New York to Study Utility Provision of Default Service, Ownership of Generation as Part of Reforming Energy Vision

The New York PSC will address several questions raised in a Staff report, including whether utilities should continue to supply default commodity service to customers, as part of its Reforming the Energy Vision proceeding.

As described by the PSC, the Staff report, "describes a new business model for energy service providers in which distributed energy resources (DER) become a primary tool in the planning and operation of electricity systems, and in which customers are empowered to optimize their priorities with respect to reliability, cost, and sustainability. Under this vision, the utility functions as a Distributed System Platform Provider (DSPP), actively managing and coordinating distributed resources and providing a market in which customers are able to optimize their priorities while providing, and being compensated for, system benefits."

In the report, Staff said that the proceeding should examine, "whether market penetration of energy-related value added services should be enhanced by modifying the role of utilities in energy commodity markets."

Staff noted that "competitive markets for value-added services at the level of small customers have been slow to develop."

"At a minimum, the public interest will require that utilities be available to provide essential services that are not provided through competitive markets," Staff said. This may include direct utility ownership of distributed energy resources, Staff noted.

However, "[r]equiring utilities to cease offering energy commodity, and requiring customers to obtain energy commodity service from an ESCO, may increase customer engagement in energy management decisions and may lead to the economies of scale that would make it possible for ESCOs to offer innovative energy-related value added services to customers with relatively small usage," Staff noted. "Such a requirement, though, would serve little purpose if it only resulted in customers obtaining commodity from ESCOs rather than from utilities. Commodity service is readily available from utilities at a just and reasonable price," Staff said.

"In addition, when utilities assume the DSPP role, opportunities will arise for ESCOs and other vendors to form partnerships with utilities in designing and delivering innovative new demand management services or facilitate newly created ancillary service market opportunities on the DSPP level. Clear delineation of the roles and responsibilities of utilities will determine how these partnerships evolve to address customer needs," Staff said.

"To the extent that ESCOs are providing services related to system needs, reliability concerns will arise. Utilities, and the Commission, will have an increased interest in the qualifications and performance of ESCOs where their products, such as demand response and ancillary services, must be relied on by operators of distribution and bulk systems. For this reason, the Commission's current review of eligibility requirements for ESCOs should include these issues," Staff said.

Questions posed by Staff include:

• What rules should govern access to customer data?

• Where utilities will rely on services provided by ESCOs, is it necessary for qualifications of ESCOs to be certified?

• Should utilities be prohibited from providing commodity service, to create economies of scale for ESCOs? If so what additional consumer protections are needed?

• How can DSPP markets, clean energy programs, and Green Bank financing be coordinated so that ESCOs can offer optimal products?

Staff also noted that an important issue in the definition and implementation of the DSPP vision will be the extent to which utilities are directly engaged in DER-related activities, beyond planning and operational functionalities. Direct utility engagement with DER could come, for example, in the forms of ownership, financing, operation, contracting, or any combination of these.

The PSC said that it anticipates the Reforming the Energy Visions inquiry to proceed in two parallel tracks.

The first track will begin immediately and will focus on the Distributed System Platform Provider issues detailed in the Staff report. Impacts on wholesale markets, opportunities for customer engagement, and other essential related issues should also be part of these deliberations. Initially the report should form the basis for discussions among parties on the utility and market issues. These discussions will form the basis for further proposals and policy recommendations on utility and market issues for Commission consideration. With respect to this first track of the proceeding, the PSC expects a status report from Staff on the DSPP issues at its July 10, 2014 session. The PSC established a goal of reaching a generic policy determination before the end of this year.

The second track of the proceeding will focus on regulatory changes and ratemaking issues. This second track will be conducted in parallel with the first track described briefly above, although not on the same decisional timeline. The PSC anticipates an initial Staff straw proposal on the regulatory changes and ratemaking issues in mid-July, 2014, to be followed by the first collaborative discussion of these issues. The PSC expects to reach a generic Commission policy determination on issues relating to regulatory design and ratemaking in the first quarter of 2015.

The PSC scheduled initial collaborative meeting, focusing on Track 1, for May 12. A public symposium will be held on May 22

Case 14-M-0101