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New York State Edges Cautiously Into the Future
Electricity Currents A Survey of Current Industry News and Developments
Utility Business, Not as Usual For utility executives who were making New Year Resolutions a few weeks ago, 2015 promised to bring in more grief in the form of lower demand growth, rising retail tariffs, and more competition from prosumers, who are consuming less due to energy efficiency gains, while producing more through small-scale distributed generation options. Utility executives, therefore, may decide to fight off the rapid uptake of solar PVs, or failing that, to join the competition in assisting more consumers to become prosumers – as a number of utilities have belatedly decided to do (see related article in this section). For regulators, the challenge is how best to regulate, if regulate at all, as the stodgy, predictable, and boring industry moves through a literal renaissance, as further described by developments in New York (adjacent article) – which are being closely watched by other regulators facing similar issues across the U.S. and overseas. For prosumers, however, the future is full of new and exciting opportunities that empowers them to do things
Continued on page 8
March 2015, Vol. 28, Issue 2
In Electricity Currents This Month: Utility Business, Not as Usual. . . . . . . . . New York State Edges Cautiously Into the Future . . . . . . . . . . . . . . . . . . . . Utilities’ New Headache: Over-Generation. If You Can’t Beat Them, Join Them, Utilities Figure on Solar Issue . . . . . . . . .
. . .1 . . .1 . . .5 . . .6
Electricity Currents is compiled from the monthly newsletter EEnergy Informer published by Fereidoon P. Sioshansi, President of Menlo Energy Economics, a consultancy based in San Francisco. He can be reached at [email protected].
New York State Edges Cautiously Into the Future The New York Public Service Commission (NYPSC) has embarked on its difficult journey towards a different future for the electric power sector, with significant implications for all stakeholders including incumbent players, new entrants, customers as well as its own future role in regulating the power sector. Its initial Order Instituting Proceeding was announced in April 2014 to explore a different future for the industry, called reforming the energy vision or REV, and was greeted with a mixture of excitement, bewilderment, amusement and skepticism by various parties – some of whom stand to gain from the proposed 1
changes in regulations while others fear loss of profitable existing monopoly services they have enjoyed for decades. The motivation for REV should not come as a surprise to readers of this section of The Electricity Journal. Its maverick Chairwoman Adurey Zibelman, with the full backing of New York Governor Andrew Cuomo, who is painfully aware that retail tariffs in the Empire State are among the highest in the U.S., described her objectives in the following way (emphasis added): ‘‘This initiative 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 microgrids, on-site power supplies, and storage. It will also promote greater use of advanced energy management products to enhance demand elasticity and efficiencies. These changes, in turn, will empower customers by allowing them more choice in how they manage and consume electric energy.’’ Following several busy months of deliberations and hearings, and working with several working groups and soliciting extensive input from 260 interveners, the Commission staff released a proposal in late August 2014 laying out its recommendations for how the Commission could proceed. The 82 page straw proposal is a challenging read, as it covers the technical, legal, regulatory, and policy implications of the ambitious changes that could be unleashed should the Commission formally adopt all the changes proposed by the staff. Not only would these changes have an impact on New York, but they could potentially serve as a blueprint for other states facing similar issues. While ambitious compared to typical regulatory reforms of the past, some observers – this editor included – are not convinced that the NYPSC staff has gone far enough in allowing the new market realities to play their full role within the rigid confines of the traditional rate-of-return utility regulation that still prevails in nearly all states and 2
is certainly applicable to existing distribution networks. Having said this, it is clearly a step in the right direction, which will inevitably lead to other regulatory and policy changes in the coming years. New York regulators, in other words, have opened the proverbial can of worms, and there is no turning back – they will have to confront a myriad of new issues and challenges as the stakeholders respond to the initial salvo. Gov. Cuomo appears to be engaged. His office issued a press release on Dec. 12, 2014, announced that the new initiative will allow the economy to grow while protecting the environment, via a mix of doubling the net energy metering cap to 6 percent, development of local energy resources, demonstration projects, demand response programs, and community choice aggregation. Whether the staff’s straw proposal goes far enough and fast enough can be debated. But New York’s decision has received rave reviews from the environmental community as well as the solar lobby. Jackson Morris of the Natural Resources Defense Council (NRDC), an environmental advocacy group, said the Commission’s steps ‘‘. . . will make it easier for all New Yorkers to benefit from clean, pollution-free solar power by easing restrictions on rooftop solar power systems.’’ Rhone Resch, CEO of the Solar Energy Industries Association (SEIA), said, ‘‘Gov. Cuomo and PSC deserve a lot of credit for being forward-looking and for understanding the importance of market certainty.’’ Peter Olmsted of Vote Solar, a pro-solar organization, declared that ‘‘Strong policy leadership is combining with business innovation to fundamentally transform NY’s energy landscape for the better.’’ What, in fact, has NYPSC done to generate all this commotion? The staff of NYPSC recommends that the commissioners formally adopt their straw proposals, focusing on track one issues – namely a discussion of the issues and suggestions for addressing them. Track two issues, focused on ratemaking reforms, are to follow later in 2015 and are probably even more interesting and important. The Electricity Journal
