Robots Come For Recycling Centers, Displacing Workers

By many estimates, robots might replace as many as 20-25% of current jobs by 2030, or a total of 40 million displacements. Industry after industry is being invaded as pink slips fly. ⁃ TN Editor

AMP Robotics, an artificial intelligence and robotics company that is automating the recycling industry, has rolled out new trash-picking robots for recycling centers that will replace countless low-skilled jobsreported The WSJ.

Single Stream Recyclers (SSR) in Sarasota, Florida, which processes 350 tons of waste per day, said last week that it would add eight AMP trash-picking robots to its already six. “Robots are the future of the recycling industry. Our investment with AMP is vital to our goal of creating the most efficient recycling operation possible, while producing the highest value commodities for resale,” said John Hansen co-owner of SSR.

AMP robots are more productive than humans, can sort garbage more accurately and faster, are set to eliminate most human sorter jobs at SSR’s Florida facility in the coming years.

“AMP’s robots are highly reliable and can consistently pick 70-80 items a minute as needed, twice as fast as humanly possible and with greater accuracy. This will help us lower cost, remove contamination, increase the purity of our commodity bales, divert waste from the landfill, and increase overall recycling rates,” said Eric Konik co-owner of SSR.

Hanson said, “It’s 95 degrees, they’re [human sorters] standing on a platform and sorting,” adding that AMP robots are “twice as fast and they don’t make mistakes.”

Kerry Sandford, a senior consultant with Resource Recycling Systems in Ann Arbor, Michigan, told the Journal that less than 5% of the residential recycling centers in North America are automated.

AMP robots are controlled by the AMP Neuron AI platform to perform tasks. AMP Neuron uses cameras and machine learning to identify different colors, textures, shapes, sizes, and patterns to identify material characteristics.

The robots have been trained to pick out water bottles, beer cans, milk jugs, food cartons, and other items—whether they are intact, dented, or crushed.

Using computer vision, sensors scan the trash on a conveyor belt to detect materials. The robot uses a suction cup that can throw the recyclables into the appropriate bin by using reverse air pressure to blow them out.

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simulation

Scientists Claim: We Are Living In A Computer Simulation

The Technocrat mind that is given over to such vain speculations should never be trusted to deliver scientific solutions that potentially affect all of society. It’s time for rational people to “just say no” to their schemes and dreams. ⁃ TN Editor

What if everything around us — the people, the stars overhead, the ground beneath our feet, even our bodies and minds — were an elaborate illusion? What if our world were simply a hyper-realistic simulation, with all of us merely characters in some kind of sophisticated video game?

This, of course, is a familiar concept from science fiction books and films, including the 1999 blockbuster movie “The Matrix.” But some physicists and philosophers say it’s possible that we really do live in a simulation — even if that means casting aside what we know (or think we know) about the universe and our place in it.

“If we are living in a simulation, then the cosmos that we are observing is just a tiny piece of the totality of physical existence,” Oxford philosopher Nick Bostrom said in a 2003 paper that jump-started the conversation about what has come to be known as the simulation hypothesis. “While the world we see is in some sense ‘real,’ it is not located at the fundamental level of reality.”

Simulating worlds and beings

Rizwan Virk, founder of the Massachusetts Institute of Technology’s PlayLabs program and author of “The Simulation Hypothesis,” is among those who take the simulation hypothesis seriously. He recalls playing a virtual reality game so realistic that he forgot that he was in an empty room with a headset on. That led him to wonder: Are we sure we aren’t embedded within a world created by beings more technologically savvy than ourselves?

That question makes sense to Rich Terrile, a computer scientist at NASA’s Jet Propulsion Laboratory in Pasadena, California. Detailed as they are, today’s best simulations don’t involve artificial minds, but Terrile thinks the ability to model sentient beings could soon be within our grasp. “We are within a generation of being those gods who create those universes,” he says.

