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Worker installs solar panels on California homes. Distributed energy like rooftop solar has contributed to utility stagnation. Photo: Will Lester/Inland Valley Daily Bulletin via Getty Images

Last week, activist firm Elliott Management Corporation mandated that California-based Sempra Energy return to basics and shutter future growth activities. With U.S. electricity demand continuing to flatline, "a return to basics" will juice near-term prices, but risks Sempra’s long-term stability.

Why it matters: Elliott's strategy, like those of other activist investors, intensifies the structural pressure on once-stable utilities. As declining utility demand, stiffer competition and increased consumer interest in distributed services challenge legacy service models, utilities are struggling in part because some owners are playing a profit-squeezing short-game at the expense of long-term planning.

The challenges:

  • In recent years, fast-moving distributed providers have started delivering smart-home services such as rooftop and community solar, allowing consumers to circumvent traditional utilities.
  • Consumers increasingly expect more choice, transparency, digital engagement and sustainable services — areas in which utilities typically underperform.
  • Telecom, security and technology providers circling energy services as an entry-point to bourgeoning smart-home markets pose another competitive threat.

The impact: In the face of fresh competition and shifting market requirements, utilities are largely retreating, not repositioning. Despite large cash volumes, utilities have not invested in the technology, systems and talent to seize emerging opportunities. That’s partly a failure of leadership, but it's also a failure of capital structures that value dividend returns over long-term planning.

The bottom line: Like the landline-to-mobile-phone transition, the electrons-to-smart-home transition will create winners and losers. Elliott’s back-to-basics strategy for Sempra is just one example of how short-term thinking risks impeding long-term viability in rapidly changing markets.

Steve McBee is the former CEO of NRG Home.

Go deeper

Rep. Rice demands Cuomo resign after 3rd woman accuses him of misconduct

New York Gov. Andrew Cuomo during a February news conference in New York City. Photo: Seth Wenig/POOL/AFP via Getty Images

Rep. Kathleen Rice (D-N.Y.) on Monday evening called for New York Gov. Andrew Cuomo (D) to resign, after a third woman accused him of inappropriate behavior.

Driving the news: Anna Ruch, a former member of the Obama administration and the 2020 Biden campaign, told the New York Times Monday that Cuomo asked to kiss her at a New York City wedding reception in September 2019.

Scoop: Inside the GOP's plan to retake the House

House Minority Leader Kevin McCarthy. Photo: Elijah Nouvelage/Bloomberg via Getty Images

House Republicans will reclaim their majority in 2022 by offering candidates who are women, minorities or veterans, a memo obtained by Axios says.

Why it matters: The document, drafted by a super PAC blessed by House Minority Leader Kevin McCarthy, names top Democrats to target — Jared Golden of Maine, Matt Cartwright of Pennsylvania and Ron Kind of Wisconsin — and the type of Republican candidates to beat them.

3 hours ago - Politics & Policy

Scoop: Trump talked out of early Ohio endorsement

Jane Timken at a 2017 Trump rally. Photo: Kyle Mazza/NurPhoto via Getty Images

Donald Trump had to be talked out of making an early endorsement in Ohio's 2022 U.S. Senate race, a sign of his eagerness to reengage politically, people familiar with the conversations tell Axios.

What we're hearing: The former president discussed endorsing former state GOP chair Jane Timken last week during a meeting at Mar-a-Lago with RNC Chairwoman Ronna McDaniel, but top advisers — including Donald Trump Jr. — urged him to wait.