graceful systems submission for the 51st state

7/21/2019 Graceful Systems Submission for the 51st State

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1Graceful Systems LLC

An Electricity System Blueprint for the 51st State

A Blueprint for Electricity/Energy Services in Fertile Ground – the 51st State

Fertile Ground is the 51st state in the United States of America. It has a sufficient electricity

infrastructure to provide electricity to the homes and businesses within its boundary but, for

unknown reasons, it has no laws, regulations, policies or practices relating to that

infrastructure. About one year ago, Fertile Ground decided it was time to design an intangible

infrastructure to accompany the physical one. It tasked a diverse group with leading a design

process for this infrastructure, charging them to involve the many diverse stakeholders of the

electricity system, as well as tap the best of academic thinking relevant to the work. This report

summarizes the group’s recommendations.

To the elected officials, community leaders, and citizens of Fertile Ground:

Thank you so much for setting us this task and sending us on a journey to design an intangible

infrastructure to accompany and guide the physical electricity infrastructure we all use everyday. It has been an enlightening journey, and we don’t mean just in terms of the LED light bulbs

that several stakeholders loved and several hated!

This report is much more blueprint than specifications. The structure it frames has five Key

Ideas:

I Use Community to Distribute Authority and Responsibility With Respect to Energy

Infrastructure

II Draw the Boundary of the Monopoly Utility System as Tightly as Possible

III Charge Regulators with Ensuring the Safety of and Access to the Monopoly Utility

System

IV Make Energy Service Contracts the Primary Arrangement between Energy Users and

Providers

V Steer Utility and Electricity Systems Policy with Rigorous Practices and Processes

Based on Outcomes

These five Key Ideas interact and inter-relate. Although we present them one-by-one in the

Key Ideas section below, we urge Fertile Ground policy-makers to see them as a whole. We

prepared the graphic below in an attempt to express the linkages between the Key Ideas.





The Key Ideas rest on the hundreds of observations our process’ participants made and, of

greater importance, the meanings that emerged from the collective conversation about those

observations. You will find these meanings in the section Key Contextual Assumptions. This is

the landscape – a particular space-time if you will – for which we propose this structure and,

almost certainly, this landscape will change. Some of those changes will be nothing less than

movement already happening but not yet perceived; others will be the fruit of decisions and

actions taken now that manifest in outcomes only months or years later. Space-time is

dynamic; the physical and intangibles structures we design to meet human needs must be

dynamic as well. Accordingly, we give you here perhaps our most important recommendation:

Use the blueprint to begin building but never assume that what you are

building is THE ANSWER. Plan to regularly refresh the work we have done.

Accepting that the landscape is dynamic and adaptation to change inevitable makes it critical to

have a means of navigation. Virtually every individual or organization with which we consulted

agreed that three values should guide both the structure and its implementation, regardless

whether it is the first iteration or the twentieth: resilience, sustainability and equity. You will

find these three described in the section Key Values. To serve as guides, these Key Values must

Outcomes-driven

planning and

learning processesestablished

Authority andresponsibility

distributed to

communitiesEnergy service

contracts

formalized

Monopolyutility services

defined

Energy services

providers

(including

uitlities)

Regulatory oversight of

safety, access, monopoly

service cost allocation

Policy-makers

and policy

stakeholders

Energy end

users/producers





be expressed as observable outcomes, as must both the hoped-for and feared results of the

decisions and actions of implementing the blueprint’s structure. The last of our Key Ideas

proposes the processes and practices necessary to ensure that every stakeholder in Fertile

Ground makes their decisions and takes action with a steady eye on the outcomes emerging

from the utility and electricity systems and the broader systems they support.

Last, even though Fertile Ground does not have laws or regulations to accompany its physical

electricity infrastructure, this does not mean that the system does not have stakeholders who

care deeply about that intangible infrastructure. We briefly address how this blueprint will

serve the various stakeholders in the Stakeholder Outcomes section.

We could never hope to identify and acknowledge all of the Fertile Ground citizens and

organizations that helped us and informed our recommendations over this past year. There

were so many and we are grateful to each and every one. We do, however, identify some of

the thought leaders, academic and otherwise, on which we relied in our work. Those who takethis blueprint into the building stage may well find it useful to consult these sources as they

work.

KEY CONTEXTUAL ASSUMPTIONS

One of our group’s first tasks – a task that lingered throughout our entire process – was

scanning the environment to get a sense of the landscape within which this blueprint for an

intangible electricity infrastructure would need to operate. We observed:

The physical system itself;

The various interactions of people with that system and with all of the artifacts

powered by it;

The purposes of people using those artifacts and how those purposes fit within larger

systems of the economy and society; and

Similar physical and intangible electricity systems elsewhere.

We solicited literally hundreds of observations from the diverse people with whom we spoke

as part of this process. All of these observations are far too numerous to cover here. What we

offer, instead, are the primary two meanings we made from our observations and the ensuingassumptions that underlie this blueprint.

