New York REV shows utilities and regulators how to manage change
Eleanor Stein, a former REV project manager, offers insight on how coordination between utilities, regulators, and the public can boost trust in the regulatory process
Editor's note: The following is a guest post from Eleanor Stein, a former New York Public Service Commission Administrative Law Judge and REV project manager from 2014-2015. If you or one of your colleagues is interested in submitting a viewpoint article, please review these guidelines.
In late October 2012, Superstorm Sandy caused $66 billion in damage and 159 deaths, 50 in New York State. New York City’s Consolidated Edison (Con Ed) was badly hit by storm flooding, with resulting power outages lasting a week or longer, impacting over one million customers. Lower Manhattan was dark: residents began referring to their neighborhood as “SoPo” – South of Power.
But some institutions kept their lights and heat on. Schools, hospitals, housing developments, and community centers with distributed generation (DG) microgrids – primarily combined heat and power (CHP), cogeneration, or solar systems with “islanding” capacity – provided resources for emergency services and refuge for New Yorkers, but exposed critical problems with utility infrastructure.
Coalitions of renewable and DG industries, environmental organizations, academia, city government, and customer advocates joined a year-long resiliency and adaptation collaborative process, recommending future resolutions and examining long-term climate change impacts in infrastructure planning and risk assessment. In time most recommendations were adopted by the New York Public Service Commission (PSC), dramatically laying a foundation for New York’s Reforming the Energy Vision (REV) initiative.
DG’s resilience potential shifted utility and regulatory focus from “storm hardening” utility infrastructure in place to integrating DG resources on a far larger scale, developing microgrid implementation plans, and prompting demonstration projects to test DG’s potential as an alternative to utility capital investment.
REV’s far-reaching response recognizes shortcomings of utility business and government regulatory models in meeting the urgency of resilience planning and major stressors on the generation, distribution, and sale of electricity. As an administrative law judge for the PSC from 1994-2014, and the project manager for REV in 2014-2015, I witnessed firsthand four elements contributing to its development and share them here to help others manage change.
The multifaceted conditions driving innovation in New York apply to many other states as climate change renders some traditional forecasting and risk assessment tools obsolete, but the factors driving REV and confronting other jurisdictions extend beyond climate. Like many Northeast and Midwest states, New York has an aging utility infrastructure; an estimated $30 billion in investment is needed in the next ten years just to maintain the current network, but existing business models weren’t incentivized to build out DG.
The shape of electricity load is also changing in New York. Although peak demand is rising, sales growth has been flat, so an ever-greater percentage of investment supports peak usage. Customers want more control over their own energy usage and bills, new services, and greater reliability. National and state climate change policies buffet utility planners, requiring large-scale entry of renewable resources and demand reduction measures
Leaders and institutions function within their concrete conditions.. Remember mid-1990s conflicts concerning long-distance and local telecommunications provider entry into each other’s markets? Within months, distinctions were obliterated and conflicts became obsolete as telecommunications architecture transformed. At that time the context was profound technological change, but technology is not the only change agent: Today’s change agenda is no less fundamental.
Solving these medium- and long-term problems requires transforming conventional industry and regulatory institutions through commitment from key decision-makers. We cannot reach carbon targets, for example, by incrementally adding renewable energy resources at current scale. New York REV demonstrates successfully managing large-scale change through commitment, collaboration, and consultation.
Unlike some other states, REV reform has been an executive, not legislative program. PSC Chair Audrey Zibelman, Chair for Energy and Finance Richard Kauffman, and Governor Andrew M. Cuomo have shown commitment to change through ambitious policy leadership, continuous pilot project demonstration of distributed energy resources, and public funding for carbon reduction technologies. This commitment empowers regulators with flexibility and speed of execution. However, the absence of legislation adopting aggressive carbon emission reductions puts today’s REV initiatives at the mercy of future administrations and means fewer enforcement tools, even as other states and cities strike their own balance.
REV’s 2015 regulatory framework decision concluded utilities should assume a new distributed system platform role coordinating and integrating distributed resources into grid operation, and be rewarded for success via incentive designs suggested in a staff white paper now under consideration by the PSC. These documents sent a strong signal to utilities and market players that renewable generation integration and load reduction is coming.
REV also envisions shifting from managing load increase by constructing utility substations or fossil fuel generation to deploying new DG in varying combinations across a fully integrated network of technologies to meet or reduce demand. Here, the PSC required utilities to provide demonstration projects trying new approaches even before REV pricing and incentives were fully developed.
A Con Ed project exemplifies this trend. After identifying the need for 50 megawatts of supply and originally proposing a $1.3 billion substation to meet growing demand, the utility is considering dozens of non-traditional demand reduction and DG solutions. This REV-supported approach should reduce costs, defer utility investment, and reduce emissions.
