30% of its electricity from conventional resources,
though it is almost entirely natural gas-fired. Another 37% comes from hydro and the remainder
mostly geothermal. The mix will begin including wind and solar beginning in December.
Sonoma Clean Power just signed contracts for 30 MW of solar and is in negotiations for another
18 MW. Eventually, the aggregator looks to add at least another 40 MW.
San Francisco is also exploring options to bypass Pacific Gas & Electric to meet demand for
renewable energy which includes joining Marin Clean Energy, a community aggregator with
about 90,000 customers.
Smart Grid Initiatives
Although municipal smart grid initiatives are in a nascent state, there are undoubtedly a number
of smart grid technologies that municipal utilities will surely employ: AMI, distribution
automation, demand response, micro grids, energy storage, EVs, etc. However, as technologies
are added, the ultimate goal will be the fruition of a Smart City.
Emerging metrics support strong business cases for smart city investments. For example, the use
of video surveillance infrastructure is a clear example of how smart city infrastructure can
deliver substantial ROI for municipalities of all sizes. According to a study conducted by the
Urban Institute, the presence of centrally-monitored surveillance cameras on Chicago’s South
Side resulted in a 20% reduction in crime within the first month of deployment, enabling
Chicago to avoid more than $815,000 in criminal justice costs while also relieving some of the
intense pressure put on trauma and healthcare centers as a result of injuries from violent crimes.
An organization known as Smart Cities Council, chaired by Smart Grid News Chief Analyst
Jesse Berst, launched the first comprehensive, vendor-neutral smart city handbook for city
leaders and planners. The Smart Cities Readiness Guide helps them assess their city's current
state of technology and its readiness to become a smart city. Importantly, it also gives them the
tools to make wise investment decisions as they plot out a smart city roadmap, with vendor-
neutral technology recommendations on all eight of a city’s most important responsibilities: the
built environment, energy, telecommunications, transportation, water and waste water, health
and human services, public safety and payments. The Guide was designed with input from
leading smart city and urban planning experts as well as top global technology companies from a
variety of industries. The downloadable PDF helps a city create its own customized "wish list"
with the confidence that it has not left out anything essential, and that all the pieces will work
together even if they are built in stages. It also highlights a variety of approaches to getting the
job done, from sharing resources to public-private partnerships and the importance of citizen
engagement.

6. There are some laudable developments under way that very well may assist cash-strapped
municipal utilities forge their way forward to making Smart Cities a reality. There is a growing
roster of options for managed services that eliminates, or vastly reduces, the upfront cost of
technology, and which enables municipalities to build smart-city networks and add applications
at their own pace.
Silver Spring Networks (SSN) announced it is expanding its hosted services for municipalities
with new offerings ranging from smart grid to street lighting applications. General Electric, Itron,
and other smart grid stalwarts also have programs underway to co-exist with smart street lights.
Other companies like Sensus are further helping cities leverage their smart grid networks for
streetlights. Itron just integrated its smart grid platform with Milsoft’s outage management
system. The OMS will be offered as part of Itron’s Total service, which was launched earlier this
year. Total is a subscription-based smart grid solution that includes advanced metering, meter
data management and other applications, such as prepaid options for customers. Integration with
Milsoft should increase Itron's attractiveness among mid-market and small public utilities.
SSN has taken the step of buying a French company with expertise in software to control and
manage street light networks, as well as many other applications, such as:
• Energy infrastructure (smart grid)
• Smart gas and smart water meters
• Street lights
• Traffic control systems
• Smart bus-stops and kiosks
• Electric vehicle chargers
• Parking meters
• Environmental sensors
• Platform for city apps
Most of Silver Spring’s municipal clients have started with distribution automation, which has
been an affordable starting point. They are also often interested in other smart grid applications
but are worried about having the in-house expertise to manage networks and implement systems.