The staff’s major achievement has been to somehow incorporate the input of 259 parties who engaged in one form or another during the proceedings, including two administrative law judges, two working groups and five committees. At the end, the PSC staff concluded that ‘‘there is large potential for the integration of distributed energy resources (DERs) into the New York electricity market via a distributed system platform (DSP) framework,’’ as originally envisioned in the VER. The staff report says, ‘‘the central vision of VER – increasing the use and coordination of DER via markets operated through a DSP – is achievable and offers substantial customer benefits.’’ It recommends: Increasing the state’s DER asset base; Building customer and market confidence in the expanded role of DERs; and Beginning the development of DSP capabilities. The straw proposal notes that, ‘‘The level of interest and engagement in this proceeding as well as Staff’s assessment of the energy landscape indicate that DER providers, energy service companies (ESCOs), and customers are ready in large numbers to participate in emerging DSP markets.’’ It also points out that, ‘‘There are significant barriers that will need to be overcome in order to optimize the use and penetration of DER, and many of these barriers from the basis of recommendations made here.’’ The staff’s main recommendations, with highlighting added, may be summarized as follows: The Commission should adopt the basic elements of the REV vision and proceed with implementation as proposed here; The DSP should enable broad market participation; The DSP function should be served by existing utilities, whose long-term status as DSP providers should be subject to performance reviews; Customers and energy service providers should have access to system information, to make transparent and readily available the economic value of time- and location-variable usage; March 2015, Vol. 28, Issue 2
Individual customer usage data should be made available, on an opt-out basis, to DER providers that satisfy Commission requirements; Utilities should only be allowed to own DER under certain clearly defined conditions, or pursuant to an approved plan; Where utility affiliates participate in DSP markets within the service territory operated by their parent company, appropriate market power protections must be in place; An immediate process should be undertaken to develop demand response tariffs for all service territories, including tariffs for storage and energy efficiency; Implementation plans should include proposals to encourage participation of low- and moderateincome customers; To protect consumers and reliability of service, the Commission should exercise oversight of DER providers; A benefit-cost framework should be defined appropriate to three different purposes: (1) utility DSP implementation plans; (2) periodic utility resource plans; and (3) pricing and procurement of DER; and As a transition toward market-based approaches to increase levels of efficiency and renewables, utilities should integrate energy efficiency into their regular operations and should take responsibility for procurement of Main Tier renewables. Why bother? The short answer is that a continuation of the status quo or business-as-usual is simply unsustainable. The technical changes that have revolutionized other industries and businesses are finally impacting the electric power sector, and to ignore, frustrate, or obfuscate these trends are futile. The report highlights five significant issues – many of the same applies to other parts of the U.S. and internationally: Minimal load growth, projected to be 0.16 percent per year through 2024; Increasing peak loads growing at an estimated 0.83 percent per year, resulting in declining system efficiency as measured by load factors; 3
Aging infrastructure, with 14,000 MW of non-hydro generation facilities over 40 years old, and approximately $30 billion needed to support transmission and distribution systems over the next 10 years; Increased dependence on natural gas for electric generation, as evidenced by the 96 percent increase from 2004–2012; and Increased customer adoption of distributed generation and other distributed energy resources including storage. The benefits of change, the staff claims, are immediate, easily quantifiable, and exceed the costs by orders of magnitude. For example, it says, ‘‘If the 100 hours of greatest peak demand were flattened, long-term avoided capacity and energy savings would range between $1.2–1.7 billion per annum. Merely increasing the system load factor from 55 to 56 percent would produce potential gross benefits of $150–219 million per year.’’ The report outlines how DSP market can be established after defining the term: The DSP is an intelligent network platform that will provide safe, reliable, and efficient electric services by integrating diverse resources to meet customers’ and society’s evolving needs. The DSP fosters broad market activity that monetizes system and social values, by enabling active customer and third party engagement that is aligned with the wholesale market and bulk power system.
