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The Future of Energy: Will a DSPP or a DSO Become the Electric Distribution System's Future?

by Bob Shively, Enerdynamics President and Lead Instructor


“Many of the current disrupters have the potential to fundamentally change the distribution system: smart grid sensors coupled to new data-crunching resources, distributed generation, distributed storage, automated demand response, smart appliances, electric vehicles,
and more.”


As technologies associated with electric distribution and customer energy usage rapidly evolve, electric utilities and their regulators are working diligently to redefine the future of the electric distribution utility.


One possibility is to try to evolve existing models through the use of incentive regulation and integrated resource planning traditionally used for generation and transmission planning. This process requires distribution utilities to use a defined and transparent process to forecast distributed resources growth and to plan for needed infrastructure upgrades to support distributed resources[2]. States such as California and Hawaii are moving down this road through recent regulatory initiatives.


But others believe that in a marketplace characterized by competition and innovation, depending on regulatory proceedings and utility-planning processes will stifle growth. Two other models have evolved in an attempt to create an environment where competitive forces can drive change. These models are called the Distribution System Platform Provider or DSPP and the Distribution System Operator or DSO


The DSPP is being developed in New York’s Reforming the Energy Vision proceeding designed to radically restructure the role of the electric utility and the way that regulation is implemented[3]. Under New York’s vision, the regulated electric distribution company would:


  • coordinate customer distributed resource activities to optimize use of energy efficiency, demand response, distributed generation, and microgrids

  • provide a platform for third-party providers to offer services to customers

The DSPP would own and operate all distribution utility assets and the New York Public Service Commission would oversee the utility through outcome-based incentive regulation. 






The DSO presents perhaps an even more radical concept. This model has been proposed by former FERC chairman Jon Wellinghoff as well as authors at the CalTech Resnick Institute[4]. The DSO would break up the distribution business in a similar way that the bulk grid in many U.S. regions was disaggregated through the creation of Independent System Operators (ISOs). These ISOs became responsible for generation dispatch, transmission system operations and planning, and facilitation of wholesale markets. 


The DSO would provide the same function for distributed resource dispatch, distribution system operations and planning, and facilitation of distributed markets. Like ISOs, the DSO would be an unbiased entity without ties to any market participant. To facilitate active retail markets, the DSO would bid aggregated distributed resources into competitive ISO wholesale markets in competition with centralized generators. While no states have yet moved forward with the DSO model, it is in the informal discussion stage at some commissions.






Of course, in the utility business significant change doesn’t happen overnight. But we can be watching states such as California, Hawaii, Massachusetts, Minnesota, and New York to get an idea of where the future of the distribution utility may be headed.




[1] Energy Experts Unplugged…Volume 6 available at http://americaspowerplan.com/energy-experts-unplugged-volume-6/

[2] For a discussion, see http://www.irecusa.org/2013/06/integrated-distribution-planning-a-path-to-sustaining-growth/

[3] See http://www3.dps.ny.gov/W/PSCWeb.nsf/All/26BE8A93967E604785257CC40066B91A?OpenDocument

[4] See http://www.fortnightly.com/fortnightly/2014/08/rooftop-parity


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