First, Fertile Ground’s electricity system (and that of the other 50 states) is in the climax

conservation phase of the cycle that families, businesses, nations and ecosystems all go





through.1 We have spent over 100 years building this electricity system, storing energy in its

many tangible and intangible structures and accumulating materials. Connections between the

key actors in the system have gradually increased and the most important actors have become

specialists, who reduce variability through mutually reinforcing relationships. Use of resources

has become more conservative and efficient, with a high emphasis on economies of scale. But

the cost of efficiency is a loss of flexibility and, as time has gone on, each increase in efficiency

requires greater investment for less gain. The system is increasingly stable but over a

decreasing range of conditions. Prospective entrants face significant barriers and the overall

growth of the system has slowed considerably. The system devotes much effort to making new

things fit into the existing system. The figure below helped us place the history of the

electricity system and its current state in the timeless pattern of all natural systems.

And, in the climax conservation stage, wise system managers create “room” within the

system for small releases of resources with the goal of nudging the system back into a growth

phase. In this “room” for change, effort is made to reduce complexity and allow the new to

flourish. One of our participants suggested this metaphor: imagine that the existing electricity

system is a jumbo jet, flying at high altitude. We know the jet needs re-design work but we

cannot afford to land it (stop its flight). Instead, we allow some smaller planes to fly, well under

1 In making this meaning out of the sum of many observations, we relied heavily on the explanations of Walker and

Salt in Resilience Thinking. Walker, B. H., and David Salt. Resilience Thinking Sustaining Ecosystems and People in a

Changing World . Washington, DC: Island, 2006. Print. We also gained insight from Henderson’s book: Henderson,

Hazel. Building a Win-win World Life beyond Global Economic Warfare. San Francisco: Berrett-Koehler, 1996. Print.

Last, we found useful all of Clayton Christensen’s books on disruptive innovation, which you can find in the

bibliography.





the altitude of the jumbo jet. While this results in some redundancy and inefficiency, it allows

the invention and experimentation to proceed that would be far too risky with the jumbo jet.

Having drawn this meaning, we proceeded on the assumption that the blueprint must enable

decisions and actions that make room in the existing electricity system for experimentation

and re-design and that Fertile Ground must accept the inefficiency and redundancy that may

result.

The second meaning we made of a number of observations is this: Many forces today are

affecting how humans obtain and apply usable energy and the effects are both interactive

and cumulative. Looking broadly throughout the economy and society, we noticed that ways

to do things (technology), ways of doing things (behavior), and even beliefs flow across discrete

areas or issues with ever greater ease. Something discovered, developed or tried “over here,”

mysteriously and quickly migrates “over there.” Energy is not immune from this. But, perhaps

because it is in a late conservation phase, the system as a whole seems less capable of seeingthat technology, behavior or beliefs from outside the system could affect it. Ralph Waldo

Emerson told us that “people only see what they are prepared to see.” By and large, the

electricity system is poorly prepared to see the changes that might affect it.

This meaning led us to our second assumption: our ability to predict – always poor – is likely to

get worse. Indeed, we reflected on the quote from Peter Drucker: “Trying to predict the future

is like driving down a country road at night with no lights while looking out the back window.”

Now, perhaps, our back window is actually fogged over. Rather than hit the defrost button, we

decided to heed further advice from Drucker: “The best way to predict the future is to createit.” The five Key Ideas in this blueprint – implemented, observed, and re-visited in continuous

learning cycles – will support Fertile Ground create its present as that appears over and over

again. Through endless experimentation, by actors throughout the system, it can steer closer

toward its Key Values. Emerson, again, inspired us:

“All life is an experiment. The more experiments you make the better.”

KEY VALUES

We spoke at length with stakeholders about what should guide decisions and actions within the

system, and the systems that it supports, given the dynamic nature of the landscape. Again and

again, stakeholders raised three over-arching values. Of course, the observations through

which each suggested one gauge the state of the outcome were markedly diverse, as one

would expect. To see these values well requires diversity and that is the purpose of the

processes and practices in Key Idea five. For our purposes here, we describe these values





generally. Fertile Ground as a whole, and individual communities, will need to provide content

to the descriptions over time.

Resilience. A resilient system can absorb many disturbances and still retain its basic function

and structure. Participants in a resilient system have the capabilities needed to restore or

revamp the system depending on the nature of the disturbance and have strategies for

achieving their purposes through other means while the restoration or revamp occurs. Three

conditions help enable resilience: diversity, modularity, and tight feedback loops.2 Diversity

refers to variety in the functions and responses of the people, places and things comprising a

system. Modularity is the manner in which the components in a system, at one or more levels,

are linked. Systems with sub-systems that are strongly linked internally but only loosely

connected to each other are modular. Tight feedback can occur most easily when governance

and decision-making is distributed through local institutions and small-scale social network; it is

hardest with centralized governance and very large-scale, virtual social networks.