Hmm . . . Revolutionary proposals that nevertheless rely on the incumbent monopoly utilities to implement? Would it fly? Recognizing the dilemma, the straw proposal engages in a lengthy discussion of the pros and cons – justifying its own recommendation. It says, ‘‘In reaching this recommendation, Staff is cognizant of the arguments in favor of establishing an independent DSP,’’ as follows (with change in style added): First, the independent DSP would more readily establish uniform market practices across the state since it would likely be one organization as compared to six. An independent DSP could also avoid some of the market power concerns associated with having the incumbent distribution utilities serve as the DSP, as well as concerns associated with utility ownership of DER. Creating an independent DSP via a competitive solicitation for a lease-arrangement might lead to lower costs than a utility could achieve. Finally, an independent DSP may be more inclined to promote the rapid technological innovations that are expected to propel the advances achieved through REV. Still, ‘‘except for market functions, many existing roles and responsibilities of incumbent utilities would have to be duplicated by an independent DSP.’’ Or:
The staff recognizes that, The market operations, grid operations, and system planning functions described above could theoretically be carried out either by incumbent utilities acting as the DSP, by a newly created independent DSP based on the NYISO’s model of an independent system operator, or by some combination of both.’’
Not surprisingly, coming from a regulatory agency, it says, ‘‘Staff recommends that the incumbent distribution utilities serve as the DSPs.’’ However, the staff acknowledged that, ‘‘While there are substantial arguments in support of an independent DSP, they are outweighed by the numerous drawbacks of that approach and the practical advantages of the utility approach.’’ 4
An alternative approach to an independent DSP is to separate the market function from the planning and operations functions that must be performed by the utility, with the DSP providing only the market function. However, it is not clear how practical such a separation might be, as grid optimization becomes a minute-tominute function that informs, and is enabled by, real-time markets for DER.’’
Clearly looking for further justifications of its proposed approach, it says, Having the incumbent utility act as the DSP will keep the essential function of maintaining grid reliability in a single entity that already bears that responsibility. Creating a new entity would result in unnecessary delay and regulatory complication.
The Electricity Journal
The staff knows, as does everyone else familiar with the industry, that this is at best a half-baked solution, as acknowledged below: Vesting the utility with the DSP role creates significant challenges in addition to market power. Most importantly, having each individual utility serve as a separate DSP creates the potential for fragmentation of market rules and platform technologies.
Having tackled – or more likely fumbled – the DSP problem, the straw proposal moves on to customer engagement, data access and privacy issues, affordability, wholesale market interactions, coordination between market operator and DSPs, and a host of other thorny issues. The staff’s straw proposal recognizes that, ‘‘there are two principal risks: discriminatory behavior by the DSP, and asymmetric advantage of utilities even in the absence of discriminatory behavior.’’ It looks at other states for guidance and precedence, for example, a decision in 2013 by the California Public Utilities Commission (CPUC) that utilities may own up to 50 percent of storage at the distribution level and behind-the-meter, or the 2008 decision by the North Carolina Utilities Commission to allow utility ownership of residential rooftop PV installations, where the utility leases the rooftop from homeowners. It recognizes that: Unregulated utility affiliates present a different question. In some respects the market power concern is at least equivalent, as the prospect of an affiliate earning unregulated returns increases the utility’s incentive to favor the affiliate’s product, or to delay system improvements on circuits where the affiliate enjoys revenues. On the other hand, the participation of utility affiliates can enhance DER markets, and structural separation methods may be applied to mitigate market power.
