Utilities to Take on "Traffic Cop" Role Under Cuomo's Energy Restructuring Plan

As New York embarks on a transformative overhaul of its electric utility system, which is aimed at increasing reliability and spurring investment in renewable energy, Germany can serve as a cautionary model. The country significantly boosted its solar and wind power in recent years, and two of its leading utility companies have taken a serious hit.

“If you look at the stock of RWE and E.ON, those are the Con Edisons of Germany, their value is pretty much cut in half. So it’s a concern,” Gil Quiniones, a top state energy official, said on Thursday. “But I think the way we’re envisioning the transformation here in New York will be different than how Germany went about it.”

Quiniones, who heads the New York Power Authority, said that in carrying out the state’s new proposal—the so-called “Reforming Energy Vision” initiative that Gov. Andrew Cuomo announced last month—officials would be starting from scratch and would take steps to mitigate such financial risks to utility companies. Moreover, utilities would be expected to take on the role of “traffic cops,” and would be compensated for their work, said Quiniones, who spoke at City & State’s “State of New York Infrastructure” conference on Thursday.

The so-called REV plan is aimed at increasing system reliability and promoting clean energy. To do this, the plan envisions greater investment in energy efficiency, energy storage, demand management and, perhaps most importantly, distributed energy generation.

“Right now the utilities are a one-way system. Big power plants transmit elecricity through transmission lines and then through distribution lines like Con Edison here in New York City,” Quiniones said. “The future is where customers—homes, small businesses, large commercial industrial customers—are able to generate their own electricity through solar, through combined heat and power.”

The REV initiative could largely transform the state’s regulatory and market structure. It builds on the governor’s Green Bank, which also seeks market-driven investment in renewable energy instead of the current offering of subsidies and incentives. Quiniones noted that Con Edison and other utilities had already sold off their power plants in the last round of deregulation, and that this is a natural next step, especially in an industry already in transition.  

“We have started with the fact that they are really just delivery utilities and they get paid for delivering the utility,” Quiniones said. “If we add this role of being the traffic cop, they should be appropriately compensated by the various distributed resource providers that deliver electricity. We just need to set up the right compensation scheme so utilities like Con Ed are really compensated, are able to invest and maintain the reliability that we need here in New York City.”

State officials have plenty to figure out about how to structure the new electricity market. They will have to develop interconnection rules, communications standards and technical rules for connecting to the grid. Parts of the existing system will have to be modernized with smart grid technology, including an effort now underway at NYPA. And officials would also have to determine how to charge customers and how utilities would recover costs.

If the REV initiative is a success, it would not be the first time New York was at the forefront of energy innovation.

“If you recall, the first power plant was built by Thomas Edison a few blocks from here at Pearl Street," Quiniones said. "And the first long-distance transmission of electricity occurred from Niagara Falls to Buffalo by Nikola Tesla, and so it is the right place for us to reclaim our place as the center and the leader of innovation in the power industry.”