Since 2014, New York has been pursuing ambitious reforms to its energy system. Collectively called Reforming the Energy Vision or “REV,” this process has propelled New York to a position of regional and national leadership. REV has put New York on a path to modernizing its electric grid, dramatically increasing renewable energy sources and giving consumers more control over their energy use and costs. With these cutting-edge goals, New Yorkers are right to think that the state is poised for an exciting clean energy future.
However, New York cannot hope to achieve its goals for consumers, energy efficiency, and clean energy if it doesn’t confront a stubborn problem: how to reform the outdated ways consumers pay for electricity.
One immediate opportunity is to reform the use of high fixed monthly charges collected by utilities. Also referred to as basic service charges or customer charges, these fixed charges are flat fees that every customer pays, regardless of the amount of electricity she uses. Across the country, fixed charges for residential customers typically range from $5 to $10 a month, but in some states — notably New York — these charges are significantly higher.
New York’s fixed charges are actually some of the highest in the nation. Acadia Center found that current average residential customer charges for major investor-owned utilities in New York range from $15.92 to $24 per month, higher than all neighboring states. National Grid has a residential fixed charge of $17 in New York, but only $5 in Rhode Island and $5.50 in Massachusetts. Central Hudson’s is even higher — $24, which it is seeking to increase to $25. Remarkably, New York’s fixed charges are higher than those in Wisconsin, a state that has been widely criticized for approving large fixed charge increases since 2014.
High fixed charges conflict with REV’s goals for a clean, modern, consumer-friendly electric system. They give customers less opportunity to lower their electricity bills by using less energy. This reduces the incentive to invest in energy efficiency and technologies like solar power. With less incentive to save energy, customers also tend to increase their electricity use, requiring utilities to spend more money to keep the lights on. Energy efficiency makes it easier for New York to meet its strong commitments to clean energy. When high fixed charges hinder new efficiency investments, they imperil those commitments.
High fixed charges also disproportionately burden low-income customers — directly contradicting goals for a modern, equitable energy system. Low-income consumers typically use less electricity than average, so they generally benefit from lower fixed charges. While a high fixed charge might still represent only a small fraction of a bill for higher-income consumers, these charges can represent a large portion of a low-income consumer’s bill, making energy costs proportionately greater for those on whom the burden is already greatest. New York needs electricity pricing that works to alleviate this injustice, not exacerbate it.
Connecticut, like New York, has high fixed charges, but with action from a broad coalition of consumers, labor and clean energy advocates, it has begun the process of reform. In late 2016, the residential customer charge for The United Illuminating Company, the smaller of Connecticut’s two utilities, was reduced from $17.25 to $9.67 per month. An upcoming rate case is likely to reduce the residential fixed charge of Eversource Energy, Connecticut’s larger utility.
New York should follow suit. While New York’s Public Service Commission should be commended for rejecting proposed increases in fixed charges since 2015, the PSC needs to take the next step and begin reducing utilities’ already too high fixed charges. In National Grid’s current rate case, the utility has proposed to keep its customer charge at $17. Acadia Center has filed expert testimony in that proceeding stating that a reasonable range for customer charges would be between $5.57 and $8.30.
A reduction to this range has broad and deep support. Recently, 52 organizations released joint principles in favor of reforming and lowering residential fixed charges in New York. Policymakers should take up this strong call to ease energy bill burdens for consumers and help ensure that REV’s ambitious reforms will succeed and benefit everyone.
Cullen Howe is New York state director and senior attorney at Acadia Center, a non-profit regional research and advocacy organization committed to advancing the clean energy future.
This op-ed was published in the Albany Times Unionhere.
NEW YORK — The Public Service Commission (PSC) issued an important Implementation Order on September 14, 2017, in the Value of Distributed Energy Resources (VDER) proceeding (Case 15-E-0751). Unfortunately, this order will impede the advancement of solar energy in New York and impose unnecessary barriers on the ability of consumers, businesses and communities to benefit from this clean energy resource. The structure laid out by the PSC in March of 2017 promised to reform and update New York’s approach to valuing solar energy and expanding consumer solar markets. The Order undermines the new VDER net metering structure because it undervalues distributed resources on the basis of unvetted utility studies that minimize solar’s economic value. In doing so, the Commission’s Order conflicts with the distributed energy future envisioned by New York’s historic and ambitious Reforming the Energy Vision (REV) future.
“The promise of a modern energy system that allows clean energy to flourish depends upon a fair determination of the economic value of solar and other clean energy resources,” said Daniel Sosland, president of Acadia Center, which has provided detailed comments on solar values in the PSC case. “Defining solar power’s economic future solely on information provided by electric utilities, who want to tilt the playing field towards investments that benefit the utility and its shareholders, is not a formula for short-term or long-term success.”
