Superstorm Sandy not only brought significant damage to New York in 2012, but it also exposed the vulnerabilities within the state’s electric grid. While the public and policymakers were already interested in supporting a clean energy future, the storm also showed why, as the state made energy investments, it should prioritize technologies that could also provide greater resilience.

But it wasn’t just New York’s energy system that needed reform. Regulatory reform was needed as well. Shifting the state towards a more resilient energy future would require foundational changes to how the state’s electric utilities make energy investments.

At the same time, our organization—then known as Advanced Energy Economy (AEE)—partnered with the Massachusetts Institute of Technology’s Industrial Performance Center (MIT-IPC) on a series of CEO forums in 2013 that brought together leaders of electric utilities, advanced energy businesses, and regulatory agencies to discuss how new technologies and services can be adopted more rapidly in the electric power sector.

These convenings and new political will from then-Governor Andrew Cuomo, led to the New York Public Service Commission (PSC) launching its groundbreaking “Reforming the Energy Vision” (REV) proceeding in 2014, and issuing an initial Order in 2015, laying out a policy framework whereby utilities create and operate a modern, customer-focused, flexible grid that can leverage high levels of distributed energy resources (DERs), including energy efficiency, demand response, energy storage, onsite solar, wind, fuel cells and other distributed generation, and use those DERs to meet both customer and system needs, including through a competitive market framework. 

The initial Order was just the beginning of a process in which Advanced Energy United and its member companies had the opportunity to engage directly with the PSC and New York energy utilities to develop policies that suited all parties involved. Among the issues United pushed for: virtual power plant programs, a robust role for competitive market participants, changes to how utilities make data accessible, and new rules for how utilities operate and make money.

By 2017, 12 demonstration projects had been approved in New York with the purpose of testing new business models. By the end of the decade, New York had launched over forty new REV initiatives aimed at promoting renewable energy, heating homes with clean, efficient appliances, and financing programs to attract private capital.

In a related proceeding that United was heavily involved in, NY developed a Value of DER (VDER) tariff, a successor to net energy metering (NEM), that showed how states can successfully evolve DER compensation to align more closely with the value of services provided while still supporting a robust market.

While REV explored many bold regulatory reform concepts, many didn’t materialize into new state policy, and the initial proceedings never lived up to its “revolutionary” ambitions. But the REV proceeding led to several successful spin-off proceedings, and the ambition behind reforming utility incentives reverberates through the state’s regulatory processes to this day, especially in the state’s earnings adjustment mechanisms (EAMs), New York’s version of performance incentive mechanisms (PIMs).

New York’s EAMs tie a portion of utilities’ earnings to its performance on desired regulatory outcomes, such as metrics for peak reduction, energy efficiency, and interconnection. Broadly speaking, the metrics incentivize DER deployment and use by utilities, among other goals. Combined with other ratemaking changes, as well as ratemaking incentive mechanisms for non-wires alternatives (NWA), the creation of these performance mechanisms changed how DERs are valued by utilities and customers in New York.

For example, Con Edison’s residential managed charging EAM provided financial motivation for the utility to launch new outreach and education programs aimed at enrolling more customers, and ultimately reduced EV charging during peak hours. Advanced Energy United took part in the settlement discussions with ConEd in establishing this EAM. Another EAM is aimed at getting EV charging infrastructure interconnected more quickly, leading ConEd to make system upgrades, ultimately leading to faster connection times.

With this fundamentally different regulatory structure in place, and complemented by New York’s new procurement and investment goals – such as the storage and renewable targets carried out by the PSC and the New York State Energy Research and Development Authority (NYSERDA) – utilities were enabled in new ways to meet peak demand by supporting a growing competitive market for DERs and the services they can provide.

Additionally, New York’s leadership became a model for regulators and utilities across the country, and dockets related to utility business model reforms were taken up in many states, including California, Hawaii, Minnesota, Michigan, Massachusetts, Missouri, and Wisconsin. From our organization’s very beginning, Advanced Energy United has been committed to reforming the utility business model so that utilities across the country are re-oriented towards a consumer-centered approach that harnesses the incredible power of advanced energy technologies and market-based solutions.