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NJ BPU Staff VPP Straw Proposal Envisions EDC-Administered "Bridge" Program For Two Years; Seeks Comment On Long-Term Utility VPP Ownership
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A straw proposal from New Jersey BPU Staff, to implement virtual power plants, envisions a two-phase implementation, with reliance on EDC-administered "bridge" programs in Phase 1
For VPPs generally, the straw proposal includes as a guiding principal, "Where competitive aggregation by
third parties is likely to deliver value at lower long-term cost, that approach should be
preferred; however, EDC-owned and/or EDC-operated solutions may be warranted as a
use case to address localized capacity needs."
Concerning the Phase 2 open-access design described below, the straw proposal would establish third-party Aggregator participation on
non-discriminatory terms as the default structure for the long-term VPP market.
However, the straw proposal states that, "a purely voluntary, market-driven model may not reliably deliver resources to the
specific locations where they provide the greatest grid value."
"Because participation depends on
where customers and Aggregators choose to enroll, DER deployment may not materialize on the
constrained circuits where it is most needed," the straw proposal states
The straw proposal thus seeks comment on utility VPP ownership
"To ensure the long-term VPP Program advances in
the most cost-effective manner for ratepayers, Staff seeks comment on whether EDC ownership
or EDC of [sic] third-party DER assets (e.g., battery storage) should be available as a bounded
exception to the open-access default, limited to defined circumstances where the open market is
unlikely to meet an identified distribution system need," the straw proposal states
The Staff straw proposal features a two-phase VPP implementation as follows:
Phase 1 – VPP Interim Program (2027-2029): A two-year, EDC-administered bridge program
launching no later than July 1, 2027. The VPP Interim Program will deliver a measured and
verified peak demand reduction target in each EDC’s service territory by leveraging existing AMI,
direct load control (“DLC”) platforms, and the demand response (“DR”) customer base enrolled
under the Triennium program, with nominal incremental investment in coordination and
automation. The program is technology-neutral, expressly transitional in design, and primarily
focused on gathering operational data to inform and refine the long-term framework, while
simultaneously providing grid services that can produce near and long-term savings by shifting
utility models to less costly non-wires solutions.
Phase 2 – Long-Term Open-Access VPP Framework (2029 onward): A market-based
structure built on an open-access VPP tariff with a defined compensation structure. This
framework requires substantial stakeholder inputs, EDC investment, and third-party systems
integration around a fully specified service architecture, and enables enrolled DERs to stack
distribution-level grid service payments with PJM wholesale market revenues where permitted. It
is designed to position New Jersey DER aggregations competitively for optimal market
participation
More specifically, the straw proposal includes a two-year VPP Interim Program design that operates from 2027 to 2029 as
Phase 1, which would require each EDC to
propose interim VPP programs to satisfy the vision that is set forth in the VPP straw proposal.
"The VPP Interim
Programs should form an extension of the current DR and VPP Pilot Programs within the
Triennium, building upon those learnings to better address long-term goals, collect necessary
data points, and create the appropriate guardrails to ensure program efficacy and efficiency. The
VPP Interim Programs will produce measurable near-term peak demand reductions while the
long-term open-market compensation-based tariff structure, aggregator qualification framework,
and enhanced grid infrastructure are established. The VPP Interim Programs are expressly
intended as a transitional mechanism -- not a permanent program -- and the design should
facilitate, rather than impede, the migration of enrolled DER assets into the long-term tariff
framework as that framework becomes operational in the future," the straw proposal states
The VPP Interim Programs will be technology-neutral, meaning that the Interim Programs should not specify or grant
preference to particular DER types or manufacturers, and instead be defined by the grid services
to be delivered, and the technical requirements necessary to demonstrate reliable delivery, the straw proposal states
Among other goals, the straw VPP Interim programs are to be designed to reduce peak demand by no less than 3% across each EDC service territory beginning no
later than July 1, 2027, through the coordinated dispatch of BTM DERs aggregated by
both EDCs and third-party aggregators.
The interim programs envisioned by the straw proposal are to also, "Establish a structured, competitive EDC-aggregator contracting framework in New Jersey
that progressively builds third-party aggregator operational capacity, market experience,
and enrolled customer bases during the VPP Interim Program period, creating the market
foundation necessary for the long-term open-access VPP tariff to function effectively upon
its launch".
The straw proposal states that each EDC’s VPP Interim Program shall offer enrolled customers at least two service
delivery pathways: (1) an EDC-administered pathway, utilizing existing already available technology; and (2) a third-party aggregator pathway in which an aggregator manages the
customer’s devices through an edge DERMS [DER Management System] interfacing with the EDC’s DERMS.
For an
EDC that has not yet established a DERMS, the third-party aggregator pathways may
instead interface with the EDC’s existing demand response dispatch communications
The straw proposal states that VPP Interim Program solicitations should be open to both Original
Equipment Manufacturer (OEM) aggregators (device manufacturers such as EV
charger or smart thermostat vendors who directly manage and aggregate their own
installed devices) and independent third-party aggregators who aggregate one or multiple
kinds of DER devices across one or more OEM platforms. The straw proposal states that EDCs shall not restrict
participation to a single aggregator type, and the solicitation evaluation criteria should be
technology- and vendor-neutral to the maximum extent practicable.
Under the long-term VPP program, the straw proposal states that each EDC shall develop and file an open-access VPP tariff that governs
the terms and conditions under which DER aggregators may participate in the EDC's VPP
program as third-party service providers.
"The tariff must be available on non-discriminatory terms to
all qualified DER aggregators, without preference for any particular technology, ownership
structure, or commercial affiliation, provided that DER aggregators affiliated with EDCs
shall be subject to additional safeguards, consistent with applicable affiliate relations
standards, to prevent preferential access, cross-subsidization, or the use of confidential
customer or grid data obtained through the EDC’s regulated operations," the straw proposal states
Concerning the long-term VPP program, the straw proposal states, "A tariff that compensates businesses or residents for participation in a VPP will allow the open
market to encourage adoption and add resources to the grid. Establishing this tariff is work that
the Grid Modernization team at the Board has already begun through the Grid Flex Working group.
This tariff would be designed to compensate aggregators for the services that the VPPs are
intended to provide."
Concerning the long-term VPP program, the straw proposal states, "Aggregators would in turn provide incentives to customers to encourage participation in the VPPs."
The straw proposal envisions that customer enrollment and participation in the program may be supported by a
compensation framework comprising the following three pathways. The straw proposal states that while Pathway 3 will be
foundational to any VPP incentive structure, Pathways 1 and 2 may not be applicable to all
devices:
i. Pathway 1: Enrollment
ii. Pathway 2: Opportunity Cost and Capacity Reservation
iii. Pathway 3: Pay-for-Performance Dispatch
The straw proposal provides that, for the retail market services, the payment may flow from the EDC to the aggregator, and from
the aggregator to individual DER owners, under contractual arrangements established between
the aggregator and each customer.
For wholesale market services, the compensation may flow
directly to EDCs and/or aggregators through the PJM market clearing mechanism and then pass
to the individual DER owners.
In both retail and wholesale markets, the straw proposal provides that EDCs and
aggregators shall be required to disclose the pass-through methodology to enrolled customers as a
condition of registration.
In these models, the EDC funding flows through the aggregator to
individual customers under contractual terms; the aggregator, not the EDC, generally determines
how that compensation is structured and passed through, particularly in the residential sector, the straw proposal states
A kickoff session concerning the straw proposal was scheduled for July 30, 2026
QO26030099
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July 16, 2026
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Copyright 2026 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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