Ohio's REV: PUCO to explore grid modernization, utility reform in PowerForward initiative
Unlike other initiatives, which began with an end goal in mind, PUCO Chair Asim Haque says his proceeding will be more 'exploratory' at the outset
The Public Utilities Commission of Ohio (PUCO) is launching a regulatory proceeding to review technological and regulatory innovations related to utility grid modernization.
Dubbed “PowerForward,” the initiative aims "to chart a path forward for future grid modernization projects, innovative regulations and forward-thinking policies" that could later be integrated into utility business practices, according to a PUCO release.
In particular, the initiative seeks to understand how changes to utility regulation and revenue models could enhance the customer experience, such as through the deployment of distributed resources and efficiency programs.
The initiative will be split into three parts, beginning with three days of technical conferences in April. In that phase, the proceeding will focus on “creating a venue for a comprehensive review of all things innovation — technological and regulatory,” PUCO Chairman Asim Haque told Utility Dive.
But, he stressed, PowerForward is more than a fact-finding mission. As the proceeding progresses, Haque expects PUCO regulators will apply its findings to individual utility proposals such as grid planning and rate cases.
“A technology review just for the sake of a technology review, that won’t get us to where we need to be,” Haque told Utility Dive. “We need to find a way to incent this technology to be deployed, so how we go about that and how we go about the ratemaking is something that needs to be explored.”
Haque said PowerForward will address many of the issues discussed in utility reform dockets elsewhere in the United States, such as New York’s Reforming the Energy Vision, which seeks to remove utility disincentives toward the deployment of distributed resources.
“The goose is not cooked here...we have not said we are pushing the docket for DERs or efficiency or anything. We want to see what’s out there.”
Chairman of the Public Utilities Commission of Ohio
But, he added, PUCO going into the process with “eyes wide open,” and has no preconceived notions of what grid modernization will mean for utility and regulatory models.
“The goose is not cooked here,” Haque said. “We have not said we are pushing the docket for DERs or efficiency or anything. We want to see what’s out there.”
States look to utility reform
Haque’s Ohio is far from alone in investigating new business models for utilities.
Regulatory proceedings to reform the traditional utility model are taking hold in a number of states as regulators look to remove disincentives to the deployment of distributed resources and demand management programs.
Under traditional cost-of-service regulation, utilities meet power system needs by deploying infrastructure like substations and wires, earning a rate of return from regulators for their investments.
That model, however, does not provide an incentive for utilities to deploy distributed resources or efficiency programs to meet the same grid needs, which can often be more cost-effective and environmentally sustainable.
In response, a number of states are reviewing how they regulate utility revenue models, testing new ways to incentivize non-wire alternatives for grid modernization.
Last year, New York instituted new revenue models for utilities in its Reforming the Energy Vision docket, allowing companies to earn a rate of return not just on traditional investments, but DER deployment as well. California, which opened its first regulatory docket on DERs in 1997, is currently considering a similar proposal as a part of a "DER mega-proceeding."
While those states have captured the most headlines, the push for business model reform has spread elsewhere, to states like Hawaii, Minnesota, Rhode Island, Massachusetts and the District of Columbia.
Now Chairman Haque wants to add Ohio to that list, but he said his effort will be more “exploratory” than reforms in other states, particularly New York.
“REV is a trailblazing proceeding,” Haque said, but it was envisioned with an end goal in mind. In 2014, New York regulators launched the proceeding with the explicit goal to turn utilities into distribution platform providers — impartial operators of the grid that facilitate DER interconnection and the development of distributed energy markets.
“In my mind, this is our REV, but it’s far different than what the New York Commission proposed … we’re going to look at the end game first.”
Chaiman of the Public Utilities Commission of Ohio
By contrast, Haque said the PowerForward technical conferences will allow stakeholders to influence what that end goal of the proceeding will be, after which the initiative will shift to understanding how to achieve it through technological adoption and regulatory reforms.
“In my mind, this is our REV,” Haque said, “but it’s far different than what the New York Commission proposed … we’re going to look at the end game first.”
Three stages of grid mod
The PowerForward initiative is scheduled to span three key phases, reaching into 2018.
The first phase — “a glimpse into the future” — involves the conferences on April 18, 19 and 20. The gatherings will involve presentations from national utility experts to “give Ohioans a glimpse of what the energy future could be,” Haque said.
Those conferences will help regulators determine the vision for the PowerForward docket ahead of the second phase of the proceeding, scheduled for July. At that point, regulators will address which technologies will be necessary to make the vision a reality.
Finally, in a third phase of the proceeding, regulators will address how reforms to utility rate designs, revenue models and other business practices could deliver on the goals of the docket. That stage of the proceeding is scheduled for “late fall,” according to Haque, and will likely reach into 2018.
At the end of the proceeding, Haque plans to have PUCO release a document outlining how regulators envision the future of the state’s power grid, potentially including recommendations for utility reforms and changes to state law.
“Our plan is to actually provide our view as a commission on what will work as a state of Ohio,” Haque said.
Proceeding a longstanding goal for Haque
Launching a grid modernization proceeding has been one of Haque’s central goals since he took leadership of the regulatory body in 2016.
In June of last year, the newly-minted PUCO chair told Utility Dive he intended to launch a utility reform docket after the commission worked through contentious proposals for subsidies to aging coal and nuclear plants owned by FirstEnergy and AEP.
Those issues are not completely resolved, but FERC's rejection of the generation subsidies last year led the utilities to scale back their proposals and sell some of the plants, allowing regulators some breathing room.
“I think we have largely taken care of some of our major cases,” Haque said. “We have some rehearings and further comments to review ... but the general utility populace understands where those cases are headed based on initial orders.”
Going forward, Haque said he intends to focus PUCO’s efforts on the distribution system and consumers, while leaving contentious issues of generation subsidies, renewable energy supports and the potential re-regulation of Ohio power markets to the legislature.
“Largely speaking, the PUCO is going to focus on the wires — the distribution system — and consumers and that will be our drive going forward,” he said.
The PUCO chair said he has received positive feedback from sector stakeholders at the prospect of a grid modernization docket, including the state’s regulated utilities.
“They understand that this is where the industry is heading,” Haque said.
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