And it proposes code of conduct rules to avoid such problems. But it also recognizes this is easier said than done, acknowledging, ‘‘The comprehensive, complex, and transformative nature of REV will require years of iterative planning and increasingly granular design determination, which should begin as soon as the March 2015, Vol. 28, Issue 2
Commission makes a policy decision to proceed.’’ Who knows, perhaps some of the New York commissioners already wish they had not let the genie out of the bottle. Perhaps the New York Public Service Commission should have waited to see how California, Hawaii, or some other brave – or foolish – state regulator tried and possibly failed to tackle these complex problems. But the genie is out of the bottle in New York and there is no way to put it back. And regulators in other states – and elsewhere – have to make equally difficult decisions on the same issues in the years to come.& http://dx.doi.org/10.1016/j.tej.2015.02.009
Utilities’ New Headache: Over-Generation In Electricity Currents we have often noted that demand growth in many parts of the world is becoming history. Making matters worse, though, is a new phenomenon: over-generation, usually referring to intermittent renewables, which – unlike thermal generation – cannot be easily adjusted by an operator. Consequently, when demand is low and there is ample renewable generation – such as during windy and sunny periods – the market operator is faced with more supply than load. Depending on the circumstances – interconnections with neighboring grids, availability of storage, and/or flexible demand programs – the market operator may have no options but to curtail the unneeded renewable generation or refuse to accept the excess generation, if that is an option in the supply contract. During such episodes, wholesale prices go negative, which means the grid operator is willing to pay customers to take some energy off the grid – thank you. This problem was discussed in early December 2014 at a briefing by the California Independent System Operator (CAISO) of the California Public 5
Utility Business, Not as Usual For utility executives who were making New Year Resolutions a few weeks ago, 2015 promised to bring in more grief in the form of lower demand growth, rising retail tariffs, and more competition from prosumers, who are consuming less due to energy efficiency gains, while producing more through small-scale distributed generation options. Utility executives, therefore, may decide to fight off the rapid uptake of solar PVs, or failing that, to join the competition in assisting more consumers to become prosumers – as a number of utilities have belatedly decided to do (see related article in this section). For regulators, the challenge is how best to regulate, if regulate at all, as the stodgy, predictable, and boring industry moves through a literal renaissance, as further described by developments in New York (adjacent article) – which are being closely watched by other regulators facing similar issues across the U.S. and overseas. For prosumers, however, the future is full of new and exciting opportunities that empowers them to do things
Continued on page 8
March 2015, Vol. 28, Issue 2
In Electricity Currents This Month: Utility Business, Not as Usual. . . . . . . . . New York State Edges Cautiously Into the Future . . . . . . . . . . . . . . . . . . . . Utilities’ New Headache: Over-Generation. If You Can’t Beat Them, Join Them, Utilities Figure on Solar Issue . . . . . . . . .
. . .1 . . .1 . . .5 . . .6
Electricity Currents is compiled from the monthly newsletter EEnergy Informer published by Fereidoon P. Sioshansi, President of Menlo Energy Economics, a consultancy based in San Francisco. He can be reached at [email protected].