Sustainability. For purposes of our blueprint, participants in a system evidence sustainability

when they work to ensure that attaining the intended outcomes (purpose) of the system does

not also cause unintended and adverse outcomes for the environment, the economy, or the

community within which the system operates. Moreover, these participants recognize that

what they build will proceed through the life cycle we discussed under Key Assumptions, rather

than simply mature and remain at that mature state. They vigilantly watch for signs of the late

conservation phase and actively release resources to enable renewal while conserving critical

function.

Equity. Participants in an equitable community work to ensure that all members have meansby which they can achieve the outcomes important to them, such as safe and healthy spaces to

live and work or food that is safely kept and cooked. Success in this work is measured by

degree to which all members achieve these outcomes, not by the particular paths chosen to

provide the means. Access to and use of interactions the energy system is based on how those

seeking access and use interact with the system, not who they are.

2 We acknowledge again how invaluable the work of Walker and Salt was to us in gaining an understanding of

resilience.





KEY IDEAS

I

Use Community to Distribute Authority and Responsibility With Respect to Energy

Infrastructure

Developing, maintaining and revising, as needed, an infrastructure for converting energy to its

highly usable electricity form and getting that electricity the point of application requires the

exercise of authority and the acceptance of responsibility. Within the electricity system today,

these authority/responsibility combinations generally occur within organizational units that we

call utility service territories. There are exceptions: a master-metered residential community

here; a community choice aggregation program there and, of course, individuals who for a

variety of reasons are provide their own electricity and do not connect to the larger system.

Utility service territories can encompass the population of a small town to millions of people.

A responsibility/authority unit of one, while preferable for some small segment of thepopulation, seems to deny the very human characteristic of sociability. A unit of thousands or

millions places most of authority and responsibility in a small number of highly centralized

hands. We sought something in between for Fertile Ground’s blueprint. An organization unit

of authority and responsibility that could nest within the larger system much as today’s utilities

nest within even larger electricity systems,

Our goal was to find an organizational unit through which the members—individuals,

organizations, and/or both – could pursue the energy use-related outcomes important to them,

achieving collectively more – and more visibly – than they could alone. Drawing upon the

understanding of motivation for change that Kerry Patterson and others detail in Influencer,3 we hypothesized that such a unit could harness both peer support and peer pressure to enable

its members to experience success – their own and the unit’s. Having participated in setting

the goals, and supported by rapid and social feedback loops, the unit could achieve both the

physical and operational/behavioral changes necessary to meet its goals, over time.

We also reasoned that, in many ways, electricity infrastructure resembles the “commons” of

old, whether those commons were pasture or forest land, irrigation systems or even fisheries:

anyone that can connect can use the infrastructure and, in the short-term, the use by one does

not detract from the use by another. In the longer-term, using as much as one wants can

trigger expense for others and, in the extreme, curtailment of use if the resources necessary to

increase the size of the commons are scarce. Where history exists, so do lessons. In the work

of Nobel Prize winner Dr. Elenor Ostrum4 we found the timeless principles by which people

3 Patterson, Kerry. Influencer: The Power to Change Anything . New York: McGraw-Hill, 2008. Print.4 Ostrom, Elinor. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge:

Cambridge UP, 1990. Print.





have collectively managed – in some cases, over centuries – a commons on which they all

depend:

Clearly defined boundaries (who can draw from the commons and what comprises the

commons);

Congruence between the rules for how one can use the commons and how one must

provide resources to support the commons;

Means by which most or all of the users of the commons can participate in modifying

the rules of use;

Means of monitoring the use of the commons that involve users in monitoring both

themselves and each other, with rewards for the monitors;

Sanctions for misuse that start at a very low level to encourage reporting and learning;

and

Rapid access to low-cost arenas to resolve conflicts among users.

For lack of a better term, this blueprint uses the label “community” for the unit we propose to

empower with certain authority, and commensurate responsibility, over electricity services for

its members. For our purposes, community is a group of people, organizations and institutions

under some participatory, community-specific form of governance, which exercises its authority

and assumes its responsibility such that its members achieve their collective energy goals they

set. In other words, the community exists to create something “larger” than the sum of its

members, somewhat like a choir creates music that is richer and deeper than the sum of its

individual voices. It broad terms, the community would have:

The authority to enter into electricity system service arrangements with the utility

serving the area around it, such as

o The characteristics of the electricity supply provided – capacity, energy, primary

energy source

o The capabilities of the electricity network within the community and its

connections to the larger territory; and

o

The type and pricing of energy services available to members of the community.

The responsibility to honor the terms of all of its agreements with the surrounding utility

and other energy service suppliers and pay the costs of the utility system it is using as

set from time to time by a regulatory agency.

This is nested authority and responsibility. The analogy we found most apt was that of the

charter schools that a number of states now authorize to operate as part of but partly

alternative to the established method of youth education. The charter schools must “connect”

with the broader school system: they draw students from and return students to that broader

system. To do this, the charter schools must meet certain standards and follow certain rules.

