Regulatory Influence on Cloud Computing for Utilities 

Today, the modern enterprise focuses on Information Technology and data solutions in every industry. Taking advantage of the scalability, reliability, flexibility, and efficient capacity usage, many industries have shifted from traditional on-prem solutions to cloud computing. Cloud computing has allowed businesses to meet their IT needs cost-effectively, with minimal internal effort, enabling them to devote more resources to core business operations and activities. 

While many industries have embraced the cloud effectively, the regulated utility industry in California has been slow in cloud adoption due to the traditional utility regulations, including the California Public Utilities Commission (CPUC). Many privately owned public utilities, including the Pacific Gas & Electric (PG&E), Southern California Edison (SCE), etc., are regulated by CPUC in California. 

According to a Zpryme survey, 71% of utilities indicated their effective use of cloud applications in 2019, up from 45% in 2016. This has benefited utilities in several ways. However, traditional regulations in California do have an effect on cloud adoption for utilities. 

In this article, we will talk about the effects of regulations on cloud adoption for utilities in California. But first, let’s talk about the importance of cloud computing for utilities. 

The Importance of Cloud Computing for the Utility Industry

In today’s world, where cloud computing is making a revolution by providing cost-effective, enhanced computing power and storage space, understanding the importance of cloud computing for the utility industry is essential. Not to forget the flexibility and scalability that comes with cloud adoption. 

As the utilities in California go through new challenges, it has become necessary for utilities to adopt new cutting-edge technologies. Some of the biggest challenges facing the utility industry include escalating financial impact, increasing complexity, balancing supply and demand, emerging customer preferences, and outdated infrastructure.

To overcome these challenges, utilities have to adopt technologies like the Internet of Things (IoT) and blockchain technologies, etc. All of these will depend on high-performing cloud computing services, making cloud adoption more important for utilities than ever before. 

What Benefits will Cloud Computing Bring for Utilities?

Among the many benefits of cloud computing for utilities, we will highlight only four in this section. Let’s take a closer look at them.

Reduced Costs

Cloud adoption can reduce the cost spent on owning, managing, and maintaining large data centers. As the cloud enables automation, it can help utility companies to automate business operations, resulting in fewer IT staff and reduced costs.

Flexibility & Scalability

Depending on the need to scale up or down, cloud computing is flexible and scalable enough to embrace any change in the community. So, there’s no need to upgrade the data center due to a shortage of space or server aging. 

Data-driven Approach & Personalization

Having to analyze vast amounts of data means knowing about your users as much as possible and segmenting them to increase customer engagement. This is difficult to achieve via traditional means. In this regard, cloud computing is essential to achieve a data-driven approach and personalizations. 

Real-time Reporting

Utilities can enhance data analytics through real-time monitoring and reporting, which can be made possible through cloud computing services. Also, real-time reporting will, in turn, enhance customer experience and the use of technology.

How Regulations Affect Cloud Adoption for Utilities?  

Despite the enormous advantages of cloud computing for utilities, many are still reluctant to adopt it due to the traditional regulations in California. While most enterprises are achieving benefits of cloud computing in their operational performance, traditional regulations made by CPUC prohibit utilities to receive a return on their investment when they choose a cloud solution over on-prem IT infrastructure, misaligning utilities’ interest in cloud computing. 

79% of investor-owned utilities believe the disparity in regulatory treatment is the reason for delaying the adoption of cloud computing, a survey by Cloud for utilities cited by AEE and EEI paper.

One such regulation is the Cost-of-Service regulation, which encourages utilities for infrastructure investments by enabling them to earn a reasonable ROI on their capital investment. Ideally, this traditional regulation favors capital investment over operational disbursement wherever a need is to be met, either by operational expenditures or long-term capital investment.

What Complicates Utility Transition from On-prem Systems to Cloud or Hybrid Solutions?

The difference between the rate of return on long-term capital investments and short-time operations expenditures is what complicates utility efforts to transition toward a cloud-based or hybrid solution. While every state regulates utilities in different ways, the rates charged to customers by utilities are set in regulatory proceedings of different regulatory bodies, including the California Public Utilities Commission (CPUC).

The rates of return in cloud computing differ from those in on-premise IT systems. The reason is that cloud-associated costs fall under the category of short-term expenditure. Since they are recurring, they allow customers to pay for a short period of time. On the other hand, on-premise IT infrastructure is considered long-term assets, including hardware and multi-layers software licenses. Therefore, they require higher costs which, however, can be recovered over time, like any other long-term utility assets. 

While the investment in cloud computing is considered short-term, once a utility decides to invest in it, it becomes difficult to return to on-prem systems. In practice, cloud computing proves to be a long-term investment, and utilities demand the same capital investment for it that is given to on-prem infrastructures.

Therefore, many resolutions are in process to encourage state regulators to consider both cloud computing and on-prem IT infrastructure similar in terms of capital investment and should be given similar regulatory accounting treatment.

How can Utilities Adopt Cloud Computing Effectively?

Effective cloud adoption requires proactive strategies and services of a robust cloud service provider. For successful cloud adoption, it is necessary to assess the challenges and opportunities for cloud deployment. A cloud service provider like Awsome LLC can help you accelerate your cloud journey. 

We provide cloud services on cloud platforms, including AWS and Azure. Our cloud consultants will help you through the planning, designing, and implementation phase of your cloud. 

Put your trust in Awsome LLC cloud solutions for your next cloud venture. Get in touch with one of our cloud consultants today and enhance your journey with our cloud platform. 

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