New York Proposal Would "Further Entrench" Utilities As Service Providers, "Roll Back" Decades of Competition

Retail suppliers were highly critical of a New York PSC Staff straw proposal regarding the Reforming the Energy Vision (REV) industry structure, with one ESCO proclaiming that the proposal, "threatens to roll back two decades of competitive restructuring in New York altogether."

Retail suppliers broadly took issue with the straw proposal's proposed role for utilities, which includes utilities acting as the distributed system platform (DSP) provider, and potentially the owner of distributed energy resources (DER), while also potentially offering other value-added services.

Direct Energy noted that the role of the DSP, to be served by the utility under the straw proposal, "encompass[es] nearly all aspects of market operations, grid operations, and integrated system planning," for DER and similar REV services.

Infinite Energy said of the straw proposal that, "Rather than facilitating the animation of fledgling DER markets through private capital, the current Straw Proposal's scheme to further entrench the utilities as DER providers in addition to their monopoly distribution business threatens to roll back two decades of competitive restructuring in New York altogether."

"In this sense, the Straw Proposal fails because it expresses so well the potential for positive change in New York, yet then settles for relying upon the monopoly utilities – the parties most insulated from risk and most naturally committed to the status quo – to implement this otherwise revolutionary vision," Infinite Energy

Other retail suppliers offered similar criticism

The Retail Energy Supply Association noted that, "The Straw Proposal expands and solidifies the utility monopoly position with respect to DER," and that, "The Straw Proposal, however, departs from [a competitive market] approach and recommends a significant expansion of the existing utility centric regulatory framework where the distribution utility rather than markets and customers will control all critical aspects of the energy infrastructure."

Likewise, Direct Energy said that, "The most important point to make about the Staff Proposal, however, is one that addresses not any specific aspect of it but rather the overall focus of the proposal, which is clearly on the utility rather on the customer."

The utility would be allowed to compete in the markets for DSP products and services for which it would also be the market maker and operator, Direct Energy said

Under the straw proposal, Direct Energy noted that:

• The utility would be allowed to rate-base its investments in the products and services with which it would compete in the DSP markets.

• The utility would continue to control all data generated by distribution level infrastructure, with competitors being allowed access to it only second hand (and, presumably, not in real-time) through a yet-to-be-created data exchange.

• The utility would expand its time-of-use products while having no obligation to enhance its distribution infrastructure to give competitors access to systems and data that would allow them to design and market their own time-differentiated offerings.

• The utility would be given control of all energy efficiency programs, and would also be allowed to rate-base its investments in these programs.

• The utility would be given control of all main tier renewable procurements, a role previously handled ably by NYSERDA, again with all investments charged to utility customers, not shareholders.

• The utility would be allowed to own and rate-base all manner of DER, provided certain conditions are met.

Generally, retail suppliers supported many of the goals of the REV proceeding, but said that the utility should be removed from the distributed system platform provider role.

"While Direct Energy remains strongly supportive of the goals of the 'Reforming the Energy Vision,' or 'REV,' and agrees with the Staff Proposal's conclusion that the tools needed to achieve those goals exist today, the approach recommended in the Staff Proposal should be modified to create a more streamlined approach that emphasizes customer needs and desires, with the DSP and the utility working together to provide a platform that will allow third parties to address those needs and desires by removing the barriers that keep this from happening under the current system," Direct Energy said.

Case 14-M-0101