Dive Brief:

• The New York State Public Service Commission (PSC) has issued an order adopting a policy framework to develop markets for distributed energy resources on Thursday as part of the Reforming the Energy Vision (REV) proceeding.
• Perhaps the biggest development in the order is that utilities will be responsible for performing the Distributed System Platform (DSP) function in the new market.
• The PSC has ordered the state's electric utilities to file plans for the implementation of distributed system platforms by December 15, 2015.

Dive Insight:

PSC Chair Audrey Zibelman, a former PJM exec who helped create the first wholesale electricity markets in the U.S. in the 1990s, has been pushing forward the REV proceeding. The REV is a logical extension of the evolution that started with deregulation, Zibelman told Utility Dive in an exclusive interview last fall.

The REV aims to tap into the wave of customer-sited resources coming onto the grid, such as rooftop solar, demand response, and electric vehicles.

"[D]istributed energy resources will become integral tools in the planning, management and operation of the electric system," the order read. "The system values of distributed resources will be monetized in a market, placing DER on a competitive par with centralized options."

Utilities will be critical to the development of this new energy system. The new role of the utility will be to develop and eventually operate the platform needed to enable distributed energy markets, according to the order​. The REV order sees utilities very much remaining responsible for grid reliability, noting that "the functions needed to enable distributed markets are integrally bound to the functions needed to ensure reliability."

"Each utility will serve as the platform for interface among its customers, aggregators, and the distribution system," the order says. "Utilities will respond to new trends by adding value, thereby retaining customer base and the ability to raise capital on reasonable terms."

Despite the new opportunity afforded to utilities, the REV order establishes that "utility ownership of DER will be the exception rather than the rule." The only situation where direct utility ownership of DERs will be considered is when the "markets have had an opportunity to provide a service and have failed to do so in a cost-effective manner," according to the order. "In the limited situation that utilities will be allowed to own DER as a regulated asset, they will be restricted to recovery of their actual costs."

Utilities in a few places have approached regulators to test the waters regarding direct utility ownership of distributed energy resources, such as rooftop solar. While utility ownership is highly controversial and unlikely to become a standard utility business model, two utilities in Arizona asked for and received approval to launch their own rooftop solar programs. It remains to be seen whether regulators in other jurisdictions will allow direct utility ownership of DERs. 

The REV order ultimately aims to eliminate many of the state utilities' disincentives to encourage DER adoption. "[U]tilities will have the regulatory obligation, operational capability, and economic incentive to optimize the use of DER," the order reads.