Utilities’ Role in Question in “REV” Energy Overhaul
A new initiative to overhaul New York’s energy market will be built on an ambitious expansion of distributed energy production, including microgrids, smaller natural gas facilities and renewable resources like solar and wind, and a shift away from large, traditional power plants.
But among the questions that have yet to be worked out is how much the restructured market will rely on utility companies—and how to ensure that the built-in knowledge and expertise of companies like Con Edison and National Grid do not give rise to a monopolistic system that prevents others from developing their own distributed power sources.
The Public Service Commission (PSC), which is overseeing the planning process for the Cuomo administration’s so-called Reforming Energy Initiative, issued a key report Friday that tentatively endorses an active role for utilities, including in the development and ownership of distributed energy resources.
“I’d say that was one of the most controversial issues and will continue to be one of the most controversial issues in the staff’s straw proposal,” Gregg Sayre, a commissioner with the PSC, said Wednesday at City & State’s “On Energy” panel discussion, co-sponsored by Entergy, Con Edison, National Grid, West Point Transmission and Anbaric Transmission. “On the pro side, clearly the utility has the relationship with the customer and understands where resources are needed and may have economies of scale in delivering these customer services that competitors wouldn’t have. On the con side, those very things give the utilities a competitive advantage that some believe is unfair.”
A closely intertwined question is who will be tasked with coordinating the new distributed energy system. In line with earlier suggestions that utilities serve as the “traffic cops” of the new system, the PSC report tentatively designates them to take on that task as well.
However, the report also outlines potential monopoly abuses if the utilities run both the new platform and their own distributed energy resources. The PSC warned of several problems that could arise in such a scenario, including a reluctance by the utilities to provide system or customer data to potential competitors who want to build their own distributed energy resources and the potential imposition of anti-competitive barriers, such as “burdensome interconnection requirements and outmoded tariffs.”
"Where a utility has a stake in (distributed energy resources) and also owns the distribution system and operates (distributed system platform) markets, the utility may have incentives to favor its own facilities," the report concludes.
Yet the report does not rule out utility ownership of distributed energy resources, especially since experienced companies can help the state expand more quickly. Instead, it lays out a set of criteria that must be met in an attempt to reduce anti-competitive behavior.
“On the two most controversial issues, the staff recommendation first is that the utility itself should be the operator of the distribution system platform,” Sayre said. “Second, on the issue of utility ownership of behind-the-meter DER, the staff recommends ownership only pursuant to a plan that’s reviewed and approved by the PSC as being in the public interest. But utility subsidiaries would have greater latitude to own behind-the-meter resources subject to some caps and other competitive protections.”
Sayre cited as an example a failed experiment in New York decades ago in which utility companies were allowed to repair the system. Main Street electricians and plumbers were found to be at a disadvantage, and the experiment was abandoned.
Utility companies are eager to have an involved role as REV moves forward. Robert Schimmenti, a vice president at Con Edison, touted the increasing number of customers the company has that are already using solar power as well as its combined heat and power capacity, which is forecast to grow from around 150 megawatts to 800 megawatts by 2030.
“I do think that with this REV process, we might see some very different projections as things start to settle in and we start to see where we can apply some of these new technologies, for the benefit of the grid and for the customers at large,” Schimmenti said during City & State's energy conference.
Christopher Cavanagh, National Grid’s principal program manager for customer strategy and environmental issues, said that he would like to see his company get more involved as the process unfolds and that it would offer more choices for customers.
“Obviously we have an opinion that there is a value to a utility having a role in that, particularly, both in what we call distributed generation and energy storage, especially since we’re a gas company as well,” Cavanagh said. “That’s not the current paradigm, but it’s something that’s part of the discussion.”
Sayre noted that although the PSC had made its initial recommendation, it is “most definitely not the final word of the commission.”
“The main takeaway from Aug. 22 staff proposal is we can do it,” he said. “The technology exists to reform the distribution network, and if we do it carefully, collaboratively and incrementally, we can gain some large ratepayer benefits compared to business as usual.”
A copy of the Public Service Commission report is posted below:
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