New York regulators last week published a major order meant to form the backbone of the state's ambitious drive to reform its electricity grid to encourage growth of distributed, decentralized power resources.

The state's Public Service Commission issued its "track one" order to lay out the basic policy framework for how the "reforming the energy vision," or REV, will proceed by year's end.

In the order, the PSC effectively told traditional utilities that they will not be permitted to own renewable generation sources except in rare circumstances to, in theory, enhance competition and create markets that will allow on-site wind and rooftop solar to flourish.

The utilities' role will instead be to facilitate distribution of a more diverse and spread-out portfolio of power production assets, in a move that fundamentally reshapes how core electric and natural gas utilities have always conducted business as the central mover behind the grid. The directive envisions thousands of small power sources joining in on the action to replace baseload power.

The decision was made to wall off companies like Consolidated Edison and National Grid because there was a concern among renewable energy companies that if utilities were allowed to own small distributed sources, they would favor their own assets in the marketplace.


"By restricting utilities from owning local power generation and other energy resources, customers will benefit from a more competitive market, with utilities working and partnering with other companies and service providers," the PSC said in a release.

The commission also ordered utilities under its jurisdiction to complete implementation plans and required the companies to improve energy efficiency by the end of the year.

The REV effort has been promoted by Gov. Andrew Cuomo (D) as a leading-edge overhaul of how electricity markets operate and is being watched by other states already going the same direction or looking to follow in New York's footsteps.

A big part of the plan is to get customers more engaged in power demand by rolling out smart meters and providing incentives for residential users to build their own power sources to sell electrons back into the grid during peak periods.

The PSC said distributed resources -- including energy storage, efficiency, demand response and renewable generation -- will operate within a system that places them "on a competitive par with centralized options."

"Each utility will serve as the platform for interface among its customers, aggregators and the distribution system," explained the order. "Utilities will respond to new trends by adding value, thereby retaining customer base and the ability to raise capital on reasonable terms."

Utility ownership of these resources, it said, "will be the exception rather than the rule." When they are permitted to own a distributed asset, the companies will be restricted to recovery of actual costs.

"The landmark steps New York state is taking today will reorient both the electric industry and the ratemaking process toward a consumer-centered approach that harnesses new technologies and markets," said Audrey Zibelman, chairwoman of the PSC.

The utilities would not comment. Renewable advocates, on the other hand, were jubilant and said the order is necessary in any event to replace expiring policies.

"This ruling is a step toward providing the certainty needed for future development of grid-scale renewables -- like wind power and hydropower -- as the state's current program expires this year," said Anne Reynolds, executive director of the Alliance for Clean Energy New York. "Industry has been awaiting a signal that New York will have a long-term renewables policy to replace it."

Cuomo in a release said the directive is essential because the state, as funded by ratepayers, will have to spend $30 billion on infrastructure over the next decade, compared to $17 billion spent over the last 10 years.

Click here to read the order.