Navigant Research Blog

New York Details Its Vision for the Future of Energy

Brett Feldman — March 2, 2015

On February 26, the New York Public Service Commission (PSC) released its long-awaited Phase 1 Order on its Reforming the Energy Vision (REV) proceeding. The order lays out the PSC’s vision for how the future retail electricity market in the state should operate to maximize efficiency, improve reliability, engage customers, and create clean, affordable energy products and services. I can’t cover the entire 328-page order in one blog, but I’ll hit on the major decisions that affect the current utility world order.

The biggest variable in the REV equation was whether the PSC would require an independent party to perform the function of the distributed system platform (DSP), the central role of REV. According to the order, the DSP’s functions include load and network monitoring, enhanced fault detection/location, and automated voltage and volt-ampere reactive (VAR) control. That list covers a lot of what the utilities currently do, so taking those tasks away from them would have caused a major shift in the market landscape. However, the Phase 1 Order outright supports utilities acting as the DSP as a way to minimize the redundancy of actions. This singular decision vastly limits the potential impacts to the state and the utilities. Utilities must be breathing a sigh of relief.

Metering Alternatives

A second thorny issue was whether utilities should be able to own distributed energy resources (DER) or whether DER should be the sole domain of the competitive marketplace. Many market players wanted to prohibit the utilities from competing with them when they might have a natural advantage in acquiring customers. Under the order, utilities will be able to own DER if they run a solicitation to meet a system need and they are able to show that competitive alternatives are inadequate or more costly than a traditional infrastructure alternative. They will also be able to invest in storage to the extent it functions as part of the transmission and distribution (T&D) system. This seems like a reasonable compromise that should work for most parties.

The last major component is advanced metering infrastructure (AMI). Earlier communications from the PSC hardly mentioned metering at all, so it was unclear how the final rule would play out. In fact, the Phase 1 Order does not mandate AMI deployment by utilities. Rather, the PSC prefers the term “advanced metering functionality” (AMF)—meaning that other technologies, including ones provided by third parties, may be able to achieve the desired functionality cheaper and more efficiently than AMI. It states that “each utility Distributed System Integration Plan (DSIP) will need to include a plan for dealing with advanced metering needs; however, plans that involve third party investment may be preferred over sweeping ratepayer funded investments.” This indicates that utilities should consider AMI alternatives before choosing a path forward.

Ticking Clock

As far as next steps, the utilities’ integration plans must be filed by December 15, 2015, so the clock is ticking. Phase 2 of REV will consider reforming the PSC’s ratemaking process so that utilities do not have disincentives to further developing DER. Utility income is tied to bond funds now, but they should depend more on creating value for customers and achieving policy objectives. A draft proposal is expected by June.

It was interesting trying to guess which way the PSC would fall on these and other major issues. Now the real fun begins: implementing the vision.

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