The PSC also set a five-year budget for energy efficiency, adopted a benefit/cost framework incorporating a social cost of carbon, and is considering utility mandates to guarantee large-scale renewable development. Successive decisions have broadened community access to share in, decide about, and benefit from distributed renewable resources.
Recommendation: Decisive and consistent policy commitment was essential to conveying long-term investment opportunities to new utility and distributed energy resource developers. The political will to follow general policies with roadmaps made REV real, but executive commitment was coupled with PSC flexibility in adapting regulation based on demonstrated results, stakeholder response, public concerns, and economic pressures.
Chair Zibelman’s leadership drove the creation of a core REV team for policy discussion and implementation. As REV-related proceedings and projects proliferated, it became apparent REV would affect almost all agency work, from renewables siting to rate cases to cost calculations, and coordination was now a collective responsibility.
The PSC’s collaborative approach facilitated large-scale change management. Internal collaboration was intentionally interdisciplinary, with an ambition to engage newer, younger staff along with organizational leaders. The PSC also reached beyond the agency by embracing strategic partners in analytical work, outreach efforts, and agency training.
Stakeholders and expert collaboration provided enormous value and expanded regulatory capacity to manage large-scale change. For example, a collaborative working group was formed to tackle the task of assessing market design and platform technology options needed for REV to take shape. This dedicated volunteer group facilitated by staff, the Rocky Mountain Institute, and NYS Smart Grid Consortium met briefly but intensively and provided industry, U.S. Department of Energy National Lab, and academic expertise expanding agency staff understanding.
Recommendation: Collaboration with strategic partners and across disciplines harnessed creative thinking and encouraged new ideas while mobilizing internal support for new policies. External collaboration to tap the expertise of National Labs, academics, and thinkers with a national and global perspective – consistent with transparency and confidentiality requirements – expanded PSC capacity to encompass the larger world of experience and ideas.
The PSC bolstered collaboration by consulting with experts and stakeholders within and outside the state to learn best practices, incorporate public interest, and build public support.
To integrate best practices, the PSC tapped the rich vein of available academic, industry, and advocate literature on carbon regulation and costs, performance-based regulation, and comparable models from other jurisdictions. DOE National Labs joined regulators, industry, and government and environmental representatives from other countries (including the UK and Germany) to bolster PSC thinking.
The PSC also consulted traditional and non-traditional stakeholders while maintaining an open door for input and discussion with industry, including utilities and distributed resource providers. However, outside consultations included stakeholders not often present in utility matters: low-income consumer advocates, trade unions, community organizations and environmental justice representatives.
A new approach expanded these consultations beyond one-time meetings or formal public hearings to institutionalized sessions with environmental justice and low-income customer groups for regulators and for at least one utility. When developing distributed energy resources, community participation is key.
In another extraordinary commitment to public engagement, agency teams discussed REV in over a dozen cities in 2015-2016, covering low-income customer concerns and regulatory decision-making on costs and incentives. Such public participation helped the PSC discover and respond to widespread interest throughout New York in harnessing renewable distributed generation and energy efficiency, and profoundly informed Commission decision-making.
The 2015 public statement hearings my team organized in eight cities featured calls for increased renewables and energy efficiency spending, and a plan to develop large-scale renewables. In response, the Commission instituted a new track based on this public input, and committed to further community outreach.
Consultation also took the form of in-reach: Workshops, trainings, videos, and conversations open to all PSC staff to solidify REV direction and urgency of change while introducing new concepts for those carrying out the policies in practice.
Recommendation: Outreach to experts, public interest groups, and communities was essential to building support for REV – but it was a two-way learning process. Reaching out to public and private stakeholders identified electricity system priorities, creating confidence large-scale change creates new value for customers. Consistent engagement with affected communities by utilities and regulators identified potential conflicts early on and provided communities a stake in distributed resources.
Large-scale change – especially moving away from fossil fuels – is hard to imagine. But in the context of full deployment of information technology, a low-carbon, more distributed, modernized system of electric generation and distribution is within our grasp. New York’s experience is based on specific conditions – utilities are no longer vertically integrated, the state is part of the Northeast Regional Greenhouse Gas Initiative (RGGI), and its generation resources are largely natural gas, large hydro and nuclear – but the REV process lessons learned about managing change can be applied almost anywhere.
Any regulator or utility wrestling with how to change our energy system to support a cleaner and distributed future, must remember to look outward for inspiration. Models in other states and countries provide ideas, we can tap each other’s available wealth of expertise via consultation, and we can mobilize necessary commitment and creativity through collaborative efforts to change.
Eleanor Stein teaches law of climate change; she is a former administrative law judge and REV Project Manager for the New York Public Service Commission and an expert for America’s Power Plan.
Thank you to Elizabeth Zelljadt, Michael Mehling, Sonia Aggarwal, Eric Gimon, and Michael O’Boyle for their input on this piece.