On July 28, 2015, the New York Department of Public Service (DPS) issued a whitepaper on ratemaking and utility business models under the Reforming the Energy Vision (REV) Track Two proceeding, providing guidance and recommendations on ratemaking and utility model reforms. REV seeks to transform the utility regulatory structure by integrating greater levels of DER and empowering customers with better energy management options.
The financial interests of utilities currently do not align with the operational changes or transactive obligations required to improve energy delivery, including DER growth, thereby working against REV objectives. To support full-scale REV markets, the DPS wants to incentivize enhanced data access, the development of platform capabilities, and customer engagement. According to the DPS, these measures would facilitate near-term reduction in system peak and control of customer bills.
To align the earning opportunities of utilities with value creation for their customers, the DPS seeks to change the ratemaking models to provide alternatives to the current financial and institutional incentives and enable utilities to earn from activities that meet their service obligations while minimizing their customers’ bills. In doing so, the regulatory model must have adequate flexibility to adapt to the developing market. The DPS expects the demonstration projects required under the February 26 Track One framework will provide enough information to ensure that regulation is attuned to REV objectives.
New energy market activity under REV would depend on customer engagement and DER value identification. To this end, the rate design must include price signals that reflect long-term avoided costs and real-time value so as to provide sufficient information and compensation to spur customer interest to participate. Meanwhile, the DPS sees regulatory incentives that spur foundational investments as a bridge measure, intended to remain in force as long as they are effective and to be supplanted by more efficient and less expensive market-driven incentives over time