Evolution of REV: New York PSC Chair Audrey Zibelman says 2016 is the year of execution
Consumers can expect to begin to see the tangible benefits from REV by the end of 2018, she said
Audrey Zibelman is no stranger to shaking up the utility sector.
Before she took on the role as New York’s chief utility regulator, she helped create the nation's first wholesale electricity market as Chief Operating Officer of the PJM Interconnection.
Now Chairman of the New York Public Service Commission, Zibelman is overseeing the most single most holistic overhaul of the utility business model in the United States: the Reforming the Energy Vision initiative.
Dubbed REV, the initiative was launched a year into her tenure as Chairman of the New York Public Service Commission in 2014. It aims to transform utilities into “Distribution System Platform (DSP) Providers,” — akin to an air traffic controller overseeing deployment of distributed energy resources on the grid.
Now halfway into her six-year tenure as Chairman of the New York Public Service Commission, Zibelman reflected on the first two years of the REV docket in an interview with Utility Dive.
After a series of preliminary hearings, workshops and comment periods, the docket is transitioning to the more practical aspects of reform, she said. By 2018, the PSC chair expects the proceeding to be in full implementation mode.
“We're going to see significant returns coming from demonstrations from programs,” Zibelman told Utility Dive. “What I expect what we'll be seeing in 2018, [is that] people will get a much clearer opportunity to see how things can change, and many more New Yorkers will have positive experiences with REV.”
“Customers will see us moving from the theoretical to the execution,” Zibelman added. “We’ll expect most of the regulatory heavy lifting done by then.”
Those living in New York City at the time will recall the massive blackouts caused by Hurricane Sandy in 2012, two years before the beginning of REV. As cleanup operations concluded, conversations emerged about grid resiliency, and New York officials saw an opportunity to change how the power system worked.
“[We saw] the effects of climate change from Hurricane Sandy and major climatic events ... so we're seeing that change,” Zibelman said.
Along with the hurricane, more frequent power outages and stagnant electric demand also contributed to the beginning of REV. After Sandy, utility officials and policymakers in New York faced a new reality, Zibelman said — the grid was old and needed extensive (and expensive) upgrades to ensure resiliency against increasingly severe weather patterns while complying with carbon goals.
When she was tapped for the job as Chairman of the New York Public Service Commission in 2013, it “was clear we had to change things,” Zibelman said. “I was so excited about the vision the governor had ... to take the business opportunity to make things better.”
The REV initiative is a logical extension of the deregulation evolution that started in the 1990s, Zibelman told Utility Dive two years ago when the proceeding first rolled out. If utilities were to enhance the sustainability and resiliancy of the power system, she said, regulators would need to remove barriers for the deployment of third-party resources and services.
But instead of tackling just one piece of the puzzle — such as examining incentives to integrate distributed energy resources onto the grid — the REV initiative chooses a holistic approach to rethink the utility business model.
The REV is divided into two tracks. Track one zeroes in on developing markets for distributed energy resources while formulating the role for utilities to become DSIP providers. Track two focuses on creating new revenue models for utilities. Central to that goal is aligning utility profits with energy goals such as reducing demand, avoiding costly infrastructure projects and growing DERs.
“We also realize that unless utilities are allowed to take advantage of new technologies and evolve their business model, you can end up going into the wrong places and create inefficiencies rather than efficiencies,” Zibelman said. “To do that, however, we recognize the earnings opportunities have to be significant in the sense the utilities can see it as a real business, not something to satisfy a regulatory mandate. We also know that is going to take time — to rebuild the asset base and rethink the model.”
Last year, the state utilities rolled out several demonstration projects as early examples to test integration of distributed resources and third-party energy services. But many of those projects are still in the deployment phase, and most of the proceedings to that point had focused on preliminary regulatory work.
In the first half of 2016, however, some of the goals are starting to harden into reality. Last month, New York utilities filed their Distributed Service Implementation Plans (DSIPs) — outlines for how they will alter internal operations to encourage DER deployment and partnerships with third-party providers.
In May, regulators also introduced new revenue models allowing utilities to earn a rate of return when they deploy DERs and efficiency from private developers rather than building their own power infrastructure.
"We've certainly have laid the groundwork, and this year we're really working on the execution,” Zibelman said. “I’m certainly excited about the clean energy standards and our initiative to both get to 50% renewables [by 2030] and address concerns about prematurely retiring nuclear plants.”
'A very different atmosphere'
2016 may only be halfway over, but already a lot has been packed in this year, Zibelman pointed out.