Not everyone is convinced. During a 2016 debate at the American Museum of Natural History in New York City, Harvard University physicist Lisa Randall said the odds that the simulation hypothesis is correct are “effectively zero.” For starters, there’s no evidence that our world isn’t the array of stars and galaxies that it appears to be. And she wonders why advanced beings would bother to simulate Homo sapiens. “Why simulate us? I mean, there are so many things to be simulating,” she said. “I don’t know why this higher species would want to bother with us.”

Echoes of Genesis

Yet, there’s a familiar ring to the idea that there’s a simulator, or creator, who does care about us. Similarly, the idea of a superior being forging a simulated universe parallels the notion of a deity creating the world — for example, as described in the Book of Genesis.

Some thinkers, including Terrile, welcome the analogy to religion. If the simulation hypothesis is correct, he says, then “there’s a creator, an architect — someone who designed the world.” It’s an ancient idea recast in terms of “mathematics and science rather than just faith.”

But for other scholars, including University of Maryland physicist Sylvester James Gates, the similarity between the simulation hypothesis and religious belief should be taken as a warning that we’re off track. Science, as he said in a recent radio interview, has taken us “away from this idea that we are puppets” controlled by an unseen entity. The simulation hypothesis, he said, “starts to look like a religion,” with a programmer substituting for god.

Who, or what, is the godlike entity that may have created a simulated universe? One possibility, supporters of the simulation hypothesis say, is that it’s a race of advanced beings — space aliens. Even more mind-bending is the possibility is that it’s our own descendants — “our future selves,” as Terrile puts it. That is, humans living hundreds or thousands of years in the future might develop the ability to simulate not only a world like ours but the bodies and minds of the beings within it.

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San Francisco

San Francisco: Techies Who Transformed it, Hate It

Most techies who live there will never sing “I Left My Heart in San Francisco” because of the ugly side-effects of the tech transformation. The city of culture is now called depressing and boring. ⁃ TN Editor

It was a beautiful winter day in San Francisco, and Zoe was grooving to the soundtrack of the roller-skating musical Xanadu as she rode an e-scooter to work. The 29-year-old tech worker had just passed the Uber building when, without warning, a homeless man jumped into the bike lane with his dog, blocking her path.

She slammed on the brakes, flew four feet into the air and landed on the pavement, bleeding. “It was one of those hardening moments where I was like, ‘Even I am being affected,’” she recalled.

It should be noted that Zoe, who asked not to be identified by her real name because she was not authorized by her employer to speak to the press, is not the stereotypical tech bro who moves to San Francisco for a job and immediately starts complaining about the city’s dire homelessness crisis. She arrived in 2007 to study at San Francisco State University and had a career in the arts before attending a coding bootcamp and landing a job at a major tech company.

But the fall and other incidents, including getting mugged and having her phone stolen, have all contributed to her growing sense of insecurity in the area. She told the Guardian the tale of her scoot, interrupted, because she said it was a perfect example of her own – and perhaps the broader community of tech workers’ – increasingly hate-hate relationship with San Francisco. “This guy needed services to help him,” she said of the man who caused her to fall, “and we all suffer because of the issues that are not being addressed.”

A quarter of a century after the first dot-com boom, the battle for San Francisco’s soul is over and the tech industry has won. But what happens when the victors realize they don’t particularly like the spoils?

Tech workers are increasingly vocal about their discontent with the city they fought so hard to conquer. In May, the median market rent for a one-bedroom apartment reached an all-time high of $3,700 a month, according to the rental site Zumper. Meanwhile, the city saw a 17% increase in its homeless population between 2017 and 2019, and residents complain of visible drug usagefear of crime and dirty streets. Even Marc Benioff, CEO of Salesforce and a San Francisco native who has long urged comity between the techies and the city, has taken to calling his hometown a “train wreck”.

