10/14/14 : David Caughran

New York Seeks to Overhaul Energy Industry and Regulatory Practices through New “REV” Initiative

New York City is a leader in energy efficiency policy.

Last month at our Energy 2030: New York campaign stop in New York City, we heard local and state government, business and utility leaders tout the benefits of increased energy productivity and its ability to drive economic gains and create jobs. Keynote remarks from former Governor George Pataki (R) highlighted the leadership role New York State has taken in driving investment in energy efficiency, modernizing the electric grid and educating all actors on energy consumption.

New York is poised to maintain that leadership role and build off its strong record in the space with Governor Cuomo (D) and the New York Public Service Commission’s (PSC) announcement of their Reforming the Energy Vision initiative, or REV for short, slated to roll out in early 2015. Billed as a sort of “Restructuring 2.0,” the proposed plan seeks to give new technologies the chance to compete with traditional modes of power generation and utilities that produce that power. Richard Kauffman, the state’s first energy czar, noted in a meeting this past summer that “business as usual will cost the state significantly more than adapting to new technologies.”

The report identifies six core policy goals to result from an overhaul of the regulation of the state’s utilities:

  • Enhanced customer knowledge and providing tools that support effective management of their total energy bill
  • Market animation and leverage of ratepayer contributions
  • System-wide efficiency
  • Fuel and resource diversity
  • System reliability and resiliency
  • Carbon emission reduction

The New York Department of Public Service (DPS), acting in its capacity as a an advisor to the PSC, issued a 66-page report released last April noting that REV “will lead to regulatory changes that promote more efficient use of energy, deeper penetration of renewable energy resources such as wind and solar, wider deployment of ‘distributed’ energy resources, such as micro grids, on-site power supplies and storage.” These regulatory changes will shake up the status quo for power generation and distribution by recognizing and encouraging evolution of the electric grid from its traditional one-way nature (from generation to transmission and distribution to the electricity-using customer) to a multidirectional structure where customers are engaged as active energy managers, including as resources for peak reduction and efficiency, energy storage, and distributed generation. One key outcome of the transformation of New York’s electric industry, the plan notes, “is to address the Commission’s stated objective to make energy efficiency and other distributed resources a primary tool in the planning and operation of an interconnected modernized power grid.”

The DPS notes in the report that the plan is not intended to replace central generation, but rather to complement it, providing new business opportunities for power generators and other energy service providers. In the plan, distribution utilities play a pivotal role as an interface between customers and the bulk power system. The plan envisions the utility as a Distributed System Platform Provider (DSPP) which will plan and redesign the local grid in order to integrate more distributed energy resources and demand response. Of particular note, the Plan states that “the DSPP will integrate energy efficiency into its system planning, targeting efficiency where it will produce maximum system value, and thus optimizing the economic value of energy efficiency expenditures for all customers.”

Among other issues, the plan focuses on engaging consumers and ensuring access to data through products, information, and enabling technologies. Inclusive in this notion is an information exchange between energy service companies (ESCOs) and customers, increasing customer awareness and engaging them in their energy options.

The REV promulgation process is moving forward in two tracks, allowing for public comments and engagement in both. Track 1, with its comment period wrapping up this month, is focused on the role of distribution utilities in enabling market-based deployment of distributed energy resources. Track 2 will examine changes in current regulatory, tariff, and market designs and incentive structures to better align utility interests with achieving the Commission’s policy objectives. The comment period for track 2 will close on March 20, 2015.

While it is unclear when a finalized plan will begin to see implementation, the PSC is moving quickly to develop the plan and regulations charged by Governor Cuomo. It is worth noting that as New York begins to plan for the EPA’s Clean Power Plan, REV could very well be used as a primary driver to meet the state’s compliance goals for carbon reduction. Other states, including Massachusetts and Hawaii, have also been mulling over a similar regulatory overhaul. With New York leading the way, we can expect other states to observe intently and consider following suit.