In some cases, the charter schools use the physical facilities of the larger system, in some they





don’t. Within explicit boundaries, however, the charter schools have considerable authority

over and responsibility for the education of their students. It also seemed to us that this model

suited well the metaphor we used above: putting some much smaller planes in the air to

innovate and provide diversity through a “release” of some of the resources of the jumbo jet

while not threatening its ability to fly.

The remaining Key Ideas all support this one in some manner:

Key Idea 2 empowers a regulatory body to identify, from time to time, the monopoly

utility characteristics and capabilities of the larger system within which the community

assumes its responsibility and exercises its authority.

Key Idea 3 enables that same regulatory body to allocate the monopoly utility costs for

which the community will be responsible, and for how long, and oversee the safety and

equity of the community’s interconnection and interactions with the monopoly utility

services.

The energy service contracts of Key Idea 4 provide the basis on which the community

can detail the monopoly utility service, as necessary to achieve the community’s goals

for its energy services and energy use outcomes.

Rigorous use of outcomes, as described in Key Idea 5, help the community use rapid

feedback to navigate closer to its desired outcomes over time.

There is no “magic number” for the size of an authorized and responsible community. The

blueprint envisions that, once the enabling structure exists, such communities form

spontaneously. The community boundary may be geographic, or based in affinity, with the

former likely able to exercise more authority and take more responsibility than the latter. One

or more enterprising groups, for-profit or not-for-profit, may form to support these

communities, which will – at least initially – need help with such matters as formation,

governance, technologies and service provider choices.

Fertile Ground will need to accept, and even celebrate that there is more than one “right”

answer to the question of how to manage an energy supply/delivery/application commons. If

we must make comparisons, the methods will need to be sufficiently robust to encompass the

breadth of outcomes communities decide to pursue. We expect that the innovation and

diversity of these communities will, over time, provide rich learning for other communities and

for the larger systems as well. Through the diverse paths they follow to meeting energy goals,

the communities will increase resilience not just for their members, but for the larger system as

well. We anticipate that many will embed elements of sustainability and equity in their tangible

and intangible infrastructure in ways that are difficult, if not impossible on the larger scale of a

utility service territory.





II

Draw the Boundary of the Monopoly Utility System as Tightly as Possible

As we observed the utilities in Fertile Ground and other states, we noticed a lack of clarity

regarding exactly what is the utility service (or, are the utility services) and what assets, tangible

and intangible, the utility organization uses to provide the service(s). This lack of clarity hinders

virtually every participant in the marketplace:

Organizations providing the utility service(s) must seek permission for most, if not all,

new services they want to offer, on the assumption that those services are within the

regulatory purview. Often, approval is contingent upon demonstrating that, in some

fashion, the new service benefits every end user connected to the physical

infrastructure. Many services will fail this test even though some subset of the end

users within a utility service territory would find them valuable. New energy service provider entrants face challenges to their services as infringing on

the monopoly or have difficulty interacting with the utility systems because the

interface points are neither specific, measurable, nor predictable.5

Most energy end-users are under utility service pricing schemes that make efforts to

change the amount, timing, or other nature of their energy use unrewarding or invisible.

Other energy end-users are lumped into categories as “similarly situated” in which they

no longer belong or whose diversity has long since outgrown the finding of similarity.

Moreover, while some states are pursuing conversations about new business models for their

utilities, the lack of clarity around the definition and monopoly nature of utility service makes

resolution elusive at best.

Our blueprint addresses these issues directly. A government body – most efficiently and

appropriately the regulatory agency also necessary for Key Idea 3 – must promptly develop a

clear definition of monopoly utility service(s) and a process for applying that definition on a

regular basis to ensure it keeps pace with changes in technology and market behavior. We

envision a two-step process.

First, the regulatory body would identify the capabilities and characteristics (C&C) of the utility

as presently understood. Capabilities are the outcomes in which the physical and intangible

infrastructure does or can participate; i.e., what can it do? For example, the infrastructure is

capable of measuring the kilowatt-hours delivered to a specific location, storing the

measurement for some period of time, using it to produce a bill, and providing a set of past

5 Christensen, Clayton M., and Scott D. Anthony. Seeing What's Next: Using the Theories of Innovation to Predict

Industry Change. Boston: Harvard Business School, 2004. Print. See, in particular, chapter 4.





measurements to the energy end user(s) at that location. Characteristics are how – with what

quantity, quality, reliability, user experience, etc. – the infrastructure performs its capabilities.

Capabilities and characteristics combine to make specific services.

In the second step, the regulatory body applies well-understood and accepted criteria to

determine which of these service (capabilities with specific characteristics) “must” be monopoly

provided and why, and the physical/intangible infrastructure necessary to do this. The criteria

for capabilities might examine, for instance:

Whether a monopoly status is necessary to obtain financing for the infrastructure;

The difficulty of assuring safety of workers and the public if redundant infrastructure

exists; or

The existence, ease of use, and financial feasibility of alternatives to a given service.