Outside of the REV docket itself, two biggest, and overarching, events are more ambitious climate goals and a groundbreaking collaboration between utilities and solar companies to transition from net metering.
Earlier this year, Gov. Andrew Cuomo (D) directed the PSC to enact a Clean Energy Standard aimed at requiring power producers to source 50% of their energy from renewable resources by 2030. In May, lawmakers introduced a bill to codify Gov. Cuomo’s climate change goals and require the state to reduce its greenhouse gas emissions 80% by 2045, eliminating them completely by 2050.
The order dovetailed nicely with REV’s goal to decarbonize the grid, Zibelman told Utility Dive. Part of the Standard includes incentives to protect the state's struggling nuclear generation. Regulators released details on that subsidy plan earlier this week.
“Without question, the fact of the matter is our ability to get to 50% renewables by 2030 but more importantly, our objective to reduce carbon over 80% over 1990s standards would be significantly more difficult if we didn't have a bridge for the nuclear units toward the end of their lifetime,” Zibelman said.
In 2015, Entergy announced it would seek to close its 838 MW Fitzpatrick plant by early 2017 as cheap natural gas and renewable power undercut its economics in wholesale markets. Gov. Cuomo is fighting to keep the plant open, along with Exelon's Ginna and Nine Mile Point point plants. Nuclear power comprises more than 30% of the state's energy consumption.
On July 11, the PSC staff mapped out a subsidy designed to preserve three upstate plants. The subsidies for the Fitzpatrick, Ginna and Nine Mile facilities would be enacted for 12 years, starting at up to $482 million a year initially and exceeding $800 million in the final years.
Finding common ground between common adversaries was another milestone in the year, something other states have struggled to do.
In April, six utilities and three solar companies shook on a deal to transition away from net metering policy and toward a set of declining incentives and fees for developers. Dubbed the "Solar Progress Partnership," the deal brought together members from both sides of the distribution grid, including Consolidated Edison, SolarCity, SunEdison, Central Hudson Gas & Electric, New York State Electric & Gas, National Grid, Rochester Gas and Electric, Orange and Rockland Utilities, and SunPower Corp.
But getting to that point was not easy.
“We like the construct of net energy metering from the clear path of creating a business around distributed solar so we didn't want to disrupt the business model, but at the same time we recognized [the need] very clearly making sure that the full value of these resources are monetized in a transactive grid and we needed to get to a solution very quickly,” Zibelman said. “We set up a framework and said, rather than the state coming and say ‘this is what we are going to do,’ everyone would be better off if everyone got together and said this is what we are going to do. They are better off discussing and looking for solutions versus delaying the inevitable and have us step in and decide.”
It marked a shift in tone and attitude among solar companies, and utilities as well. Utilities, Zibelman said, are slowly evolving from established entities with little to none entrepreneurial spirit.
“If you talk to them, it's a very different atmosphere,” Zibelman added. “Much more innovative and entrepreneurial. I don't think they are riding skateboards in the hall yet but definitely working in much more collaborative way.”
The evolution in mind is something Zibelman expects to see in the upcoming year as she faces more filings and deadlines.
In the big picture, Zibelman can see a complete shakeup of the utility business model. But to get there takes incremental steps. In the next few months, the PSC’s calendar is filled with dates to discuss a new tariff for community choice aggregation, updates on demonstration projects and comments on the Clean Energy Standard and the initial DSIP outlines.
If the proceeding stays on course, the grid in 2018 will be cleaner, with more DERs, while utilities and DER providers start to see how they can make money.
Conscious how REV has captured the imagination of the nation, Zibelman is aware every development and misstep is scrutinized by other states.
“The more states that take a look at what we’re doing — how do you use more distributed resources better, how do you make it part of the grid — it creates greater market opportunities,” Zibelman said. Opportunities which can reel in more innovators and investors, which can only open the door for more conversations with other states.
Electricity is a “product,” she said, and it should be the same regardless of which state or regulatory entity oversees it.
“It should work the same everywhere so if somebody has a product that is great for consumers, you want them to be able to sell it in New York and and in Minneapolis and Chicago and they don't have to worry it's a whole different set of rules,” Zibelman said.
But the biggest hurdle to jump is a long-term one: staying focused on the long term goals.
“I think the state is taking on extremely ambitious goals,” Zibelman said. “There's always the opportunity for folks to take one thing that doesn't work and say then ‘well nothing's working.’ Anytime you are trying to change an industry and trying to change the status quo, there are people who are threatened. So our biggest challenge is to stay focused, be very clear on what [ultimately is] the prize and celebrate the wins and not be afraid to admit when things don't work.
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