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New York PSC “REV” Initiative Could Benefit Business Customers

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The New York PSC’s initiative to remake traditional electric utilities so they function as “Distributed System Platform Providers” could well have a material impact on all users of the electric grid, but especially those with the flexibility and know-how to make use of the opportunities that the initiative, if successful, will create.

The “REV” initiative will focus on expanding the utility’s role from that of a mere delivery system to the “aggregator of aggregators” that will integrate energy efficiency, demand response, distributed generation, and other energy management technologies to increase overall system efficiency and address other policy goals. In that capacity, the utility will provide opportunities to market participants to monetize the system benefits their individual energy-related decisions may bring. Business customers who have the ability to adjust their electric consumption in response to near real-time price signals, or who plan to make investments in energy efficiency or behind-the-meter generation, should see a variety of new ways to recoup their investments in those technologies. If done well, this should create an appropriate incentive for customers to make more of such investments than they would otherwise. Utilities would benefit from this new structure through a revised ratemaking paradigm that would reward the utility for achieving improvements in system efficiency or other societal benefits.

This approach is not without risks, however. The PSC’s vision would rely heavily on utilities to be market makers for products and services that at present are not part of the energy equation. Developing pricing for such products and services, which might be based at least in part on internalizing costs that are now external to energy-related transactions, would be a challenging exercise, as would balancing regulated versus unregulated solutions for particular goals. Moreover, PSC Staff’s report on the initiative appears to contemplate utility ownership or control of some of the distributed energy resources that would be central to the reconstituted market. The ability to profit from these resources, while acting as system administrator and market maker, could create conflicting imperatives for the utility.

Direct Energy’s hope, however, is that these concerns can be addressed adequately so that the laudable goals of the REV initiative can come to fruition, potentially serving as a model for other states looking to realize the considerable promise of decentralized grid resources.

Posted: May 06, 2014