For Zoe, the newfound financial security from working in tech does not counterbalance a constant sense of being unsafe in the city. She now earns three to four times more than when she was a “starving artist”, but she says she is terrified to walk at night. She no longer rides scooters and says she feels “triggered” when she sees them around the city. She takes Ubers everywhere after dark and asks drivers to watch to make sure she gets inside her apartment building.

“Mark Zuckerberg lives nearby, but our corner is the main prostitution corner in the city,” she said of the Mission District apartment she shares with her boyfriend. “There’s condoms and syringes. It’s absolutely crazy with how much we pay for rent … It’s tough, because we work in tech, but we ask ourselves every day if we should move.”

It’s a striking contrast from just five years ago, when tech workers showed up in force at San Francisco City Hall to declare their love and respect for a city that was not exactly loving them back. “I am so proud to live in San Francisco and be a part of this community,” Google employees were instructed to say, as a preface to their remarks at a January 2014 hearing before the local transportation authority, according to a leaked company memo.

That hearing was one of several pivotal moments in recent San Francisco history when public officials could have used the city’s legislative or regulatory powers to force the tech industry to contribute more to public services, but chose not to. Such inflection points (which also include a controversial 2011 tax break for Twitter and a failed attempt at a “tech tax” in 2016) highlight the complicated relationship between the city government and an industry that has brought untold wealth and jobs, but has arguably failed to pay its fair share – while treating the city as a petri dish for disruptive innovations (think Uber, Airbnb and self-driving cars) by ignoring regulations.

The nominal issue in 2014 was the use of public bus stops by private charter shuttles (AKA “Google buses”) hired by tech companies to ferry employees the 45 miles south to their Silicon Valley headquarters. Activists wanted the double-decker buses banned from the streets and the companies fined for the illegal use of bus stops; the city chose to legalize the buses.

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AI

When AI Becomes Your Boss, You Become The Robot

AI sees humanity itself as a thing to be optimized, squeezing out all inefficiency. When unleashed as your boss, AI effectively turns you into a living robot to be controlled like a puppet on a string. Employees will never tolerate this indefinitely. ⁃ TN Editor

Critics have accused companies of using algorithms for managerial tasks, saying that automated systems can dehumanize and unfairly punish employees.

When Conor Sprouls, a customer service representative in the call center of insurance giant MetLife talks to a customer over the phone, he keeps one eye on the bottom-right corner of his screen. There, in a little blue box, A.I. tells him how he’s doing.

Talking too fast? The program flashes an icon of a speedometer, indicating that he should slow down.

Sound sleepy? The software displays an “energy cue,” with a picture of a coffee cup.

Not empathetic enough? A heart icon pops up.

For decades, people have fearfully imagined armies of hyper-efficient robots invading offices and factories, gobbling up jobs once done by humans. But in all of the worry about the potential of artificial intelligence to replace rank-and-file workers, we may have overlooked the possibility it will replace the bosses, too.

Sprouls and the other call center workers at his office in Warwick, Rhode Island, still have plenty of human supervisors. But the software on their screens — made by Cogito, an A.I. company in Boston — has become a kind of adjunct manager, always watching them. At the end of every call, Sprouls’ Cogito notifications are tallied and added to a statistics dashboard that his supervisor can view. If he hides the Cogito window by minimizing it, the program notifies his supervisor.

Cogito is one of several A.I. programs used in call centers and other workplaces. The goal, according to Joshua Feast, Cogito’s chief executive, is to make workers more effective by giving them real-time feedback.

“There is variability in human performance,” Feast said. “We can infer from the way people are speaking with each other whether things are going well or not.”

The goal of automation has always been efficiency, but in this new kind of workplace, A.I. sees humanity itself as the thing to be optimized. Amazon uses complex algorithms to track worker productivity in its fulfillment centers, and can automatically generate the paperwork to fire workers who don’t meet their targets, as The Verge uncovered this year. (Amazon has disputed that it fires workers without human input, saying that managers can intervene in the process.) IBM has used Watson, its A.I. platform, during employee reviews to predict future performance and claims it has a 96% accuracy rate.