Mark LeBel, Associate Director of Acadia Center’s Grid Modernization Initiative, said, “The Commission has made a major mistake by approving unvetted marginal cost of service studies from Central Hudson, NYSEG and RGE. These studies all improperly limited the potential values provided by distributed energy resources. In addition, Central Hudson used a new and untested methodology that has never been put forward before in an adjudicated proceeding, and the Commission failed to address several detailed critiques brought forward by Acadia Center and other parties.”
Cullen Howe, Acadia Center’s New York Director, noted, “Acadia Center supports the overall vision that has been laid out by the Commission and the Cuomo Administration over the last several years. However, implementation of this vision cannot ignore the details and the practical realities of how to animate markets for energy efficiency and clean energy.”
In March, Acadia Center released an analysis demonstrating that outdated financial incentives are driving expenditures on expensive and unnecessary utility infrastructure and inhibiting clean energy in the Northeast. The report, Incentives for Change: Why Utilities Continue to Build and How Regulators Can Motivate Them to Modernize, shows that under current rules, utilities can earn more money on infrastructure expenditures like natural gas pipelines and electric transmission lines than on cleaner, local energy resources like energy efficiency, rooftop solar, and highly efficient electric heat pumps. The key takeaway from the analysis is that without changes to the way they are regulated and rewarded, utilities will continue to advocate for infrastructure over local energy resources because their fiduciary duty to shareholders requires it.
Meanwhile, experience throughout the Northeast shows that clean, local energy resources can replace expensive grid infrastructure proposed by utlilities. These local alternatives include energy efficiency and demand response technologies that reduce demand for electricity at specific times, as well as roof-top solar, battery storage, and efficient combined heat and power.
Energy efficiency investments alone have avoided over $400 million in major transmission upgrades in Vermont and New Hampshire.1 Similarly, the Tiverton/Little Compton pilot project in Rhode Island,2 the Brooklyn/Queens Demand Management Project in New York,3 and the Boothbay Smart Grid Reliability Project in Maine4 are real world examples of local clean energy resources deferring or avoiding upgrades to the distribution grid. Earlier this year, expert witnesses for the New Jersey Division of Rate Counsel argued that a $75 million, 10-mile transmission line is no longer needed due to increasing adoption of distributed generation.5 There are additional examples from California also, where the state’s grid operator (California Independent System Operator, or CAISO) announced in December 2016 that it is putting the Gates-Gregg 230 kV transmission line project on hold, and may cancel the project entirely, due to forecasted increases in the development of solar energy.6
These clean energy projects are possible when consumers are given the ability to shape a cleaner, lower cost energy system through their investment decisions and behaviors. To motivate utilities to give consumers these options, utility regulators need to adopt alternative economic structures that balance the need to bring clean energy resources on-line with the need to keep utilities financially healthy.
Acadia Center’s UtilityVision outlines an alternative economic structure to resolve this conflict. UtilityVision recommends that states adopt performance incentives to motivate utilities to advance priorities such as system efficiency, grid enhancements, distributed generation, energy efficiency, and other energy system goals. Regulators can then increase the portion of revenue recovered through those performance incentives while reducing the portion of revenue that is linked to infrastructure projects, helping to shift utility priorities further towards achieving the performance outcomes.
A handful of states are beginning to adopt reforms to focus the utility’s financial incentives on advancing public policy goals for clean energy development. On January 25, 2017, the New York Public Service Commission issued an Order approving a shareholder incentive to reward Con Edison for deploying distributed energy resources (DER) to defer or avoid traditional transmission and distribution projects and deliver net benefits to ratepayers. The PSC approved a shared-savings model that uses a benefit-cost framework to determine the difference between the net present value of DER and the traditional infrastructure solution. The PSC found that this reward structure effectively signals the utility to find the most cost-effective grid solutions for ratepayers and advances additional energy and environmental goals.7
The California Public Utilities Commission is taking similar steps to resolve the conflict between bringing more DER online and ensuring they do not harm utilities’ profits. In December 2016, Commissioner Florio issued an Order creating a model to financially incentivize utilities to adopt DER. The Order will incentivize the deployment of cost-effective DER that displaces or defers utility spending on infrastructure by offering the utility a reward equal to 4% of the payment made to the DER customer or vendor.8
Whether the New York and California model is the best of many ways to revamp the utility business model to incorporate DER is an open question. One limitation of this model is that it is based on a comparison between DER and the traditional infrastructure projects that would otherwise be built in their place. This model makes it relatively straightforward to compensate the utility based on the cost savings and greater net benefits from the DER solution, but it is not easy to apply to more general deployment of DER. For instance, in Rhode Island,9 stakeholders led by the Office of Energy Resources are considering how to reward the utility for proactively and strategically using DER to improve grid conditions and prevent problems before the grid gets to the point of needing infrastructure upgrades. In this case, the NY/CA model can’t be used because there isn’t a traditional infrastructure project to compare to the proposed DER.