Silver Spring’s Speed-to-Value program can cut the time needed to roll out a network by 15 to
30%, although the cost savings vary depending on the city and the application. Cities might want
to start with putting in smart meters in a central business district, or adding distribution
automation to specific feeders with issues. Although utilities might still need to pay for some
hardware, such as additional sensors or meters, the network can be hosted by Silver Spring.
Cloud-based web services for virtual power plants will be another boon for municipal utilities. In
February of 2014, Siemens Smart Grid Division announced that the company can provide
municipal utilities with a cloud-based Web service for virtual power plants. This service enables
the utilities to interconnect their customers' small distributed-energy resources together and offer

7. the bundled power to operators of a large virtual power plant for marketing. Because the standard
functions of the Siemens energy management system DEMS are adequate for setting up a small
virtual power plant, software license costs are reduced. Another advantage of the cloud-based
Web service is that there are no costs incurred for the computer hardware that is otherwise
required. Benefits include communication interfaces for the distributed power generation plants,
generation forecasts, and aggregation functions as well as a Web portal through which owners of
distributed plants can release their generated power for marketing in the virtual power plant
network. Siemens will be offering this service starting in early summer 2014. The company will
provide the service jointly with RWE Deutschland AG which operates one of the major virtual
networks.
Landis+Gyr also moved further into cloud-based services earlier this year to integrate outage
detection, meter data and conservation voltage reduction for smaller utilities.
Municipal Benefits
A municipally owned utility enables customers to pay competitive rates for more reliable service,
and the utility can use their profits to make infrastructure improvement. A perfect example of
this is the City of Winter Park, Florida, which in 2005 took over from its private utility, now part
of Progress Energy. The utility lost money and raised rates in its early years while it made capital
improvements to the system. But now it is making about $5 million in profit on about $45
million in revenue; a profit the city is using to put wires underground. The city has already
buried 10 of its 80 miles of cable, a project that should be completed in the next 15 years at
current rates and power supply costs.
PV Rooftop and Battery Storage
IOUs are nearly apoplectic in regard to the development and application of PV rooftop and
battery storage systems as some regard them as the beginning of the end for utility companies as
we know them today. As the technology becomes less expensive, and software is developed for
energy management, there will likely come a day when utilities will not be needed for home
power systems. Add EV charging and home automation to the mix, and a residence can operate
with very little energy.
The U.S. Department of Energy (DOE) has made available more than $8 million for seven micro
grid projects in Alaska, California, Illinois, Minnesota, New York, Tennessee and Washington to
help better prepare cities and towns for extreme weather events and other potential electricity
disruptors. This investment supports advanced technologies, bringing together communities,
technology developers and providers, and utilities to develop advanced micro grid controllers
and system designs for micro grids less than 10 MW.
In 2011, EPRI announced a solar-storage pilot project with the Sacramento Municipal Utility
District (SMUD). The SMUD is a publicly-owned power provider that has been rolling out a
wide array of smart grid technologies and tech-enabled services to its 600,000 customers since it
received a $127.5 million DOE smart grid grant in 2009.

8. The solar-storage project is the 2500 R Midtown housing development, where 34 homes have
been outfitted with solar panels and a combined lithium-ion battery pack, inverter and power
control system, all contained in a closet-sized box built by Stockton, California.-based startup
Sunverge Energy. Patrick McCoy, SMUD’s solar program planner, described the project’s goals
as not just to test whether the technology works but also to see how it can support the peak-
shaving, grid-balancing and customer energy-saving concepts that SMUD and the DOE have in
mind.
Customers who can get paid more by utilities for their net-metered solar than they return in
power bills are seen as a threat to the continued survival of utility business models. A bigger
problem will be when we see “net-zero-energy” homes which are designed to use no more grid
power than they generate over the course of a year, as is the case with the 2500 R development.
Another project with Sunverge involves the company’s UL-certified Solar Integration Systems
(SIS) which combine batteries, power electronics and multiple energy inputs in one box,
avoiding the problem of DC-to-AC-to-DC conversion losses, and it manages the interplay of
those systems from its cloud-based software platform, which simplifies integration with utility
systems.
