Microgrid Group on REV: Don’t Replace One Utility Monopoly with Another

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Monopoly tokensNew York appears to be moving in the direction of making electric utilities into something like an Internet marketplace for energy — and this may not be a wise move.

That’s the word from the Microgrid Resources Coalition (MRC) in written comments filed this week on Reforming the Energy Vision (REV), a much-watched strategy to decentralize New York’s electric grid.

MRC was among several energy stakeholders to comment in the most recent REV deliberation before the New York Public Service Commission. This round focused on  a staff white paper about the new utility role.

MRC championed the overall direction of REV — the reinvention of the electric grid to account for the rise in microgrids, solar, energy efficiency and other forms of decentralized energy.  But the microgrid advocacy group also expressed concern about giving utilities too much monopoly clout on the new grid.

“Creating a new, artificial monopoly to solve the problems caused by an old monopoly is bad public policy,” MRC said.

Policymakers and stakeholders — indeed utilities themselves — aren’t sure what a utility becomes under REV. The utility monopoly was set up for an era when customers couldn’t easily govern their energy destiny. With today’s microgrids, solar, and energy storage, consumers can take more control. So where does a utility fit in now?

State policymakers say a utility should act as a ‘distributed system platform,’ or DSP. But it’s not exactly clear what that means. Early on, the state described utilities serving as a kind of middleman between retail and wholesale markets. More recently, talk has turned to making the DSP into an e-commerce platform, a kind of Amazon.com-like portal for energy.

MRC sees neither role as effective. For one, customers don’t need a middleman to access the wholesale grid, MRC said. Further, utilities have no experience in the e-commerce realm. In particular, MRC advised against letting utilities leverage ratepayer information to create a new kind of monopoly. Better to let experienced competitive businesses take the job than let the platform become another monopoly, MRC said.

Mapping Microgrid Opportunities

So what should the utility do on the new grid?

MRC recommends they play a role closer to what they already do. The utility would continue to run the distribution system, which would become a kind of platform in itself. From it would emanate free customer and market information that would help distributed energy companies do business and serve consumers.

Utilities would still be charged with ensuring the grid is reliable and efficient. Among other things, they might map weak spots on the grid that microgrids could bolster. A utility also might issue requests for proposals and sign long-term contracts for installation of microgrids in lieu of more expensive transmission and distribution upgrades.

In essence, the DSP would act as a “common-carrier platform,” under MRC’s vision. It would help integrate microgrids and other forms of distributed energy to improve the grid and help consumers participate in energy transactions.

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Energy giant NRG Energy, which is a member of the microgrid group, made clear that the intent is not to do away with electric utilities. Instead, the state needs to “get the utilities’ role ‘right’ and set them on a path toward a sustainable future.”

The right role “should follow as a principle that if a product or service can be provided through competitive means, it should be provided by competitive means,” NRG said in its own written comments.

So instead of earning revenue from selling competitive products, the utility might charge for services offered through the DSP, NRG said. The charges would be competitively neutral and usage based, “akin to a tariff distribution charge.” Eventually, NRG sees the DSP becoming self-supporting.

Inertia or Game Changing?

The Energy Democracy Alliance, a coalition of environmental and social justice groups, said it supports the shift to more locally controlled energy, but is skeptical that utilities can be the primary agents of change.

“Their inertia, internal culture, and their economic structure may not be so easily overcome, even with clear new financial incentives,” the group said.

However, the alliance added that it makes sense “to realign investor-owned utilities’ profit motives toward public policy goals,” at least until there are more municipal utilities or community choice aggregations.

“If done successfully, it could be the game-changer needed to propel New York toward the rapid transition to renewables we desperately need,” the group said.

Subscribe to the Microgrid Knowledge newsletter for Part II of this article: The Utility Take on REV.

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About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com and EnergyEfficiencyMarkets.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.