We do not expect that identifying monopoly utility services will be easy. Moreover, theboundary of what are monopoly utility services and what are not will change over time as

conditions and circumstances change. The blueprint requires the regulatory body to set a

regular interval at which it assesses this boundary. Although this periodic re-assessment will

lessen specificity and predictability for short periods, it is necessary to ensure that the

boundary remains current.

Although our blueprint establishes a process rather than a specific outcome, we urge that

Fertile Ground encourage the regulatory body to draw the boundary as narrowly as possible

and shrink it over time. Among our reasons is the inherent difficulty of economically regulating

the rates and profits of a monopoly service. Monopoly utility service(s) require cost-of-service,

rate-base regulation. Although the academic literature is replete with articles about the

infirmities of this method of managing monopoly profit and achieving reasonable rates, no one

has developed a good way to replace it. All of the alternatives – performance-based

ratemaking, price regulation, index or formula rates – have infirmities as well and most are

incomplete replacements, applying at least some aspects of the cost-of-service, rate base

approach they attempt to displace.

Another reason we urge a narrow boundary is to encourage innovation, both by the

organization providing the utility services and other energy service providers. The tighter the

boundary, the more room for capabilities and characteristics that address energy end users’

differences and reflect different values. We describe below the blueprint’s guide for pricing the

monopoly utility services; but we note here that this design envisions the monopoly services as

building blocks that energy service providers can transform into services that address not just

an energy end user’s need for the input of a certain amount of kilowatt-hours but the end





user’s requirements around the outcomes for which that energy input is necessary and the

consequences of its use.

Last, this Key Idea 2 is necessary to enable Key Idea 1 – the formation of communities that can

exercise some authority and take some responsibility for their energy services. Just as with

new entrants in the energy services market, these communities will need specific, measureable

and predictable interfaces – and cost allocations for such – with which to design and follow a

path toward their energy goals.

III

Charge Regulators with Ensuring the Safety of and Access to the Utility Monopoly System

Key Idea 2 mentions the existence of a regulator for the electricity system. Here, in Key Idea 3,

we endorse that such a regulator exists and has certain statutorily-defined responsibilities.

What the blueprint suggests may be a change for other states; for Fertile Ground, of course, itwill be the beginning.

The electricity system, both as it presently exists and as our blueprint would change it, is and

will remain complex. Government oversight of some of its interactions must exist and that

oversight should occur through an agency with the continuity of experienced personnel to do

this oversight well. We identified five critical areas within which a Fertile Ground electricity

system regulatory agency should exercise authority and take responsibility.

They are as follows:

Specific, measureable, predictable interfaces for accessing monopoly utilitycapabilities. The regulatory agency will adopt rules detailing who (what qualifications)

and how an individual or organization – such as energy end-user, community, or energy

service provider – can connect to or interface with the monopoly utility services. The

rules should assure equitable treatment of users (including the organization providing

the monopoly utility services if it wishes to use those in other business endeavors) such

that those having similar access to and making similar usage of the services face similar

charges and requirements for that access or use. The agency will establish processes to

ensure compliance with the rules and re-visit and revise them as necessary for changes

in conditions.

Price the monopoly utility services through which qualifying persons and

organizations access the various monopoly utility capabilities and characteristics.

This authority and responsibility has two aspects.

o With respect to those taking the prices (i.e., users of the monopoly utility services),

the agency will price access to and use of those services according to the costs of the

capabilities and associated characteristics ordered by their users. To the extent





possible, these orders will be explicit, rather than assumed. For example, if the

service is delivery or receipt capacity, the order will be for an explicit amount of

kilowatts that the user intends to take from or deliver to the system at any one time.

Moreover, the same order for the same service at the same explicit amount will cost

the same regardless of the identity or characteristics of the individual or

organization making it. Each service will bear its own costs to the extent they are

identifiable. If more than one service uses the same infrastructure, the agency will

allocate the costs among the services accordingly to understandable and predictable

approaches.

o With respect to the provider of the monopoly utility services, the agency will set

prices for the monopoly utility services using cost of service principles that provide,

over time, reasonable returns on the capital investment that were made to provide

them. Unless the organization provides only monopoly utility services, the agency

will need to develop frameworks for separating monopoly utility costs from the

costs of the larger organization. For example, the agency may determine the “cost”of administrative and general expense relating to the monopoly utility services

according to a formula or use a cost of capital representative of what a solely

monopoly utility service company would incur.

Monopoly utility service organization oversight. Regulatory agencies in states other

than Fertile Ground spend considerable time overseeing and, often, approving or

disapproving, such activities of organizations providing monopoly utility services as

property sales, financings, and budgets. As Fertile Ground constructs this oversight role,

the blueprint suggests that it limit such oversight to only those areas absolutely

necessary to the continued availability of the monopoly utility services.

Safety. Oversee the safety of the monopoly utility physical infrastructure to thoseworking on or around it, its users and the community at large.