So far, California’s IOUs see solar-equipped customers as a destabilizing force to the grid and an
economic burden for the rest of utility customers who may end up paying more in rates to cover
the diminishing share being paid by solar system owners. The IOUs are on a campaign to deter
the spread of rooftop solar. They are seeking changes to state ratemaking policy to make it less
economically viable, and this summer, Southern California Edison and Pacific Gas & Electric
started denying net metering contracts to customers who add batteries to their solar-equipped
homes.
SolarCity Corp., the biggest developer of U.S. rooftop solar panels, has been testing units with
photovoltaic panels to generate power and batteries that retain that energy for use when the sun
isn’t shining. The company has installed a total of 65 of the systems in areas overseen by PG&E
Corp., Edison International’s Southern California Edison and Sempra Energy’s San Diego Gas &
Electric. Since the combination is a threat to the business model that has been in place in the
power industry for a century, they have been stone-walled to the point that they have halted
efforts to install and connect the systems because California’s utilities are reluctant to link them
to the electric grid. In addition, the utilities require a series of applications and fees that have
made the process too onerous, and their applications are going nowhere.
Add-on Products and Services
The ongoing worldwide deployment of smart grid communications technology is creating
unprecedented telecom business opportunities for utilities with the right mix of assets, market
demand and favorable regulatory climate. For instance, if a utility sets up a communications
network for its own needs, it may be able to sell access to that network for such things as TV and
Internet access, and in some cases, both inside and outside of their service areas. Tacoma Power
has been doing this for well over a decade but only inside its own service territory. Now the
municipally owned Electric Power Board of Chattanooga, Tennessee (EPB), which has deployed
a 1Gbps fiber to the home (FTTH) network that passes every residence and business in its 600

9. square mile area service area as part of its overall smart grid project has applied to sell such
services, as well as broadband voice, video and data services, outside of its own service territory
and is seeking approval from the Federal Communications Commission to do so. The FCC has
signaled that it welcomes competition that might help spread high-speed access to rural areas.
The New York Times claims that the EPB has the fastest Internet in America. The utility has
generated $40 million of telecommunications revenue, along with $12 million in energy savings
and $300 million in projected benefits over the next 10 years. The University of Tennessee at
Chattanooga has projected the total economic and societal benefits at $600 million, also over the
first 10 years. In addition, the City is attracting new business to their area. Their focus on
environmental stewardship has helped attract $4 billion in foreign direct investment including a
Volkswagen auto assembly plant.
Municipal Challenges
Municipalization
Cities that mount the challenge to municipalize face an extremely uphill, expensive and time-
consuming battle as they will be vigorously challenged by IOUs who are vehemently opposed to
losing their assets. Municipalities wishing to take successful charge of their electric utility will,
no doubt, have to scream and kick their way to the finish line.
Centralized private utilities oppose the municipalization of parts of the electricity system for a
number of reasons, not the least of which is the loss of valuable customers. Part of their
argument about losing their customers is that it leaves them unable to recoup investments made
in anticipation of their customer needs.
The road to a new utility takes a very extensive amount of time and is incredibly expensive, so
much so that many towns that have attempted the transition in recent decades simply resigned
their efforts. The community and the utility must fix a price for the electric company’s property,
a calculation that includes not just the value of poles and wires but also stranded assets, or
investments made in things like power plants on the assumption of needing to provide service for
a certain number of customers. The challenges associated with breaking off assets in a highly
interconnected operational and financial system fall just short of overwhelming.
As it relates to timing, some electric utilities that were successful completed the transition from
investor-owned to municipally owned in a year or two while a few of the most hard-fought
municipalization campaigns have taken seven or eight years to complete. The average length of
time for the transition from an investor-owned utility to a municipally-owned utility is three to
four years.