Then there are the startups. Cogito, which works with large insurance companies like MetLife and Humana as well as financial and retail firms, says it has 20,000 users. Percolata, a Silicon Valley company that counts Uniqlo and 7-Eleven among its clients, uses in-store sensors to calculate a “true productivity” score for each worker, and rank workers from most to least productive.

Management by algorithm is not a new concept. In the early 20th century, Frederick Winslow Taylor revolutionized the manufacturing world with his “scientific management” theory, which tried to wring inefficiency out of factories by timing and measuring each aspect of a job. More recently, Uber, Lyft and other on-demand platforms have made billions of dollars by outsourcing conventional tasks of human resources — scheduling, payroll, performance reviews — to computers.

But using A.I. to manage workers in conventional, 9-to-5 jobs has been more controversial. Critics have accused companies of using algorithms for managerial tasks, saying that automated systems can dehumanize and unfairly punish employees. And while it’s clear why executives would want A.I. that can track everything their workers do, it’s less clear why workers would.“

It is surreal to think that any company could fire their own workers without any human involvement,” Marc Perrone, the president of United Food and Commercial Workers International Union, which represents food and retail workers, said in a statement about Amazon in April.

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Dishwashers: Robots Are Coming For Your Jobs

At least 500,000 people are employed as dishwashers in America, providing the lowest income workforce a place to survive. The Technocrat mind has no concern for the social or human impact of their inventions. ⁃ TN Editor
 

More than half a million people work as dishwashers in the United States today, according to the most recent data from the Department of Labor. But that’s not nearly enough hands to keep cookware clean in the 660,755 establishments counted by the 2018 NPD Group Restaurant Consensus.

Enter Dishcraft, a start-up building a robotic dishwasher for commercial kitchens.

CEO and founder Linda Pouliot said that to figure out what tech could really do to help, she and CTO Paul Birkmeyer went to restaurants of every kind, volunteering to wash their dishes. Restaurateurs and managers were more than welcoming.

The co-founders discovered that work in the dish room is the same as it has been for decades — repetitive, frantic and physically punishing.

In a typical setup, it’s easy for a dishwasher to break a dish, get burned or slip and fall on the wet floor, Birkmeyer noticed. And at work it’s tempting for dishwashers to just put a rubber band on the overhead sprayers to keep hot water running all day, so they won’t have to keep reaching and grasping. Those conditions drive attrition.

“We found the problem is universal. It didn’t matter if you were the French Laundry, a hospital cafeteria or Chili’s; everyone is having a hard time hiring dishwashers,” Pouliot said.

Some restaurants turn to disposables or just deal with the expense of constant recruiting. But Dishcraft wants to give them a more sustainable, less costly option.

Dishcraft’s system contains four main elements: a dish drop, robotic dishwasher, rolling racks and sanitizing machine.

At the dish drop, diners or bussers place dirty bowls and plates into a container that stacks and keeps track of them. When a rack is full, a light calls for a dish-room worker to roll it over to the robotic dishwasher, which loads them up automatically.

The washer picks up the plates and bowls with a magnet, cleans them with a rubber scraping wheel and rinses them with gray water (recycled water safe for cleaning purposes). Dishcraft’s robotic washer uses cameras, sensors and “dirt identification algorithms” to find and clean every last spot of food, even those that would be invisible to the naked eye.

Once they are washed, the machine stacks the plates and bowls into racks. A worker then places those racks in a sanitizer, standard equipment already used in commercial kitchens today. The sanitizer heats up the dishes, killing any remaining germs.

Restaurants love the system because “Robots do not call off, robots don’t take breaks, and robots do not take vacation,” Pouliot said.

While Dishcraft is focused on installations in high-volume cafeterias today, it has a way to help smaller restaurants, too.