Energy service provider legitimacy. Energy end users in Fertile Ground have only ever

purchased electricity from a utility. With the implementation of Key Ideas 1 and 2 and

the other aspects of this Key Idea 3, we envision a robust energy service provider

developing in Fertile Ground. As a transitional matter, these energy service providers

may need indicia of their legitimacy similar to what the organizations providing

monopoly utility services have as a consequence of being the utility. The blueprint

suggests that the regulatory agency develop and operate a system by which energy

service providers can register and obtain certification in a manner similar to thatadopted for retail energy commodity providers by states that restructured their

commodity electricity and natural gas markets. The registration and certification will

also reinforce that energy service providers are a constituent of the regulatory agency.





IV

Make Energy Service Contracts the Primary Arrangement between Energy Users and

Providers

Our fourth Key Idea is a modification of the implicit, and often somewhat vague, relationship

between the utility and the energy end user and application of the new form of relationship to

the transaction of energy services throughout the system. We observed that, in Fertile Ground

and many others states, energy end users simply open accounts with a utility and begin

receiving service under the terms of a tariff that the end user may or may not see. Typically,

very little obligation attaches to the end users except for payment of bills. The end user need

know nothing about the capabilities or characteristics of the energy service needed or taken

and has few responsibilities with respect to that service.

As discussed under Key Idea 3 of the blueprint, we envision that prices for utility monopoly

services will be based on the costs of providing the capabilities, with certain characteristics, thatthe end user requires be available for use. It makes most sense to us that the specifics of these

requirements and any responsibilities the energy end user must assume to receive the services

(such as the notice period to change key aspects of, or terminate, the service) be made explicit

in an energy service contract that accompanies the opening of an account. Moreover, the

blueprint adopts the energy service contract for the many possible transactions between

energy service provider and energy service user(s) throughout the system.

One of the most important aspects of the energy service contract borrows what has been a

valuable feature of the implicit agreement between utility and end user: the continuity of

service to a given service location regardless of change in the identity of the end user residingor working there. This feature arose in connection with long-lived central station generators,

transmission and distribution lines, and pipelines. Because of the continuity, utilities could

finance the investments on the assumption that the buildings and other physical things served

with electricity by the assets would continue to take service throughout the assets’ lives. This

assumption and financing ability it enables will remain necessary for the monopoly utility

services and the assets that support these. It is also likely useful, and perhaps even necessary,

for a newer and broader understanding of assets providing energy services, such as distributed

generation, building shell modifications or major pieces of equipment.6 Indeed, economic,

societal and environmental outcomes might considerably improve if energy end users could

step into energy services tailored to a particular building and the activities within it, rather than

just step into a monopoly electricity service. To achieve this feature, Fertile Ground will need to

establish a legal framework by which an energy services contract attaches to a building or

6 We acknowledge that much work has recently occurred in developing tools for financing this broader set of

energy service investments, such as residential and commercial PACE (Property-Tax Assessed Clean Energy),

distributed generation leases and various forms of “share-the-savings” agreements.





major piece of equipment (e.g., an irrigation pumping system), rather than to a person or

organization. The contract will survive an ownership transfer of the building or equipment, just

as the obligation to pay for monopoly utility service physical and intangible infrastructure and

costs does today.

Another reason the blueprint recommends the use of energy service contracts is that effective

and efficient energy services, defined in terms of capabilities and characteristics, will almost

always span periods of time. A contract is the logical format within which to record both user

and provider rights and responsibilities over this time period. For example, an energy service

contract might be for five years of lighting services: the energy service provider furnishes the

lighting fixtures and bulbs and the energy end user pays for delivered lumens, within certain

parameters such as timing and interaction of artificial and natural light. We expect that

contractual practice will quickly evolve early termination arrangements or other ways to modify

the energy services for changes in the current purchaser’s needs or the different needs of a

subsequent occupant of the property.

It struck us that energy service contracts were analogous in many ways to the cell phone service

contracts that have become commonplace. People used to receive telephone service under

implicit, somewhat vague, terms just as electricity service now. Some likely predicted that

telephone customers would never be willing to commit to a given communications provider for

two or three years and pay for the necessary equipment. Others likely worried that the service

contracts would be too complex. Over the last ten years, these concerns have diminished and

most now take for granted the diversity of telecommunications services and contracts available

and have little difficulty understanding them or finding one whose terms are acceptable.

The blueprint envisions that energy service contracts may be between:

Individual energy end user and one or more energy service providers

A community of energy end users who are also energy service providers (e.g. distributed

generation or storage services)

A community and one or more energy service providers

One or more buildings/structures and one or more energy service providers (e.g.

lighting services, HVAC services and “plug load” energy services.)

Widespread use of energy service contracts makes available to individual energy end users

some of the exercise of authority and assumption of responsibility described under Key Idea 1

for communities. Although individuals cannot intentionally take advantage of synergy between

the energy services they use or provide and the choices others make to use or provide, we

expect that the various energy service providers will work with their customer bases to find

some of this synergy. Moreover, it is our hope that many, if not all, of these energy service





contracts will include measurements of the service provided or received and the efficacy and

efficiency of that service. If shared through a means that preserves confidentiality of the

specific individuals or organizations involved, these measurements could become valuable

sources for “seeing” the system.

