Comparing NYS and CA: Blog 1 – Series Overview
This is the first in a series of blogs comparing the New York State and Californian energy and regulatory policies
Catherine Mitchell, IGov Team, 14th June 2017
IGov is uploading a series of blogs over the coming week to compare New York State (NYS) energy governance with Californian (CA) energy governance. This first blog provides an introduction to the series. The 2nd blog is an update of the New York State Reforming the Energy Vision (NY REV). IGov has previously written three blogs about the NY REV: 2014, 2015 and 2016. The 3rd blog sets out Californian energy and regulatory policy. The 4th blog compares the fundamental principles and characteristics of NYS and CA regulatory policy. The 5th blog is a more detailed comparison of CA and NYS policies towards DER, and the 6th blog reviews the potentially different distribution utility functions and names.
Introduction to NYS and CA energy and regulatory policy
In April 2014, Governor Cuomo of New York State (NYS) kicked off the New York Reforming the Energy Vision (NY REV). This encompassed multiple dimensions of regulated administrated programs (such as support for renewable energy), regulatory reform (for example, more performance based regulation); new functions / institutions (for example, distribution system providers); and a new set of roles for all stakeholders – all of which are intended to work together to create an enabling environment for a transition to a sustainable energy future for NYS.
At part of this, the New York Public Service Commission (NY PSC, the Energy Regulator) initiated a regulatory reform aspect with a Staff Paper and then in February 2015, a PSC Order (see here, here) of the Reforming the Energy Vision (REV). This had‘ the objective of creating market-based, sustainable products and services that drive an increasingly efficient, clean, reliable, and customer-orientated industry’ (see here). A podcast by the then-Chairperson of the NY PSC, Audrey Zibelman, described how Hurricane Sandy was a major driver in the NYS decision to articulate a new Vision for energy.
The NYS relevant statute is a century old mandate that the PSC must ensure reliable universal service at reasonable rates. The PSC in the 2015 Order made clear that the REV is not a new, discretionary policy but a new, and necessary way to implement an old mandate. They argued that the current system is unsustainable and the PSC’s core mission of ensuring reliable universal service could not be fulfilled without fundamental change. Hurricane Sandy made this ‘starting afresh’ easier in that NYS people were open to change. The PSC Order enunciated a new approach to energy system regulation and put forward a new value proposition in keeping with D4 (decarbonisation, decentralisation, digitalisation and democratisation); for enabling a new, coordinated system operation; and for ensuring a continuing process of public service obligations.
There are multiple documents which describe, or predict, a very different energy system by 2030 (see, for example, here, here, here etc). However, in fact, there are very few energy systems around the world which are ‘walking the walk’ and changing rules and incentives so that ‘value’ is transferred from the ‘old’ system to be available for D4 and new ways of doing things. This is why NYS is so interesting.
The NYS energy and regulatory approach is very different from the Californian approach.
In NYS, the PSC was (along with the relevant statute as described above) given general direction from the State and Governor to deal with the energy system issues following on from Hurricane Sandy. Having been given that general direction the PSC, and the Commissioners, were central to the shaping of that Vision. CA, in contrast to NYS, is driven by the Gubernatorial (i.e. the State Governor) and Legislative direction. Thus, CA still effectively delegates executive responsibility for its sustainable policies to its Investor Owned Utilities (IOU’s) via the four, key State Agencies. Regulation remains the more important aspect of the alternative tools of regulation or market incentives.
Whilst both States are avowedly progressive in terms of greenhouse gas reduction, NYS was upfront in the PSC 2014 Vision / 2015 order arguing that traditional energy regulation is no longer fit for purpose, and that new roles for utilities, customers, and the Regulator are required. CA has been far less strident but, in part because CA first introduced its progressive energy policies in the late 1970’s, CA is much further along, in some respects, towards sustainability. The question is whether the NYS or CA characteristics better suit the momentum within global energy systems towards D4.
Thus, the NYS and CA governance systems offer two very different models to learn from. They provide real lessons for any country (or US State) that is trying to work out what ‘best practice’ model of governance to follow.
This blog series is intended to distil what those lessons are.
Thanks to the very many people who have inputted to this blog series, but in particular to Carl Linvill and Rudy Stegemoeller of RAP.