Utilities Owning Departments Of Transport Is Not A Crazy Idea
Source: ETS on August 9, 2018
Last week, I shared thoughts about how, having lost the battle for the smart home, utilities can capture the opportunities provided by smart cities and own the signals that customers get about what should matter. I got a few emails asking what that looks like. While this is part of the strategy/futurecasting service we’ll be providing, it makes sense to peel back the curtain a little and give a peek into how we think about these things. This was also spurred by a conversation with a fellow ‘Future Utility’ slack channel buddy of mine, Ken-Ichi Hino.
As mentioned last week, transport systems are part of the complex network of utilities that ensure the movement of energy, people and resources within every city. The most desirable cities have just the correct mix of private and public options for (mostly) efficient movement of people and products between points A & B at optimal costs. Public transportation provided more than 10 billion unlinked passenger trips for more than 50 billion passenger miles for the ninth consecutive year in 2014 (the most recent data provided by the American Public Transportation Authority). Utilities that are strategically focused on winning customers’ hearts by expanding the services they provide could look to transportation systems as a way to build deeper connections with the customer. Regardless of how bad any individual system is in a city, public transportation is often at the core of decisions about where to live. Public transportation systems provide the most salient signals to residents of a city, rich and poor alike.
Different populations have different needs of their city’s transport systems. Suburban families might come into the city for weekend fun or weekday work using public transportation. City dwellers choosing not to buy cars would rely solely on public transportation to navigate their cities. Residents commuting to second or third jobs are absolutely dependent on timely public transportation system. All these customers pay to ride public transport systems. For a utility looking to embed itself in the lives of a customer, even tap into customer engagement, taking over the Department of Transportation (DoT) is not a crazy idea. It is a remarkable opportunity to advance customer engagement and create a new revenue model. Considering the current atmosphere of reduced city, state, and local government capacity to fund these systems adequately, there is probably more willingness at this time to divest of these systems than at any other time.
Taking over a DoT or regional transportation network would fit in line with the regulated utility business model of collecting rent on assets managed, and Cost of Service Regulation (COSR). Utilizing DoT vehicles as assets for the grid increases the number of assets collecting rent, possibly reducing cost of service for public transport. The operations and management of the people, the fleet of cars/vehicles, and the building infrastructure for effectively running a transport system match the current utility structure of people, fleet of assets, and infrastructure required to generate, transmit, and deliver electricity. Penn Station in New York, South Station in Boston, Union Stations in DC/LA/Chicago/Denver are microgrids waiting to be upgraded and form the heart and soul of some of these cities with tens of thousands of commuters daily. While there is a distributed energy element to managing the assets (moving trains, etc) the utility industry, with our ability to maintain 99% uptime, has mastered the art of charging rent on the usage of those assets and keeping them going.
Another advantage is the ability to obtain even more holistic data on how the city runs and how people move about. Since the 1970’s, public transportation ridership has shown a steady increase in growth. Imagine owning the platform that knows where people are and aren’t. Imagine truly understanding the energy usage reductions that will occur as a result of reduced occupancy due to the ebbs and flows of people from downtown to the suburb after work, or the opposite flow of people, and the socioeconomic consequences, in cities like Toronto or Sydney. Imagine combining these ‘big data’ sets with the current smart meter and distribution system data that the utility has with selling anonymized data to private transportation companies or real estate firms. Most utilities complain about the dearth of true business models for the energy usage data the industry has, but we can get creative by looking beyond just the current silos of data.