District of Columbia Considers New Regulated Entity: The Microgrid Operator

A report released late last week for the nation’s capital calls for a new regulated entity known as a microgrid operator, part of the city’s far-reaching effort to modernize its electric grid.

The 433-page report came out of a multi-year effort launched in June 2015 by the Public Service Commission of the District of Columbia. The effort was later named Modernizing the Energy Delivery System for Increased Sustainability or MEDSIS

The city had faced something of a crisis — or at last embarrassment — when in April 2015 several key buildings lost power, including the White House, the Smithsonian, the Department of Energy, the Justice Department, the University of Maryland and parts of the subway.

The multi-stage proceeding that followed brought together 242 stakeholders over the last year to participate in a series of working groups. The recommendations are compiled in the report, which focuses not only on microgrids but also related distributed energy issues involving non-wires alternatives, data and information, rate design, and customer service.

Under the microgrid proposal, the public service commission would require that any microgrid in the city that has multiple customers be run by a regulated operator. Microgrids with just one customer would not need an operator.

What a microgrid operator is not

The microgrid operator would be neither an electric utility nor a competitive retail supplier, but another kind of entity, regulated under a “light touch” — at least as advocated by the district’s Department of Energy and Environment. That means the operator would ensure the microgrid complies with the district’s energy goals, but not face the level of scrutiny that a utility does.

The Microgrid Resources Coalition (MRC), an advocacy group for microgrids, supports the idea of a microgrid operator. The report described the MRC vision as allowing an operator to:

• Arrange for the operations and maintenance services
• Coordinate operations and offtake of on-site distributed energy resources
• Coordinate the operations of the microgrid distribution system
• Arrange for microgrid metering configurations
• Retain an electricity supplier for imports as well as to manage the billing of microgrid users
• Retain a curtailment service provider or another type of PJM market integrator/power marketer

Utility interests, generally oppose the idea of light regulation for a microgrid operator, according to the report.

Undermines monopoly?

Pepco, which serves 883,000 customers in the district and Maryland, says the idea undermines the Pepco monopoly. The utility also argues in the proceeding that the commission should regulate microgrid retail rates as it does utility rates.

The Edison Electric Institute, an advocacy organization for investor-owned utilities, says that if a microgrid provides the same service as Pepco then it should be subject to the same type and level of regulation as the utility.

The report proposes the commission decide on appropriate regulation for microgrids pertaining to consumer rights and responsibilities, customer protection, customer choice, electricity quality of service, renewable portfolio standards, fuel mix/emissions requirements, construction and permitting, safety and electric code standards.

The report also contemplates the commission creating a microgrid tariff.

The tariff transaction would be between a microgrid customer and the utility and could include: fixed charges, time-of-use charges, volumetric charges, payments and/or credits for export, and demand charges.

The DOEE supports tariffs that accounts for benefits provided to the macrogrid by the microgrid and benefits provided to the microgrid by the macrogrid. This would include the value of microgrid resilience.

Resilience factored into tariff

“Resilience value is a critical part of the value stack of microgrids. DOEE believes it is untenable to create a microgrid tariff that does not capture, in some way, the value of resiliency,” says in the report.

Determining a resilience value isn’t easy, the report says, but that the commission should attempt to do so for at least some types of microgrids, such as those serving commercial operations.

The report also explores utility cost recovery of microgrids, inconnection rules, and use of city funds for microgrid pilot projects.

The recommendations in the report require commission action. The report was prepared for the commission by the Smart Electric Power Alliance and is available on the commission site, 

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