Before the New York Public Service Commission’s vision of a grid operated by Distributed System Platform Providers (DSPPs) can become a reality, there are just a few points to hammer out — to say the least.
The Public Service Commission envisions that DSPPs will upgrade the distribution network and then “create markets, tariffs and operational systems to enable behind-the-meter resource providers to monetize products and services.” They will essentially become the purchaser and aggregator for distributed resources.
The issues are complex and open for debate: What technology will DSPPs use to call upon utility and behind-the-meter resources to meet demand in real time? How does the New York electricity market need to be designed to allow these transactions? Which entities will be allowed to be DSPPs?
On the latter point, Consolidated Edison is clear. It wants to be a DSPP, and the wording of the "Reforming the Energy Vision" white paper from the PSC suggests that distribution utilities such as Con Ed will be transformed into DSPPs.
“We should operate [this DSPP]. We should be…allowed to own some of these distributed resources, at least in the early days,” said Richard Miller, director of energy markets policy group at Con Ed, said during a recent panel discussion at the NYU School of Law.
Speaking to a room full of lawyers, Miller suggested that the regulatory framework to unlock the full potential of what REV envisions does not require a complete overhaul of the wholesale electricity market in New York.
“The regulatory construct does not matter. Technology matters,” he said. “The issue is to have the regulatory framework in place to anticipate those technology changes.”
Miller argued that Con Ed already dispatches demand response resources for distribution reliability. “In terms of how we operate and dispatch, no one has said, ‘We think that’s a wholesale transaction and subject to FERC jurisdiction,’” he said. However, if DSPPs dispatch resources to maintain bulk system reliability, then it could fall under federal, not state, jurisdiction.
John Reese, SVP at U.S. Power Generating Company, which supplies about 15 percent of New York City’s electricity, noted that REV is an evolution, not a revolution, and therefore there is time to get the jurisdictional issues sorted out. Even so, he said there could be ongoing litigation pertaining to the issue for the next ten to fifteen years.
But Con Ed sees a path forward. Miller noted that when Con Ed ran its targeted demand-side management program, there was an issue at the PSC as to whether unregulated affiliates could participate. Since Con Ed is the monopoly, the utility is rigorously monitored, “and we accept that,” said Miller. He said there is no reason why Con Ed’s role as one of the DSPPs could not be monitored the same way.
But Reese argued that if Con Ed owns behind-the-meter assets, it could stifle competition. “Competition drives my cost down,” said Reese. “Con Ed providing those services doesn’t get us to innovation.”
“The concern about innovation would be justified if we proposed to have a monopoly on that service,” countered Miller. “We don’t expect to have a monopoly on that service.”
There will be working groups to settle some of these issues, but one of the problems is that the two tracks of the program are not simultaneous. The first track, which is going on now, looks at the role of distribution utilities such as Con Ed in terms of “enabling market-based deployment of distributed energy resources.” The second track, designated to occur on an as-yet-unspecified “later timeline,” would look at changes to regulatory, tariff and market designs.
“I think the more we resolve it now, the better off we are,” said Miller. He added that there should be a discussion as to what exactly constitutes a buy-and-sell transaction with the New York Independent System Operator.
One project that could help bring clarity to some of these issues is Con Ed’s Brooklyn-Queens Demand Management Program, which will spend $500 million in demand-side management and distributed generation in order to defer the construction of a $1 billion substation.
The program, which will be fully deployed by the summer of 2018, will answer some questions as to whether Con Ed can own behind-the-meter assets like batteries and how they will be used to shape load. The program will also raise — and hopefully answer — some questions about how rate designs can help to flatten loads.
“We need a bit more evolution until we know how those transactions will get structured,” Miller said of distributed generation being used for system reliability.
“I think we have plenty of time to handle it properly,” said Reese. “There’s time to ensure there’s not just litigation forever.”
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