Edison International’s bid for new markets and revenue will be conducted from Irvine.
The Rosemead-based parent corporation—best known as the owner of Southern California Edison—has recently started or acquired several lines of business and tucked them into Edison Energy Group, which has its main office at University Research Park in Irvine and operates without many of the constraints faced by the highly regulated SCE.
Among the ventures are a water resources unit that will develop, construct and operate water treatment facilities at major customers’ locations to make more water available.
Edison Energy Group also is the umbrella for a consulting unit that started operations last month with the aim of crafting energy management strategies for major energy users around the nation.
The new unit also has a business that bids for transmission construction contracts around the nation and a solar panel installation operation that it acquired.
“It’s all about growth,” said Theodore Craver, chairman and chief executive of Edison International. “We’re not expecting significant growth on the energy usage front. The real growth is going to come from increasing the control and customization of energy use. That’s what these businesses are all about.”
Craver said that increases in the number of electric vehicles and the emergence of other technologies will boost demand for electricity, which sounds like a recipe for growth for SCE. He also noted, however, that the company expects the rise of solar power and the increasing ability of customers to generate their own electricity on-site will offset demand for utilities.
“Over time, these will likely cancel each other out, which is why we’re not forecasting much growth in electricity [demand] use from our customers,” he said. “So we have to go where the growth is.”
That, he said, was the driving force behind the creation of Edison Energy Group, which is headed by Ronald Litzinger, a former president of SCE who’s been named chairman of the newly formed group.
Solar
The new group’s So-Core solar rooftop installation venture has shown the most promise so far, getting a shout-out during Edison’s fourth-quarter earnings conference call in February, when Craver said the operation was busy on 250 projects in 16 states.
The company did not disclose how much revenue is flowing from those installations.
Edison Energy Group also has acquired a small independent energy consulting-engineering company, as well as other firms specializing in energy procurement and off-site renewable energy sourcing.
It will be some time before the Irvine-based operations account for significant contributions to parent Edison International, which had earnings of about $1.1 billion on $11.5 billion in revenue last year.
“To really get to a point where this impacts the corporate bottom line, they are going to have to take the solutions that they draw up for their clients and then either partner with or acquire companies that can provide the energy to carry out those solutions,” said Burrell Kilmer, managing director in the energy practice division of Chicago-based Navigant Consulting.
Other utilities across the nation have been providing similar energy consulting services for years and have learned that lesson, he added. So far, only one company has managed to put the pieces together and bring about big revenue gains: Chicago-based Exelon.
A recent annual survey by Utility Dive, a publication that provides news and analysis for electric utility executives, found that the “vast majority” of 300-plus executives who responded said their utility companies “are pursuing at least one new revenue stream beyond traditional generation and grid infrastructure.”
The greatest revenue-growth alternative: “energy management and efficiency services to customers,” with two-thirds of respondents saying their utilities are pursuing that strategy.
History
The push for Edison Energy Group isn’t the first time its parent or other utilities have ventured beyond their traditional regulated businesses. Edison formed several nonregulated businesses 20 years ago—most notably a power-generating subsidiary, Edison Mission Energy, which also was run from Irvine.
Edison Mission Energy rapidly acquired a portfolio of power-generating plants across the nation but ran into trouble in the Midwest as collapsing electricity prices hampered its ability to repay debt incurred while trying to renovate an aging crop of power plants. Edison Mission Energy filed for Chapter 11 bankruptcy protection in December 2012; its power plants were ultimately sold for $2.6 billion to NRG Energy Inc. of Houston.
The driving force behind the strategy has changed this time around, with changes in technology rather than regulatory requirements prompting companies to seek new lines of business.
“More and more large energy users increasingly are being bombarded by new startup companies that come in and say, ‘We have a terrific product here that can solve your energy problems,’” Craver said. “It’s becoming harder for large customers to sift through all these. And there isn’t anyone to advise on how to put all the pieces together for a customized solution at the best price. That’s what Edison Energy has set out to do.”
An earlier version of this story appeared in the Los Angeles Business Journal, a sister publication of the Orange County Business Journal.