States must continue to seek reforms to utility regulations so that clean energy can flourish and both consumers and utilities are treated fairly. Replacing poles, wires, transformers, and substation upgrades with rooftop solar, battery storage, demand response, and energy efficiency can reduce costs and make the grid cleaner—but utilities make a guaranteed rate of return on their million (and billion) dollar grid investments, and any lower cost DER alternatives threaten to undercut those revenues. Until a new system of incentives is created, it will be an uphill battle to achieve states’ goals for a lower cost, cleaner energy grid.
3 New York Public Service Commission Case 14-E-0302, “Petition of Consolidated Edison Company of New York, Inc. for Approval of Brooklyn Queens Demand Management Program.” June 15, 2014.
4 Maine Public Utilities Commission Docket No. 2011-238, “Final Report for the Boothbay Sub-Region Smart Grid Reliability Project.” January 19, 2016.
5 “Rate Counsel Sees No Need For High Voltage Transmission Line,” NJ Spotlight (Jan 19, 2017) available at: http://www.njspotlight.com/stories/17/01/08/rate-counsel-sees-no-need-for-high-voltage-transmission-line/
6 ”Solar Growth Puts Fresno High-Voltage Line on Hold,” Fresno Bee (Dec 20, 2016). Available at: http://www.fresnobee.com/news/local/article122063189.html
The traditional system we currently use for serving the needs of energy users is quickly going out of style. The energy grid is still relying on a system that was invented almost 100 years ago (hello, the 1930s called and they want their transmission and distribution lines back!). The old classic version of the grid has served an important purpose for getting energy to consumers reliably and safely, but today’s energy fashion is more demanding. While the old grid excelled at sending energy one-way from generators to consumers, the new energy grid needs to be able to accessorize by incorporating distributed energy resources (“DER”) such as solar and wind energy, active load management, and energy efficiency programs. DER will enable the development of a grid that is increasingly resilient, flexible, and adaptable to the needs of all energy consumers. In New York, a process is under way to try to bring these innovative new options online.
A modernized energy grid doesn’t happen overnight. States across the Northeastern U.S. are trying to figure out how to facilitate the transition from a traditional energy grid system to a more modernized grid. The Distributed System Implementation Plan (“DSIP”) process initiated by the New York Public Service Commission (“PSC” or “Commission”) may be one model for helping utilities make a smooth and efficient transition.
The Commission has required all electric service utilities to create and maintain comprehensive Plans detailing the processes by which they will transform the traditional one-way electric grid into a more dynamic and integrated grid that can manage two-way flows, is more resilient, and produces fewer carbon emissions. The DSIPs are a comprehensive source of information for the public and serve to consolidate several important pieces of New York’s Reforming the Energy Vision (“REV”) strategy. They are also intended to be a source of data and information to assist third-party DER providers with planning and investment. The new energy grid will require joint decision-making and planning between utilities, third-party providers, consumers, regulatory bodies, and other interested parties. This means that transparency and visibility are paramount to achieving a modernized grid.
The DSIP process is novel in that it has required utilities to make their internal decision-making more transparent and begin making joint planning decisions. This type of practice has potential for creating a collaborative environment that produces a constructive transition. The DSIP process has done well in New York to:
Provide insight into key decision-making processes of utilities, especially regarding the use of DER in addressing system needs
Provide a baseline for current data-gathering capabilities as well as capabilities regarding load forecasting and accommodating DER
Create a space for joint decision-making and planning between utilities
Involve stakeholders on various key issues
While the DSIPs that the utilities produced are important and useful, in many ways they fall short of what was expected of them. Some improvements that should be made to the DSIPs include:
Valuable data – for example regarding hosting capacity, DER forecasting, and DER impacts on the grid – has not yet been included in the DSIPs and the utilities have not in many cases provided sufficient plans for providing the data
Many of the plans that have been provided are a good start, but are still not sufficiently detailed or specific enough to be useful for the public and third-parties, for example, almost no timelines for implementation are provided
There is a general lack of description regarding how various processes, such as forecasting and making decisions about using DER for system needs, will be re-assessed and evolved as technologies and data-gathering capabilities improve
Stakeholder process has been utility-centric and lacked necessary oversight by the state energy regulatory body to ensure fair and meaningful engagement by all interested parties, including at the scoping stage of the process.
In sum, the DSIP process provides one model for states to facilitate the transition to the modernized energy grid, but they should look for opportunities to build on New York’s model. These first DSIPs were filed in 2016. Updated DSIPs will be filed in June 2018, giving utilities another opportunity to seek and receive the level of detailed data and planning that is needed to inform decision-making by other stakeholders and in other states.