In addition, municipalities have limited monetary resources to combat the political and financial
clout that IOUs have stored in their armory, and are at a distinct disadvantage in the
campaigning process. When these IOU resources are put into play, the process can drag on for
years. Political action committee and independently sponsored financial and campaign support
are critical. Grass roots campaign efforts including informational consumer polling, and local
meetings are important and frequently employed campaign strategies.Some munis, and their state
legislators, have even tried to change the law to confront this issue, but with little success. An

10. example of this has been in Massachusetts where the decision to sell is left to the utility.
Lawmakers have been trying for nearly a decade to change that rule, especially because of high
rates and the poor maintenance and performance of private utilities after storms. “I don’t foresee
a rush by communities to do this,” said Stephen L. DiNatale, a Massachusetts state representative
from Fitchburg who recently reintroduced a bill that would require utilities to sell for the going
rate if a town had the money, as determined by state regulators. “But I think having that ability to
do it would help to keep some of these investor-owned utilities in line.”
In the Boulder, Colorado case, Boulder tried to convince the state's regulatory commission to
force Xcel to allow a gradual transition that would minimize Boulder's switching costs.
However, Consultant PowerServices Inc. has released a new report that implies Xcel is
deliberately making things difficult. The report states: "Uncertainties are amplified if the owner
of the system to be acquired does not cooperate and acts as an impediment to the acquisition
process." The back-and-forth gridlock is causing Boulder to spend more than they have been
spending on an annual basis in an effort to take over Xcel Energy’s local distribution grid. The
costs of negotiations with Xcel could climb even higher, so much so that the city might not be
able to afford to proceed.
Smart Grid Investment
Smart grids aim to deliver increased utility system efficiency and reliability, as well as
participatory customer energy use management. The investment required to implement
comprehensive smart grid initiatives is substantial, and many hardware and software
technologies are still evolving. Utilities are anxious about whether these investments will pay for
themselves over time, or that mistakes in making near term smart grid decisions may increase
costs and limit benefits. Determining a business case for smart grid investments is particularly
difficult for municipal and other publicly owned utilities because of their typically smaller size,
limited staff and the greater importance of fixed costs relative the number of their customers.
It is difficult for municipal utilities to attempt investment analysis due to the large number of
interrelated of current and future smart grid technologies available, the range of smart grid
applications from the substation to behind-the-meter technologies, and limited implementation
experience available for study in the municipal market.
A consortium of thirteen utilities was formed in May 2010 to review smart grid technologies,
smart grid experience and to develop investment models to support smart grid business case
analysis at municipal utilities. The consortium project, completed in 2011, included a national
telephone survey of 87 coops and municipal utilities. The survey sample was stratified by utility
size and region to provide statistically reliable results. The results indicated that only 5% of
municipal utilities have initiated smart grid investment programs. Nonetheless, the consortium’s
survey suggests that municipal utilities will apply reasonably conservative investment criteria
while evaluating smart grid investments, and will require a 6.5 year payback, an amount that is
equivalent to an internal rate of return of 14.3% on a twenty-year investment.
A vast majority of municipal utilities simply cannot justify the cost of electric smart meters, or
even full-blown distribution automation projects at this time, and one of the biggest cost drivers
is the integration of the backend system. For cities that already have reliable power and relatively

11. happy customers and other energy efficiency programs, smart grid plans will likely stay in the
wings for at least another year or two.
Regulatory and Legal Considerations
Federal
Deloitte LLP has reported that for the electric power generation sector, the US Environmental
Protection Agency’s (EPA’s) new Mercury and Air Toxics Standard (MATS), promulgated
under the Clean Air Act of 1970, is expected to cost utilities an incremental $55 billion between
2015 and 2020. Other federal standards also have the potential to cause a change in the industry.
For instance, federal policies supporting the adoption of electric vehicles could contribute to new
patterns of electricity demand and consumption including the potential for substantial
decentralized electricity storage.