VSteer Utility and Electricity Systems Policy with Rigorous Practices and Processes Based on

Outcomes

Electricity is an output of the system Fertile Ground and others have structured to produce and

deliver it; and it is an input into myriad processes by which people get done the things they

need to do. Both the production/delivery system and the myriad processes have consequences

for society and the natural environment. The dominant market structure brusquely divides

these input, output and consequence domains, however; seeing across them and their totality

is difficult at times, and far more frequently impossible. Information translates and transfers

poorly from one domain to another. Decision-makers in all domains make decisions that,

however well-intentioned, occur in virtual blindness to the state of one or more of these

domains, including the one in which they may be acting.

If you don’t know where you are, it is exceedingly difficult to get where you want to go. Only by

chance will you arrive there and, once there, it will be exceedingly difficult to remain there as

conditions constantly change because you won’t understanding the route you took. While

none of the Key Ideas of this blueprint has precedence over the others, we feel confident in

predicting that Fertile Ground will not achieve resilience, sustainability and equity in its

electricity system without adopting this Key Idea.

We found the following definition of an outcome helpful:

To be counted as an outcome, the world must be perceived to have changed in

one of the senses of the observer.7

To be an outcome, one must see it, hear it, taste it, feel it or smell it. When observed over

time, using the same measurements or scales, a pattern will emerge. The pattern is the door to

questions that, explored collectively, can produce understanding of how what “is” has come to

be.If a single feature of adaptive governance stands out, it is the criticality of

building understanding about the system. In practice this generally means a

constant search for and recognition of areas of uncertainty and ignorance,

7 Ehrenfeld, John. Sustainability by Design: A Subversive Strategy for Transforming Our Consumer Culture . New

Haven: Yale UP, 2008. Print. See Chapter 5.





coupled to planned interventions designed to produce learning, as well as keep

the system functioning and healthy.8

Outcomes can energize learning and inform decisions about what to do next;

they serve far less well as measures of success because we always see

incompletely and no one has “control” over meaningful outcomes.9

Our blueprint advises the development of observable outcomes, along with processes for

learning from and improving them, to support every decision-maker within the

electricity/energy system or affected by it, whether an energy end user (which is everyone),

energy service provider, utility, regulator, or policy-maker. And, of course, we all have multiple

roles and are all, at a minimum, affecting and affected by this system.

As with the other Key Ideas in this blueprint, much work remains to implement the idea and,

after much time and work, that implementation will improve. The outcomes identified (andreconsidered and re-identified from time to time) must be robust, which has at least three

aspects: numerous, diverse and insightful. When we say outcomes are:

Numerous, we mean that decision-makers:

o Prefer full ranges and distributions over averages;

o Borrow liberally from decision-makers in other systems generating outcomes for

other purposes; and

o Are vigilant about the dangers of simplifying data and information to make it more

manageable.

Diverse, we mean diverse across:o Participants in the system: energy users of all types; energy and energy service

providers of all types;

o The non-energy systems important to those participants; e.g., for energy end-

users, those systems with a large effect on their well-being (food, housing,

markets); and

o Those affected by or affecting the system, directly or indirectly (as in the case of

the environment).

Insightful, we mean that they are:

o Supported by hypotheses about the primary interactions underlying them and

the interactions within which these outcomes, in turn, produce more outcomes

(the system within and the system without); and

8 Id.9 Heijden, Kees. Scenarios: The Art of Strategic Conversation. Chichester, England: John Wiley & Sons, 1996. Print. See Chapter 2.





o Developed and examined in processes that are designed to improve, over time,

the accuracy and depth of meaning of the hypotheses.

Further, the legal structures put in place for these Key Ideas should enable Fertile Ground to

gather the data and information necessary to observe the identified outcomes and Fertile

Ground should ensure that funding exists to support the people and processes by which that

data and information can become useful knowledge and a basis for shared meaning,

assumptions, and beliefs.

Stakeholder Outcomes

Owners/operators of utility infrastructure

Several organizations currently own and operate the electricity infrastructure in Fertile Ground

and were very involved stakeholders in this process. To a greater or lesser extent, these

organizations initially questioned Key Idea 2 in particular, because defining monopoly utilityservice could have the consequence of limiting opportunities to invest in monopoly assets

under what are perceived to be well-understood practices in Fertile Ground. Over time,

however, the organizations began to perceive that the predictability of these historic practices

and their outcome in terms of assets’ income potential was in doubt. As this perception took

hold, the organizations shifted focus to the opportunities for their investors and employees

enabled by Key Ideas 1, 3 and 4. With a clear definition of monopoly utility services, in terms of

characteristics, capabilities and related assets, the market within which the organization could

nimbly and profitably serve customers becomes much bigger. Clarity lessens or removes many

of the risks and uncertainties that now surround any attempt by these organizations to operate

outside of an historical “understanding” of what the utility does. Rather than acting within theboundaries of what is expressly permitted or for which permission can be obtained, these

organizations saw that the blueprint would allow them to operate anywhere unless such

operation was expressly forbidden.

