Dive Brief:

• Seven Illinois utilities and Advanced Energy Economy (AEE) on Thursday asked state regulators to finalize accounting rules for cloud-based computing solutions.
• Current rules disincentivize some investments and have not kept pace with changes to technology, the utilities say. Those rules allow utilities to earn a rate of return on computing systems developed on-premises, but treat cloud-based systems as operating expenses.
• The Illinois Commerce Commission launched a rulemaking in December 2017 to consider the changes, citing a need to "level the playing field" between on-premise and cloud-based computing systems at a time when utilities focused on modernization are investing billions in new systems.

Dive Insight:

Changes to cost recovery of cloud-based computing solutions could be a boon to companies providing a range of services, from demand management to grid monitoring.

Investor-owned utilities spent $32 billion on grid modernization in 2016, according to the Edison Foundation Institute for Electric Innovation, and the number of advanced meters installed around the country could reach 90 million by the end of 2020. To manage the resulting sea of data, utilities are turning to outside vendors.

Changes to accounting rules would make public utilities "indifferent" to implementing cloud-based solutions versus building more mainframe solutions, the utilities and AEE told regulators in the May 9 letter.

The group added that whether a computing solution is cloud-based or on-premises, nothing changes basic ratemaking principles: It still must be a "prudent investment and its cost reasonable in amount to be recovered in rates."

"Cloud-based computing solutions provide benefits to customers and can serve the same functions as on-premises computing solutions," the group said in their letter. The proposed change "makes the accounting rules technology-agnostic and removes the disincentive to invest in cloud-based systems as opposed to on-premises systems."

The ICC acknowledged the issue in its December 2017 initiating order, when it said regulatory accounting rules "have not kept pace with technological innovation" and "[t]he disparity between on-premise and cloud computing systems create a disincentive for utilities to invest in new technology."

Along with AEE, utilities urging the commission to adopt the final rule include Commonwealth Edison, Ameren Illinois, Peoples Gas Light & Coke and others.