Uchin: State utility regulators, through
their prudency review of utility expenditures, have a significant amount of
oversight and influence. Historically, the
most successful models in utility regulation have been where regulators create
the right policy structure that guides
utility investment rather than making
operational decisions on behalf of the
men and women running the utilities.
POWERGRID International: How quickly do you think regulators will realize
their need to resolve and respond to
cost recovery questions about SaaS and
Uchin: Regulators have already indicated
that they see this as an important issue
to address, as evidenced in November
2016 when the National Association
of Regulatory Utility Commissioners
(NARUC) Board of Directors adopted the resolution, “Encouraging State
Utility Commissions to Consider
Improving the Regulatory Treatment
of Cloud Computing Arrangements.”
Each state public utility commission will
approach this in its own way, whether
through a specific rulemaking, or as part
of a much larger ordering document on
utility reform (like in New York REV),
and yet others may address it through
the next general rate case they review.
POWERGRID International: Should
utilities feel encouraged by the results
of this report? Why or why not?
Uchin: Utilities should absolutely feel
encouraged by the results of this report.
It’s clear that regulators are increasing-
ly aware of and thinking strategically
about the impact of cloud computing
on the utilities they oversee. Both this
report and the NARUC resolution are
strong indicators that regulators are
interested in providing clear guidance
in support of a level playing field for
utility IT investments.
solutions for customers and to
improve their operations. Regulators
determine the degree to which utilities
can use the cloud.
POWERGRID International: When/why
is cloud computing considered a cap-
ital expense and not part of normal
Uchin: The determination of what is considered a capital expense vs. an operating expense is a regulatory accounting
issue that is approved by state utility regulators and based on FERC’s Uniform
System of Accounts (USOA). Cloud
computing provides business critical
solutions to utilities like on premise
computing solutions, the only difference
is the delivery model. Because of this
distinction, there are existing USOA
accounts within which cloud computing can be considered a capital expense.
Regulators want their utilities to
make investments that best serve
the public interest. Instead of
focusing just on archaic accounting
rules, forward-thinking regulators
are aligning utility incentives with
the public interest.
POWERGRID International: How much
say should regulators have? Should they
be expected to only decide the mechanism
for cost recovery, or should they have a say
in the selection of the cloud services?
revealed that many do understand the
importance of the cloud to utilities’ future
success (Figure 1). Just under 40 percent,
however, thought they should play a “
significant” role in determining whether utilities use on-premise or cloud technologies
(Figure 2), the survey showed.
Figure 3 shows some other key survey
To gain a little more insight into the
report’s key findings and why regulators’ perspectives matter to utilities,
POWERGRID International conducted a
one-on-one interview with Uchin.
POWERGRID International: Why is it
important to utilities for regulators to
understand cloud computing? How
are they involved with utilities’ decisions about cloud computing?
Uchin: In a 2016 survey of utility executives, 97 percent stated they are currently or plan to use cloud computing
solutions. Given this direction of utility IT investments, and the central role
that regulators have in determining
prudency of utility expenditures, it
is important for regulators to understand the unique benefits and attributes of cloud solutions.
The cloud is about innovation, and
it’s critical that utilities are able to use
cloud-based technologies to continue
to provide the latest, most convenient