According to Steve Anderson, founder of Baseline VC and early investor in Dishcraft, the company will swap clean cookware for dirty at select restaurants at the end of each meal or day, much like a laundry service.

Dishcraft systems work only with the plates and bowls that the company makes and sells today. They are hard to break, easy to transport and have metal pieces affixed to the bottom so they are easily grasped by the robotic dishwasher.

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florida

Florida First To Waive Driver Requirement For Self-Driving Autos

The world will be watching carefully as driverless and autonomous vehicles flood Florida roads for the first time in an entire state. Other states are right behind Florida, including Arizona and California. ⁃ TN Editor

Florida will allow autonomous vehicles (AVs) to operate on public roads without a human driver starting next month, under a new law signed by Gov. Ron DeSantis, R.

The bill, designed to facilitate more AV testing in the state, sets out a statutory framework for insurance and safety rules for the vehicles. It also exempts AV passengers from distracted driving rules that bar texting and phone use.

The bill was signed at the SunTrax facility, the southeast’s only high-speed AV testing facility, marking the completion of the center’s newest AV test track.

Florida has positioned itself as a leader for AV testing. The state has been allowing companies to test on some public roads and has authorized autonomous shuttles for use in Orlando.

The new law will put Florida on par with other states that have passed progressive laws to encourage automakers and tech startups to bring AV testing. Arizona, California, Utah and Pennsylvania have all pushed policy to make it easier for AVs to operate on public roads. Given the immense interest in AV technology, and the potential for driverless cars to remake mobility, it makes sense for states to try to put themselves on the front line.

Florida’s law also comes as the federal government has taken a hands-off approach to setting AV rules, leaving most decisions up to state and local governments. The Department of Transportation (DOT) passed rules in October that lift the assumption of a human driver, but did not move prescriptive policy for several safety issues.

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Self-Driving Cars Could Disrupt The Airline Industry

Technocrats who promised that their self-driving cars would solve major urban transportation problems never though the overall consequences of their actions. Airlines may be disrupted and studies have already shown that unban congestion is increasing, not decreasing. ⁃ TN Editor
 

As driverless cars become more capable and more common, they will change people’s travel habits not only around their own communities but across much larger distances. Our research has revealed just how much people’s travel preferences could shift, and found a new potential challenge to the airline industry.

Imagine someone who lives in Atlanta and needs to travel to Washington, D.C., for business. This is about a 10-hour drive. A flight takes about two hours, assuming no delays. Add to that the drive to the airport, checking in, the security line and waiting at the gate. Upon arrival in D.C., it may take another 30 minutes to pick up any checked bags and find a rental car—and even more time to drive to the specific destination. The average person would estimate a total travel time of four to five fours. Most people would choose to fly instead of driving themselves.

However, if they could have a fully driverless car take them there, the choice changes. Passengers could eat, drink, work and sleep during the 10-hour drive. They could leave whenever they want, and pack whatever they want—including liquids and pocketknives—with no searches or scans. When they get to D.C., they wouldn’t have to find a rental car and navigate to the actual place they’re going.

Which would you choose? Now imagine the self-driving car has a reclining seat with actual legroom, or even a bed. It’s more than a little tempting.

What do consumers say?

As experts in public opinion research, we know that the American public loves how quickly flights can cover large distances, but hates the security checks, long lines, delays, risk of losing baggage and overall hassle of the flying experience.

We also know that at the moment, most people are reluctant to ride in driverless vehicles—including school buses and even ambulances that could speed their treatment in an emergency. However, our data also shows that as people learn about the benefits of driverless cars, they become more accepting of the new technology. Over time, people will feel comfortable using autonomous cars (and ambulances), just like they adjusted to riding in the first automobiles.

A future with driverless cars means people will have more options to avoid driving on their own, beyond trains and buses.

In our study, we showed people trips of different lengths and asked them to choose whether they would rather drive themselves, take a flight or ride in a self-driving car. In general, the data indicated that people always preferred driverless vehicles over manual driving. Taking a driverless car got even more attractive if people were told that after flying, they would need a rental car in their destination city.