Current Customers of Utility Organizations

The individuals and organizations that use electricity and other forms of energy to do jobs that

they are trying to do were central to all of our work on this blueprint. Although we heard a

great variety of complaints about “how things are,” we came to understand many of them as

stemming from feelings of powerlessness. The first four Key Ideas all work to alleviate this

feeling through one means or another. This blueprint provides all energy end users more

authority over and responsibility for their energy services, whether exercised individually

through energy service contracts for the monopoly utility services and none to many additional

energy service providers or exercised collectively through a community.

Pricing the monopoly utility services according to the characteristics and capabilities required,

rather than according to the end users’ identity (e.g. a household) or characteristics (has on-site





electricity generation or storage), will also address some of the concerns about equity that we

heard. In addition, limiting as much as possible the scope of monopoly utility services that use

shared infrastructure will minimize any unavoidable cross-subsidies that may arise from the

methods used to allocate costs. And, while electricity is only one of the systems in which

inequity based in unequal financial or other resources can manifest, it is our hypothesis that the

clarity and focus on outcomes provided in the blueprint will help policymakers identify and

implement more effective mitigations to the inequity than are possible today.

Energy Service Providers and the value chain of which they are a part (suppliers, employees

etc.)

The energy service providers that engaged with us found much to like in the blueprint. In

particular, the following concepts were popular with this group:

Solid legal footing for long-term energy services, whether provided to an individual or

an organization or a community. Clarity and predictability regarding the interface with monopoly utility services and

infrastructure and the characteristics, capabilities and price (over time) of monopoly

utility services.

The ability to sell everything except monopoly utility services to any segment of the

market.

The focus on and processes for developing, gathering and learning from outcomes

because it will give energy service providers important insight into what is important to

the decision-makers – direct or indirect – on desirable energy services.

Key Ideas 1 and 4 should increase opportunities for local employment because many of the

energy services involved will require local people for delivery.

Some in the value chain worried about the loss of utilities as a focal point for new technology

experimentation and adoption. It may make sense as Fertile Ground implements this blueprint

to provide some state financial support for a technology demonstration and testing center and

a non-governmental entity capable of supporting technologies through the stages from

application of academic discovery to commercialization.

Independent power producers

We engaged several companies that design, build, operate, and/or market the electricity from

generating facilities not part of current utility infrastructure. These organizations were

primarily in observation mode because the blueprint leaves for implementation the critical

question whether the injection of electricity into a delivery system from a generating facility is a

monopoly utility service and, thus, whether the individuals and businesses of Fertile Ground

can access a monopoly utility service to deliver such injected electricity. While we think it





possible and even probable that Fertile Ground’s regulatory agency will make that

determination at some time in the relatively near future, this blueprint was not the place to

develop and apply the criteria that would support such a decision. Nonetheless, the

independent power producers generally found valuable the same aspects of this blueprint that

the energy service providers supported.

Regulatory Agencies

Because Fertile Ground does not yet have a regulatory body, we solicited input from several

such bodies in other states. In general, these agencies appreciated the clarity that the blueprint

provides to the roles and responsibilities of electricity regulation. Some noted that the

responsibilities their governing statutes imposed upon them had become increasingly difficult

to fulfill as the electricity system has evolved. Attempting to “assure” an outcome of a vaguely-

defined safe and adequate utility service at just and reasonable rates was creating ever longer

and more numerous regulatory proceedings with little expectation of progress toward a

standard about which there is little shared understanding. Most appreciated Key Idea 5’s focuson outcomes and noted that state financial and organizational support of this would be crucial.

Other affected (market) stakeholders

We are all stakeholders. The electricity system is inseparable from systems that cover all of

Fertile Ground and the entire planet. In space-time, its consequences affect everyone past,

present and future. We strove to keep this perspective as we developed the blueprint. Among

the effects of our effort to keep this in mind is the deliberate exclusion of the word “optimal”

anywhere in this blueprint. We were persuaded by this passage that to seek “optimality” in the

electricity system would be a fool’s errand:

The pursuit of a sustainable optimal state is an illusion, a product of the way we

look at and model the world. Little wonder that problems arise and when they

have, we typically attempt to exert even greater control over the system. In

most cases this exacerbates the problem or leaves us with a solution that comes

with too high a cost to be sustained. In the real world, regions and businesses

are interlinked systems of people and nature driven and dominated by the

manner in which they respond to and interact with each other. They are

complex systems, continually adapting to change.10

We close with one more contribution from Peter Drucker: Plans are only good intentions

unless they immediately degenerate into hard work. We look forward to the hard work ahead

as Fertile Ground launches this blueprint on a sea of possibility and ever-changing conditions

with the intent of navigating toward “better.”

10 Walker, B. H., and David Salt. Resilience Thinking Sustaining Ecosystems and People in a Changing World .

Washington, DC: Island, 2006. Print. See Chapter 1.




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graceful systems submission for the 51st state

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