5 REV Initiatives and their Impact

When the NY Department of Public Services’ (PSC) released the 66-page report (REV) in April 2014, it introduced a new way of thinking for utility companies. According to the report, its recommendations will lead to “regulatory changes that promote more efficient use of energy, deeper penetration of renewable energy resources” and wider deployment of “distributed energy resources.” In fact, REV is being touted by many industry leaders as the model for future efficiency policies across the country. REV may have been born in NY, but its impact will be felt far and wide as forward-thinking utilities begin to implement many of the REV-inspired initiatives.

More specifically, the NY PSC set out to address the following key questions (as excerpted from the report):

  • What should be the role of the distribution utilities in enabling system-wide efficiency and market-based deployment of distributed energy resources and load management?
  • What changes can and should be made in the current regulatory, tariff, and market design and incentive structures to better align utility interests with achieving energy policy objectives?

With this framework in mind, they identified five key policy objectives. Here’s what you need to know about each:

1. Customer Education and Knowledge

Currently, a customer’s visibility into energy usage consists of a bill showing the number of KWh used, the per-KWh rate, and total cost of service for that billing period.

REV encourages utilities to equip customers with tools that support effective management of their total energy bill. For instance, instead of simply showing how much was used in a given month, the bill may provide visibility into how the energy was used, when it was used, and how usage compares to other consumers with similar facilities. This allows customers to make structured and intelligent decisions about upgrades and adjustments for best gains in efficiency, such as:

  • Scheduling usage times – example: when to turn parking lights on and off during the night
  • What equipment is used – example: shutting off the heater or air conditioner depending on the season
  • Which system parts to improve or upgrade – example: transitioning to LED lights

2. Market Animation and Leverage of Ratepayer Contributions

Contributions by ratepayers represent the largest source of revenue for utilities. Traditionally, utilities have applied ratepayer contributions to the cost of generation, upgrades, and new facilities. These funds also support ancillary services such as meter reading, line repairs, and maintenance.

The REV initiative changes this completely with new set guidelines for achieving greater efficiency from existing ratepayer contributions by opening the contracting of ancillary services to the open market. By accessing market forces for these services, utilities can drive down the cost to ratepayers. For NY, REV also sets in place standards for ratepayer increases that are based on effective market animation and efficient use of contributions.

3. System-Wide Efficiency

REV also calls for utilities to examine not only how efficiency is managed and controlled at the customer level, but also across the system. For example, in order to service customers during peak energy use times, many utilities maintain excess capacity that costs hundreds of millions of ratepayer dollars per year. REV calls for examination of how alternative sources of power—wind, solar, and other sources formerly considered “fringeâ€â€”can create a more flexible and efficient system. Simultaneously, it calls for utilities to audit internal and external costs across the system to seek greater efficiency.

4. Fuel and Resource Diversity

Hand-in-hand with system-wide efficiency measures, REV calls for utilities to consider alternative sources of energy as part of the total system. It establishes a priority for seeking new energy sources, starting with efficiency, and moving down through each resource according to a formula that takes into account cleanness, efficiency, cost, and other factors.

5. System Reliability and Resiliency

In the aftermath of Hurricane Sandy, millions of New York electricity users were left without power for weeks. As a result, many customers have sought out alternative, distributed systems of power, and some have disengaged from the electric grid altogether.

While disengagement from the electric grid can provide a satisfactory solution to individuals who can afford to do so, it creates an uneven distribution of resources at the cost of those who cannot. Further, it represents a significant threat to the ongoing viability and relevance of the centralized utility system.

 

REV outlines an approach for creating a distributed system of generation and distribution that is more resilient and reliable. Such a system will even out the inequality and maintain the relevance and viability of those utilities that adopt this approach.

REV aims to help utilities better their strategies and implement programs that will help them reach the standards that are sure to arise from this initiative. With these 5 new objectives in mind, utilities can redefine the way they interact with energy in a way that will benefit themselves and customers alike.

 

 

 

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