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New York State Energy Plan - Submitted Comments

Energy Coalition New York ("ECNY") consists of New York State's major gas and electric utility companies: Central Hudson Gas & Electric Corporation, Consolidated Edison Company of New York, Inc., National Fuel Gas Distribution Corporation, National Grid, New York State Electric & Gas Corporation, Orange and Rockland Utilities, Inc., and Rochester Gas and Electric Corporation. ECNY collectively employ more than 32,000 people, service more than 8.5 million customers, and pay more than $3 billion in state and local taxes, assessments, and fees. The ECNY member companies annually invest billions of dollars to make capital improvements to the electric and natural gas infrastructure located in New York State.

ECNY supports the direction and general objectives of the New York State Energy Plan. Implementation of the goals outlined in the plan is the focus of these comments.

A Modernized Grid Is Central to the Success in Meeting the State Energy Plan Objectives

Energy use in New York State is changing – creating both challenges and opportunities. Technology developments are, in part, creating pressure for these changes. These developments include increasing deployment of customer-sited generation (including renewable and conventional generation), growing customer energy efficiency and demand response technologies, and smart grid technologies, products, and services that make the grid more responsive and energy usage more transparent. At the same time, customer needs and expectations are changing, including the desire for increased control over energy use and costs, as well as expectations for a more resilient system in the face of the recent increase in extreme weather events. In addition to the inherent desire of the member companies of ECNY to address both technological developments and customer preferences, policy makers and regulators are questioning the current utility business model. A successful transition to a new model for the electricity and natural gas markets must leverage the capabilities of the grid and will require alignment between the state's regulatory framework and the state's policies on energy, the environment, and economic development.

A successful transition will require adoption of an economically viable regulatory structure. Utilities must have sufficient financial resources to maintain, operate, and invest in the grid. The draft State Energy Plan calls for the modernization of electric and gas delivery systems to replace aging infrastructure and ensure service quality and reliability with enhanced capabilities to integrate distributed energy resources. In addition, the design of the future grid will need to provide for network smart grid development, microgrids, balancing and voltage support needs, and voluntary load management – all integral aspects of the grid's pivotal role in distribution.

The capital investment needed by utilities to modernize the grid will require a new regulatory regime. As recognized by Governor Cuomo's Energy Highway initiative, the utility infrastructure must be updated to meet the challenges of both the marketplace and likelihood of recurring extreme weather conditions. Where joint utility investments are required a regulatory mechanism should enable the utilities to work together to apportion costs to enable capital projects to go forward with benefits on a statewide basis.

Utilities Will Play a Key Role in Capturing Value for All Customers

Technological advances in energy continue to expand, with smart grid technologies, increasing penetration of distributed generation, upgraded controls and communications. In order to effectively provide value to customers, most of these technology advances must be melded into the distribution grid. Energy distribution systems will continue to be important in delivering innovative technologies, as a support and integration system for distributed energy resources and as a default mechanism. Encouraging utilities to incorporate anticipated changes in technology and supply resources into their system planning efforts now will, after a period of time, result in potential opportunities for the utility and the customer to lower customers' bills.

The development of value-added services for energy consumers is an important avenue for the state and the utilities to explore. By affording utilities expanded opportunities to provide additional value-added services to their customers using the grid the state energy plan objectives can be met. However, the utility business model must be broadened for utilities to expand their ability to capture the necessary revenues from such value-added services. The utilities' pipeline into the customer should be monetized when used to deliver optional customer services. Without such opportunities, the cost of the grid will continue to increase for customers.

Utilities are the main point of customer contact for all things energy. ESCOs, energy developers, power producers, and others are not the primary contact point for customers. To achieve the state's policy objective of increased customer engagement in energy consumption and energy management the frequency and intensity of utility-customer interactions will need to significantly increase. It will be important to ensure that utilities are adequately compensated when these services are performed, particularly as more extensive contact is required to meet customer needs.

Experience demonstrates that energy efficiency solutions are most effectively managed and delivered by the utilities. Streamlined policies for energy efficiency, particularly with new technologies being developed, would positively impact energy consumption and demand response. The utilities' role should be central in effectuating energy efficiency with a flexible approach for program administration.

The State Should Support Equitable and Transparent Charges for Customers

It
is critical to have an equitable regulatory mechanism which will enable utilities to recover their fixed costs to operate and maintain the grid. Cost shifting among customers undermines the goal to maintain safe and reliable service. Therefore, the rate design needs to be evaluated to ensure not only is innovation encouraged but that the value of the grid is equitably apportioned among its users. This includes establishing an appropriate baseline which allocates cost among customers on an equitable basis.

Utility Business Models Should Be Provided Flexible Treatment

Policy objectives can be met more efficiently if utilities are afforded the opportunity to own and operate utility-scale renewable generation, particularly as such renewable resources are increasingly embedded in the fabric of the distribution system. Utilities have the skills and expertise to ensure that renewable generation is integrated into the system safely and at the most efficient and beneficial locations to ensure the overall integrity of the system. Utilities are also in the best position to provide renewable generation opportunities to customers with space and other limitations. Renewable generation also provides utilities with a potential revenue source that will inure to benefit the entire customer base.

Cost Impacts Must Be Monitored

Deploying the infrastructure required to enable the changes discussed in the State Energy Plan requires significant investments – by utilities and others. It will be important to assess the costs as well as the direct and indirect broad benefits of these changes, and to move forward in a way that provides net benefits to customers.

Taxes, assessments, and fees should be decoupled from utility bills. The cost of taxes, assessments, and fees creates a significant burden on the customer. Utility taxes and assessments are increasingly regressive and inequitable, particularly as the customer base for collection shrinks and as the amount of taxes and assessments are tied to usage. Customers that deploy distributed generation are able to use the grid for their benefit while paying minimal utility taxes, assessments and fees. Cost shifting based on net metering should be addressed to ensure the financial viability of the grid.

Lastly, ECNY advocates that all goals set forth in the State Energy Plan are measurable and identified as medium or long term goals to ensure appropriate focus and evaluation.

ECNY appreciates the opportunity to provide these comments.