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Study: Ride Sharing Services Actually Increase Traffic Congestion

Ride sharing in Smart Cities is supposed to get people out of their cars to decrease congestion and pollution. Guess what? The exact opposite is happening: more pollution and more congestion. ⁃ TN Editor

Ride-share companies like Uber and Lyft promised they would supplement public transit and help ease traffic congestion.

But data collected by the city and now made public shows almost half of Chicago’s millions of monthly ride-share trips are taking place in just a few wealthy, crowded and already transit-rich areas.

A Tribune analysis of ride-share trips that occurred in March shows that more than four of every 10 passenger pickups happened in five of the city’s community areas — the Loop, the Near North Side, the Near West Side, Lakeview and West Town. Many of the drop-offs were concentrated in those areas, too.

A more granular look at ride pickups and drop-offs by Census tract, which can be areas of just a few blocks in a dense city like Chicago, shows that aside from airport trips, the most popular ride was a short one between the Loop and the Near North Side.

Nearly 1 in 5 trips in March occurred during rush hour, when trains and buses are most readily available.

Ride-sharing services have ushered in new convenience for residents trying to get around the city and represent another transportation option in lower-income communities. But the city’s data also reflects ride-sharing’s impact on city streets and balance sheets — Uber and Lyft drivers competing with taxi cabs in already congested neighborhoods and millions in dollars of lost revenue at the Chicago Transit Authority as people shun public transportation for a solo ride in the back seat of a stranger’s car.

The release of the data comes as new Chicago Mayor Lori Lightfoot considers new fees for ride-share trips. Chicago already imposes a 72-cent-per-trip fee, which helps fund the CTA.

Lightfoot has not specified what new fee the city could impose, though her transition document suggested exploring additional funding for transportation, including congestion pricing and a new Loop ride-share surcharge.

“We will continue to look at creative ways to address our challenges and to improve transportation access in Chicago, including as it relates to ridesharing,” a spokeswoman for Lightfoot said in an email.

Transportation experts who have reviewed the data say that it appears some people are choosing ride share over transit.

“We’re definitely seeing trips that could have been served by transit — people are taking Uber and Lyft instead,” said Elizabeth Irvin, transportation director for the Center for Neighborhood Technology, a sustainable development nonprofit.

An unintended consequence

Ride-sharing companies started operating in Chicago in 2011 and have expanded rapidly.

As of March, there were 66,562 active ride-share drivers who make 4 or more trips a month, compared with 15,078 in March 2015, according to the city’s Department of Business Affairs and Consumer Protection.

Uber and Lyft say that most Chicago drivers work part-time.

Although the number of cabs operating is limited to 6,999, there is no cap on ride-share vehicles.

Ride-share trips are far outstripping cab trips — with almost 10 million rides just in March, compared with 21 million taxi trips for all of 2018, according to the city. Taxi trips have dropped from 33 million trips in 2015, according to the city.

The services have changed the way people get around the city and, for some, have opened up an opportunity to earn extra income as a driver. But they may also have an unintended consequence: more traffic congestion.

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logistics

Update: Robots Will Take Millions Of Logistics Jobs

Logistics is the heartbeat of globalization’s supply chain, and Technocrats are determined to squeeze out every ounce of inefficiency in order to maximize profit. Humans viewed as comparable resources will lose every time. ⁃ TN Editor

The automation wave is expected to dramatically reshape the US economy in the 2020s. This disruption will impact the labor force and cause tremendous job losses. By 2030, automation could eliminate 20% to 25% of current jobs — equivalent to 40 million displaced workers, hitting the bottom 90% of Americans the hardest.

A new report from The Atlanta Journal-Constitution (AJC) shows how warehouse automation is starting to gain traction in Atlanta, the sixth largest warehousing space in the US.