Summaries of Important DSIP Focus Areas
Some of the most relevant aspects of the DSIPs are briefly described and assessed below. For more information about the New York DSIPs, read Acadia Center’s full Summary Analysis or the DSIP documents available in the proceedings.
Forecasting is the process by which utilities make predictions about energy load on the grid. Utilities also use forecasting to predict penetration of different DER technologies on the grid. These predictions have varied implications for what the grid needs to ensure reliable and safe power to all customers. The DSIPs provide a first glimpse into the calculations that utilities use and the impacts that DER are expected to have on forecasting. However, the DSIPs also reveal that utilities need to improve their forecasting processes and especially that they need to continue refining their methods for predicting DER penetration as well as DER impacts on the grid.
Utilities’ plans for accommodating and enabling DER on the energy grid are addressed in the DSIPs. As DER increase, their impacts on the grid increase. Distributed generation (such as wind and solar) for example, will increasingly be able to inject energy into the grid from various locations. The current energy grid can only manage a limited amount of distributed generation since it is currently only configured to manage energy flowing from a select few large generators into the homes and businesses of energy users. To optimize development of DER, third-party developers need to have detailed information about where DER can be accommodated and where DER might be most beneficial. The DSIPs provide important information about when and how this information will be available. They also describe their plans for streamlining the interconnection processes for distributed generators. These efforts will go a long way to reduce barriers for integrating DER with the grid, but the DSIPs also show a lack of preparation and planning for actively encouraging more DER. Increasing DER will be invaluable for enhancing resiliency and flexibility as well as decreasing carbon emissions.
Non-wires alternatives are DER that are procured by utilities to address the needs of the energy grid. Traditionally, utilities simply invest in more traditional infrastructure when the need arises. These types of upgrades are costly for the utility and thus for ratepayers. Alternatively, DER can be more cost-effective and can be used to avoid or postpone traditional infrastructure investments. The DSIPs provide clear analysis of the types of projects that they consider suitable for using non-wires alternatives. The utilities have defined a narrow range of projects that are suitable for these alternatives, and limiting the range of possible projects in this way means that there will be missed opportunities to address a wider range of system needs.
Advanced Metering Infrastructure (“AMI”) is important for advancing grid modernization efforts. It will enable utilities to vastly improve data-gathering capabilities and increase their ability to control energy load on the system. In the past, meters were only needed to measure energy used within a time frame, usually one month. With AMI, meters will be able to report hourly or even near to real-time data about energy use. This information will be invaluable for load forecasting and for better understanding DER impacts on the grid. Utilities will also be able to share data with customers – empowering them to better manage their own energy use. AMI also enables strategies to optimize the grid, like demand response, time-varying rates, and active load management. These strategies are based on increasing energy consumption during off-peak periods and decreasing it during peak hours. The DSIPs show that all utilities are planning to implement AMI over the next several years. However, the utilities are not consistent in how they present their plans for AMI roll-out. Some utilities provide excellent summaries or even include their full plans in the appendix of their DSIP. Other utilities provide almost no summary and simply refer to other proceedings.
Electric Vehicles will be key for achieving New York’s carbon emissions reduction goals. New York has made clear goals for increasing the number of electric vehicles on the road. This will require increased infrastructure, such as charging stations. Utilities are expected to be proactive about planning for and enabling the electric vehicle market. The DSIPs show that utilities are implementing pilot projects, mostly aimed at better understanding how these vehicles are used and charged, which will in turn help utilities better understand their impact on the grid. The utilities have also jointly produced a plan for creating an “EV Readiness Framework” which will guide their actions for preparing for electric vehicles. The DSIPs lack any concrete plans for going beyond pilot projects to implementing any wide-scale infrastructure investments for electric vehicles.
The DSIPs include investment plans that indicate how and where the utilities will spend money in the next several years to begin the transition to a modernized energy grid. Generally, utilities are investing in new systems and capabilities that will enhance data-gathering, load management, and DER integration, which will in turn increase grid reliability and efficiency. Utilities also need to invest in improving customer engagement by providing understandable billing and secure data exchange platforms.
Jamie Howland, director of the Climate and Energy Analysis Center at the Acadia Center, an advocacy organization, said this is all still a work in progress. “It is going to take some time to know how well it’s working.”
Meanwhile, he worries about what New York hasn’t done to prime the economy. “New York has to import all its fossil fuels, so for every dollar spent on energy efficiency, the economy grows by five dollars. And New York can clearly do more on energy efficiency. It is lagging states like Massachusetts and Rhode Island.”
Read the full article from InsideClimate News here.