New York State Edges Cautiously Into the Future The New York Public Service Commission (NYPSC) has embarked on its difficult journey towards a different future for the electric power sector, with significant implications for all stakeholders including incumbent players, new entrants, customers as well as its own future role in regulating the power sector. Its initial Order Instituting Proceeding was announced in April 2014 to explore a different future for the industry, called reforming the energy vision or REV, and was greeted with a mixture of excitement, bewilderment, amusement and skepticism by various parties – some of whom stand to gain from the proposed 1
changes in regulations while others fear loss of profitable existing monopoly services they have enjoyed for decades. The motivation for REV should not come as a surprise to readers of this section of The Electricity Journal. Its maverick Chairwoman Adurey Zibelman, with the full backing of New York Governor Andrew Cuomo, who is painfully aware that retail tariffs in the Empire State are among the highest in the U.S., described her objectives in the following way (emphasis added): ‘‘This initiative 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 microgrids, on-site power supplies, and storage. It will also promote greater use of advanced energy management products to enhance demand elasticity and efficiencies. These changes, in turn, will empower customers by allowing them more choice in how they manage and consume electric energy.’’ Following several busy months of deliberations and hearings, and working with several working groups and soliciting extensive input from 260 interveners, the Commission staff released a proposal in late August 2014 laying out its recommendations for how the Commission could proceed. The 82 page straw proposal is a challenging read, as it covers the technical, legal, regulatory, and policy implications of the ambitious changes that could be unleashed should the Commission formally adopt all the changes proposed by the staff. Not only would these changes have an impact on New York, but they could potentially serve as a blueprint for other states facing similar issues. While ambitious compared to typical regulatory reforms of the past, some observers – this editor included – are not convinced that the NYPSC staff has gone far enough in allowing the new market realities to play their full role within the rigid confines of the traditional rate-of-return utility regulation that still prevails in nearly all states and 2
is certainly applicable to existing distribution networks. Having said this, it is clearly a step in the right direction, which will inevitably lead to other regulatory and policy changes in the coming years. New York regulators, in other words, have opened the proverbial can of worms, and there is no turning back – they will have to confront a myriad of new issues and challenges as the stakeholders respond to the initial salvo. Gov. Cuomo appears to be engaged. His office issued a press release on Dec. 12, 2014, announced that the new initiative will allow the economy to grow while protecting the environment, via a mix of doubling the net energy metering cap to 6 percent, development of local energy resources, demonstration projects, demand response programs, and community choice aggregation. Whether the staff’s straw proposal goes far enough and fast enough can be debated. But New York’s decision has received rave reviews from the environmental community as well as the solar lobby. Jackson Morris of the Natural Resources Defense Council (NRDC), an environmental advocacy group, said the Commission’s steps ‘‘. . . will make it easier for all New Yorkers to benefit from clean, pollution-free solar power by easing restrictions on rooftop solar power systems.’’ Rhone Resch, CEO of the Solar Energy Industries Association (SEIA), said, ‘‘Gov. Cuomo and PSC deserve a lot of credit for being forward-looking and for understanding the importance of market certainty.’’ Peter Olmsted of Vote Solar, a pro-solar organization, declared that ‘‘Strong policy leadership is combining with business innovation to fundamentally transform NY’s energy landscape for the better.’’ What, in fact, has NYPSC done to generate all this commotion? The staff of NYPSC recommends that the commissioners formally adopt their straw proposals, focusing on track one issues – namely a discussion of the issues and suggestions for addressing them. Track two issues, focused on ratemaking reforms, are to follow later in 2015 and are probably even more interesting and important. The Electricity Journal
The staff’s major achievement has been to somehow incorporate the input of 259 parties who engaged in one form or another during the proceedings, including two administrative law judges, two working groups and five committees. At the end, the PSC staff concluded that ‘‘there is large potential for the integration of distributed energy resources (DERs) into the New York electricity market via a distributed system platform (DSP) framework,’’ as originally envisioned in the VER. The staff report says, ‘‘the central vision of VER – increasing the use and coordination of DER via markets operated through a DSP – is achievable and offers substantial customer benefits.’’ It recommends: Increasing the state’s DER asset base; Building customer and market confidence in the expanded role of DERs; and Beginning the development of DSP capabilities. The straw proposal notes that, ‘‘The level of interest and engagement in this proceeding as well as Staff’s assessment of the energy landscape indicate that DER providers, energy service companies (ESCOs), and customers are ready in large numbers to participate in emerging DSP markets.’’ It also points out that, ‘‘There are significant barriers that will need to be overcome in order to optimize the use and penetration of DER, and many of these barriers from the basis of recommendations made here.’’ The staff’s main recommendations, with highlighting added, may be summarized as follows: The Commission should adopt the basic elements of the REV vision and proceed with implementation as proposed here; The DSP should enable broad market participation; The DSP function should be served by existing utilities, whose long-term status as DSP providers should be subject to performance reviews; Customers and energy service providers should have access to system information, to make transparent and readily available the economic value of time- and location-variable usage; March 2015, Vol. 28, Issue 2
Individual customer usage data should be made available, on an opt-out basis, to DER providers that satisfy Commission requirements; Utilities should only be allowed to own DER under certain clearly defined conditions, or pursuant to an approved plan; Where utility affiliates participate in DSP markets within the service territory operated by their parent company, appropriate market power protections must be in place; An immediate process should be undertaken to develop demand response tariffs for all service territories, including tariffs for storage and energy efficiency; Implementation plans should include proposals to encourage participation of low- and moderateincome customers; To protect consumers and reliability of service, the Commission should exercise oversight of DER providers; A benefit-cost framework should be defined appropriate to three different purposes: (1) utility DSP implementation plans; (2) periodic utility resource plans; and (3) pricing and procurement of DER; and As a transition toward market-based approaches to increase levels of efficiency and renewables, utilities should integrate energy efficiency into their regular operations and should take responsibility for procurement of Main Tier renewables. Why bother? The short answer is that a continuation of the status quo or business-as-usual is simply unsustainable. The technical changes that have revolutionized other industries and businesses are finally impacting the electric power sector, and to ignore, frustrate, or obfuscate these trends are futile. The report highlights five significant issues – many of the same applies to other parts of the U.S. and internationally: Minimal load growth, projected to be 0.16 percent per year through 2024; Increasing peak loads growing at an estimated 0.83 percent per year, resulting in declining system efficiency as measured by load factors; 3
Aging infrastructure, with 14,000 MW of non-hydro generation facilities over 40 years old, and approximately $30 billion needed to support transmission and distribution systems over the next 10 years; Increased dependence on natural gas for electric generation, as evidenced by the 96 percent increase from 2004–2012; and Increased customer adoption of distributed generation and other distributed energy resources including storage. The benefits of change, the staff claims, are immediate, easily quantifiable, and exceed the costs by orders of magnitude. For example, it says, ‘‘If the 100 hours of greatest peak demand were flattened, long-term avoided capacity and energy savings would range between $1.2–1.7 billion per annum. Merely increasing the system load factor from 55 to 56 percent would produce potential gross benefits of $150–219 million per year.’’ The report outlines how DSP market can be established after defining the term: The DSP is an intelligent network platform that will provide safe, reliable, and efficient electric services by integrating diverse resources to meet customers’ and society’s evolving needs. The DSP fosters broad market activity that monetizes system and social values, by enabling active customer and third party engagement that is aligned with the wholesale market and bulk power system.
Hmm . . . Revolutionary proposals that nevertheless rely on the incumbent monopoly utilities to implement? Would it fly? Recognizing the dilemma, the straw proposal engages in a lengthy discussion of the pros and cons – justifying its own recommendation. It says, ‘‘In reaching this recommendation, Staff is cognizant of the arguments in favor of establishing an independent DSP,’’ as follows (with change in style added): First, the independent DSP would more readily establish uniform market practices across the state since it would likely be one organization as compared to six. An independent DSP could also avoid some of the market power concerns associated with having the incumbent distribution utilities serve as the DSP, as well as concerns associated with utility ownership of DER. Creating an independent DSP via a competitive solicitation for a lease-arrangement might lead to lower costs than a utility could achieve. Finally, an independent DSP may be more inclined to promote the rapid technological innovations that are expected to propel the advances achieved through REV. Still, ‘‘except for market functions, many existing roles and responsibilities of incumbent utilities would have to be duplicated by an independent DSP.’’ Or:
The staff recognizes that, The market operations, grid operations, and system planning functions described above could theoretically be carried out either by incumbent utilities acting as the DSP, by a newly created independent DSP based on the NYISO’s model of an independent system operator, or by some combination of both.’’
