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Draft REV Market Design Report Does Not Envision N.Y. Utilities Buying Distributed Energy For Default Service

July 16, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

A draft report on the market design for New York Reforming the Energy Vision does not envision that utilities will procure energy from distributed resources for resale to default service customers.

The draft report published for public comment states, "While the electric utility hosting the DSP [distribution system platform provider] function will continue in its role as a retail energy service provider and provider of last resort (POLR) for all utility customers, the specific DSP functions as envisioned in this report do not include the purchase of energy for resell from DER [distributed energy resources] providers,"

"[T]he initial products transacted via the DSP market are proposed as those electricity services that DER could provide as better or more effective alternatives to traditional infrastructure investments and operational expenses to support the reliable operations of the distribution system. Thus, recommended initial products priced and transacted within the DSP market could include distribution capacity relief or deferral, voltage management, reduced line losses, and other products providing distribution system reliability and resiliency benefits," the draft states

"Importantly, at the outset of the DSP market, energy is not considered as a DSP market product. As stipulated in the Track One Order, a transaction that could be considered a sale for resale remains in the jurisdiction of FERC and the NYISO wholesale market. Thus, the benchmark for the hourly price of energy is still priced in the wholesale spot market at the locational based marginal pricing (LBMP) node regardless of whether it is produced above or below the transmission-distribution interface. Once the foundation of the DSP market is established, and jurisdictional issues resolved, the potential for developing an energy market at the distribution level, including the potential to incorporate elements of peer-to-peer or transactive energy can be further explored. The development of a distribution energy market would mean that active market participants could buy and sell energy among each other at the distribution level in situations that potentially bypass the transmission system. However, as noted by the PSC in the Track One Order, this could constitute a sale for resale and may require regulatory changes," the draft states

"The recommended DSP and its functions, including distribution system planning, and grid and market operations, are distinct from providing energy to end-use customers, which is an LSE function, and also distinct from many traditional utility functions (e.g., substation and distribution construction and maintenance). The report recommends that a foundational responsibility of the DSP is to proactively manage and optimize operations, planning and DER markets at the distribution level to achieve a safe, reliable distribution system. In that capacity, a significant portion of its role at the distribution level is analogous to the role that the NYISO plays at the wholesale level. Again, that is not to say that the distribution utility in which the DSP group resides cannot also provide retail service to end-use customers, but that function is not directly related to the functions of the DSP," the draft states

"[T]he overarching responsibility of the DSP during Stage 1 should be to carry out the planning, operations and market functions necessary to acquire cost effective DER to meet the distribution utility's short and long term capacity and operational needs," the draft states

Click here for draft report

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