FTC Staff Advises New York State Public Service Commission To Increase Competition in Proposal to Transform Electric Distribution System

The Federal Trade Commission staff submitted a reply comment in response to certain comments filed with the New York State Public Service Commission (NY PSC) regarding the NY PSC staff’s proposal to transform the function of the electric distribution system that serves residential, commercial, and industrial electricity customers in New York.

The comment, submitted by staff of the FTC’s Office of the General Counsel, Office of Policy Planning, and Bureau of Economics, recommends revisions to the NY PSC’s staff’s “straw proposal” on issues in the Reforming the Energy Vision project.

Under the NY PSC staff’s proposal, the NY PSC would authorize the establishment of entities known as Distributed System Platform (DSP) operators, which would be responsible for balancing electricity supply and demand on local, lower-voltage distribution lines. The NY PSC staff anticipates that this would foster the deployment of more innovative types of electricity resources, such as customer-owned solar arrays, energy storage units, and demand reductions offered by customers. These innovations, known as “distributed energy resources” (DERs), would benefit customers through lower electric system costs, increased reliability, improved resiliency, and lower environmental impacts.

The revisions recommended by FTC staff would address a key concern regarding competition in the electric distribution system: distribution utilities that serve as their own DSP operators have the incentive and ability to raise the costs and risks for rival, independent DERs.

The FTC staff comment recommends the use of a competitive procurement process to select the entities that will serve as DSP operators. This would allow a variety of bidders to show how they could keep administrative costs low, remove incentives to discriminate against independent DERs, and provide other benefits to electricity customers.

The FTC staff comment also encourages the NY PSC to use a competitive procurement approach to appoint independent market monitors to evaluate the performance of DSP operators, and suggests ways to improve the performance of the electric distribution system. In the event a distribution utility ends up serving as its own DSP operator, the comment recommends that the NY PSC consider disclosures to potential DER investors to avoid deception of customers and third parties contemplating new or expanded DER investments, as well as performance-based incentives to avoid discrimination.

The Commission vote authorizing the staff comment was 4-0-1, with Commissioner Julie Brill abstaining. (FTC File No. V140012; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702).