Not surprisingly, coming from a regulatory agency, it says, ‘‘Staff recommends that the incumbent distribution utilities serve as the DSPs.’’ However, the staff acknowledged that, ‘‘While there are substantial arguments in support of an independent DSP, they are outweighed by the numerous drawbacks of that approach and the practical advantages of the utility approach.’’ 4
An alternative approach to an independent DSP is to separate the market function from the planning and operations functions that must be performed by the utility, with the DSP providing only the market function. However, it is not clear how practical such a separation might be, as grid optimization becomes a minute-tominute function that informs, and is enabled by, real-time markets for DER.’’
Clearly looking for further justifications of its proposed approach, it says, Having the incumbent utility act as the DSP will keep the essential function of maintaining grid reliability in a single entity that already bears that responsibility. Creating a new entity would result in unnecessary delay and regulatory complication.
The Electricity Journal
The staff knows, as does everyone else familiar with the industry, that this is at best a half-baked solution, as acknowledged below: Vesting the utility with the DSP role creates significant challenges in addition to market power. Most importantly, having each individual utility serve as a separate DSP creates the potential for fragmentation of market rules and platform technologies.
Having tackled – or more likely fumbled – the DSP problem, the straw proposal moves on to customer engagement, data access and privacy issues, affordability, wholesale market interactions, coordination between market operator and DSPs, and a host of other thorny issues. The staff’s straw proposal recognizes that, ‘‘there are two principal risks: discriminatory behavior by the DSP, and asymmetric advantage of utilities even in the absence of discriminatory behavior.’’ It looks at other states for guidance and precedence, for example, a decision in 2013 by the California Public Utilities Commission (CPUC) that utilities may own up to 50 percent of storage at the distribution level and behind-the-meter, or the 2008 decision by the North Carolina Utilities Commission to allow utility ownership of residential rooftop PV installations, where the utility leases the rooftop from homeowners. It recognizes that: Unregulated utility affiliates present a different question. In some respects the market power concern is at least equivalent, as the prospect of an affiliate earning unregulated returns increases the utility’s incentive to favor the affiliate’s product, or to delay system improvements on circuits where the affiliate enjoys revenues. On the other hand, the participation of utility affiliates can enhance DER markets, and structural separation methods may be applied to mitigate market power.
And it proposes code of conduct rules to avoid such problems. But it also recognizes this is easier said than done, acknowledging, ‘‘The comprehensive, complex, and transformative nature of REV will require years of iterative planning and increasingly granular design determination, which should begin as soon as the March 2015, Vol. 28, Issue 2
Commission makes a policy decision to proceed.’’ Who knows, perhaps some of the New York commissioners already wish they had not let the genie out of the bottle. Perhaps the New York Public Service Commission should have waited to see how California, Hawaii, or some other brave – or foolish – state regulator tried and possibly failed to tackle these complex problems. But the genie is out of the bottle in New York and there is no way to put it back. And regulators in other states – and elsewhere – have to make equally difficult decisions on the same issues in the years to come.& http://dx.doi.org/10.1016/j.tej.2015.02.009
Utilities’ New Headache: Over-Generation In Electricity Currents we have often noted that demand growth in many parts of the world is becoming history. Making matters worse, though, is a new phenomenon: over-generation, usually referring to intermittent renewables, which – unlike thermal generation – cannot be easily adjusted by an operator. Consequently, when demand is low and there is ample renewable generation – such as during windy and sunny periods – the market operator is faced with more supply than load. Depending on the circumstances – interconnections with neighboring grids, availability of storage, and/or flexible demand programs – the market operator may have no options but to curtail the unneeded renewable generation or refuse to accept the excess generation, if that is an option in the supply contract. During such episodes, wholesale prices go negative, which means the grid operator is willing to pay customers to take some energy off the grid – thank you. This problem was discussed in early December 2014 at a briefing by the California Independent System Operator (CAISO) of the California Public 5