The new, robot-powered warehouse in McDonough, Georgia, is currently undergoing pilot tests and will begin operations in June. Project Verte, a start-up trying to compete with Amazon, is responsible for automating the warehouse.

AJC said the Bulter robots are like “giant Roombas” that move between 6,000 refrigerator-size shelving units lined up in rows 85 deep within the warehouse. An employee summons the robot with a handheld device, it then uses a jack to lift the shelving unit and transports it to the human picker, who then grabs items out of the bins, scans it and hands it off to the packaging department.

While there are no other fully automated warehouses in Georgia, the closest one is in Jacksonville, Florida, which uses similar Roomba-like robots.

In the next 10.5 years, automation is set to eliminate millions of jobs in the warehouse and logistics space, as well as increase the demand for small to medium-sized automated warehouses.

“I think there’s definitely going to be fewer workers in warehouses, but warehouses are also experiencing labor shortages,” said Nancey Green Leigh, a Georgia Tech professor who studies robots and works with a National Science Foundation grant.

According to AJC, Atlanta has 683 million square feet of warehouse space, making it the sixth-most largest in the country.

Once fully operational, the McDonough warehouse will be able to ship 200,000 items per day, aided by a fleet of robots and 400 human pickers, packers, supervisors and technicians.

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sandbox

The Sandbox: Unregulated Playgrounds For Technocrat Experiments

The establishment of so-called “Regulatory Sandboxes” are sweeping the world. This article reveals their nature: “While there is no precise definition of a regulatory sandbox, it is, broadly speaking, a framework within which innovators can test business ideas and products under regulatory supervision, without fear of penalties.”

The logic of this definition would have justified the grotesque medical experiments performed by Nazi scientists during WWII – anything goes, experiment on live communities, no penalties for consequences. ⁃ TN Editor

The fundamental business principles and very fabric of American utility infrastructure have remained basically unchanged for more than a century.

The regulatory compact set forth for public utilities was driven by economic principles. Public utilities, beginning with railroads then the distribution of electricity and gas, were (and are) considered to be natural monopolies because the economies of scale are so great that it is more efficient for one firm to provide the service than for competitors to do so.

The absence of competition enables public utilities to exact monopoly profits by producing less and charging more — an economically inefficient outcome.

Regulation is a surrogate for competition and market forces. The role of public utilities regulators, therefore, is to ensure public utilities act in a prudent manner in lieu of competition and market forces. Rates are determined by regulators through what is known as the rate-of-return regulation with utilities earning a theoretically competitive return on their reasonable capital investments.

The requirement that prudency exists is a safeguard against the tendency of a monopoly to make excessive and unnecessary investments. Historically, the burden of proof for prudency has lied with the utility and is applied conservatively by public utilities commissions.

To earn a rate of return on capital investment, utilities must prove that benefits of an investment outweigh its costs. Although sensible in theory, this burden often results in an impassable test for utility investment in innovation — which is often inherently unproven.

In comparing data across industries, utilities rank the lowest in their spending in research and development (R&D) by orders of magnitude.

High technology companies often spend up to 25% of their revenue on R&D, whereas utilities typically spend less than 1% (usually much less). The average across all industries is roughly 5%. Until recently, utilities were not incentivized to change or innovate because steadily growing demand (load) justified large investments in traditional infrastructure that earned reliable annual returns.

Innovation challenges

But concern over climate change and the improving economics of renewables, electric vehicles, battery storage and the revolution of digital transformation are driving a step-change in utility business models. The confluence of these forces will require utilities and regulators to reevaluate traditional assumptions by recognizing and rewarding innovation.

We are at the precipice of multiple technological revolutions that will fundamentally change how essential services are provided and paid for.

If the driving principle behind public utility regulation is to ensure the prudency of capital investments, and operations and maintenance, in lieu of market forces, it stands to reason that in fundamental ways utilities and their unregulated corporate peers should behave similarly. In the case of investment in innovation, this is clearly not the case.

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