State
• Renewable Portfolio Standards (RPS): While state RPS mandates are raising costs for
electricity in the short term, investments in wind and solar generation (in particular) are
also helping to bring these technologies to scale, and closer to grid parity.
• Energy Efficiency Resource Standards (EERS): State EERS are growing, resulting in
reduced consumption. The combined energy efficiency budgets of US states are expected
to increase at a compound annual growth rate of 4-10 percent by 2025 as more states
enact energy efficiency policies and increase savings targets.
• Third-party resale of electricity: Third parties traditionally have been prohibited from
selling electricity by the kilowatt-hour (kWh). But with the build out of charging station
infrastructure to serve electric vehicles, several states have lifted these prohibitions and
other states may well follow suit.
MUNICIPAL UTILITY EXAMPLES
EPB – Chattanooga, Tennessee
In 2011, the city of Chattanooga, Tennessee completed the installation of a smart grid that is
becoming the backbone of a smart city. Installed by the Electric Power Board (EPB), the
community-owned electric utility, the project encompassed EPB's 600-square-mile service area.
It included many smart city functions, including:
 Ultra-high-speed Internet, voice and video access to all residents
 A city-wide Wi-Fi network for use by the city and the utility
 Street light controls
 Surveillance cameras
 Enhanced police and fire response
EPB’s smart grid has already saved them millions due to reduced outage times during major
storms and has made it easier for them to attract business.

12. THE CITY OF FORT COLLINS, COLORADO
The City of Fort Collins smart grid initiative includes the municipal utilities for the cities of Fort
Collins and Fountain, Colorado. This forward-thinking initiative is driving the citywide
deployment of advanced metering infrastructure (AMI), approximately 99,000 smart meters and
their associated management systems. The initiative is also driving the expansion of energy
distribution automation capabilities including real-time integration with outage management
systems, new innovative customer rate programs that leverage the power of smart meters, as well
as the next generation of customer-facing services accessible through the city’s web portal.
The Fort Collins smart grid initiative is among 100 projects currently supported and co-funded in
49 states under the U.S. government’s American Recovery and Reinvestment Act’s Smart Grid
Investment Grants. As a result of this program, innovators like the City of Fort Collins received
50% of the up-front investment in advanced metering infrastructure and related information
technology from the U.S. Department of Energy.
ROSEVILLE ELECTRIC, CALIFORNIA
Roseville Electric, the municipal electric utility of Roseville, California, is seeking to increase
the amount of energy it receives from renewable resources to 33 percent by 2020. As part of
meeting this goal, the utility has entered into a 10-year contract with Iberdrola Renewables, the
U.S. renewable energy division of parent company Iberdrola SA.
Over time, the contract will deliver firm quantities of renewable energy to help Roseville fulfill
California's renewable portfolio standard (RPS) obligation through 2024. In order to gain cost
efficiencies and ease of compliance with the RPS law, Roseville is procuring all three qualifying
renewable energy products in a single contract. The contract gives Roseville the flexibility to
adjust volumes as needed to economically manage its renewable energy supply.
As a municipal utility, Roseville Electric is not required to purchase renewable energy to comply
with legislation until 2020. However, in an effort to gain the buy-in of its customers, Roseville
Electric offers "Green Roseville," a voluntary program for those customers wishing to support
energy from regional renewable energy sources.
OUTLOOK
• There will be an uptick in the number of municipalities looking to secede from their
incumbent utilities.
• The distributed energy storage market is heating up fast. Look for early adopter regions
such as California, New York, Hawaii, Colorado and New England to lead in this
emerging market. SolarCity’s move to bundle solar systems with Tesla batteries for
commercial customers was precedent-setting. Following SolarCity's lead, SunPower
recently announced it will bundle solar and storage for residential customers. Expect the
customer-sited storage market to be a big opportunity in the coming years.

13. • Smart cities are likely to evolve into fiercely competitive new markets where
Communication Service Providers may not only compete with each other, but also with
other technology providers and integrators, for long term revenue opportunities.