Can a Utility Code of Conduct Keep Competition Fair in a ‘REV’ World?

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It’s a kind of déjà vu all over again in New York as the state tries to work out a utility code of conduct so that distributed energy companies are not shut out by dominant monopolies.

The New York Public Service Commission is encouraging market participants to provide input on utility rules for its Reforming the Energy Vision (REV), an evolving policy aimed at creating a market that encourages distributed energy.

Attempts to keep the playing field fair are nothing new in the state, which restructured its electric industry nearly two decades ago to allow retail competition and disallow utility ownership of generation. Then the focus was on opening the market to competitive retail suppliers. Now it’s expanded to a new crop of companies, those offering distributed energy: microgrids, solar, combined heat and power, and the like.

REV creates a platform to animate the market for distributed energy — elevate it actually — so that local energy becomes a major source of electricity.

How New York resolves the competitive issues is important because REV is being closely watched by other states looking for ways to improve efficiencies, drive down costs, ward off power outages and green the grid with renewables.

Under REV, New York intends to let utility affiliates compete to offer distributed energy. Not everyone likes this idea. Independent companies fear utilities will use their monopoly clout to cut out the competition.

Independent companies are especially concerned because the utility also will act as the administrator of the new distributed grid. They will manage the distributed system platform, or DSP, a crucial role.  NRG Energy described the DSP as a kind of “traffic cop” for the new grid in a recent filing.

The PSC has asked participants to weigh in on whether existing utility codes of conduct will suffice in the new REV world.

The Advanced Energy Economy Institute (AEEI) last week offered a series of recommended minimum guidelines to ensure fair competition.

They are listed below.  Are they enough to keep utility dominance in check? Or is more needed? Let us know your thoughts in the comments section below or on our LinkedIn Groups, Community Microgrids and Local Energy or Microgrid Knowledge.

Major Principles of the REV Code of Conduct for interactions between the utility/DSP and unregulated affiliates

  1. Independent Functioning
  • Separation of financial accounts
  • Separation of physical offices
  • No sharing of operating employees
  • Rules for transfer of employees to and from utility
  • Separation of compensation mechanisms for management between utility and affiliate
  1. Fairness
  • Information exchanged between affiliate and utility must be available to the market in the same timeframe, form and substance
  • No interconnection preferences or difference in terms for affiliates
  • Sales referral neutrality by utility
  • No joint marketing between utility and affiliates
  • Non-disclosure of information supplied by competitive DER providers to utility affiliates
  1. Pricing and Cost Allocation
  • Adherence to cost allocation standards — affiliate must pay fully loaded prices for utility resources
  • No favorable pricing or terms for affiliates
  • Transfer of assets from utility to affiliate standards
  1. Avoiding Unresolvable Market Power Conflicts
  • If affiliate is allowed to offer competitive services within its parent utility territory, there must be:
    • A cap on affiliate market share for the utility territory and on a circuit level
    • A prohibition on the affiliate’s use of the utility’s name or resources
    • No preferential access to data
    • Our preference is that affiliates should not be allowed to participate in RFP solicitations by utility/DSP If utility procurements involving an affiliate are allowed, an independent party must select winning bids.
  1. Transparency
  • Limitations on Directors serving on both utility and affiliate boards
  • Limitations on Management supervising both affiliate and utility employees
  • Officers of utility and affiliate file annual affidavits of compliance with code of conduct
  • Utility has a reporting requirement to ensure compliance with code
  • A complaint procedure exists for citizens who feel aggrieved by possible violation of code
  • Annual code compliance training for employees
  • Prohibition on joint legal representation where conflict may exist
  • Rights for PSC audits
  • Enforcement procedure for violations of code
  • Streamlined dispute resolution for complaints on violations of the code

The AEE recommendations also include code of conduct principles for interactions between the utilty/DSP and any department in the utility that offers competitive services.

The full AEE filing is available on the NY PSC site, docket 14-­‐M-­‐0101.

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Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.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.

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