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Utility Dive (Opinion): BQDM Program Demonstrates Benefits of Non-traditional Utility Investments

Posted by Coley Girouard on Mar 11, 2019
Utility Dive ran AEE's third case study in a six-part series on utility business reform.This one covers how the Brooklyn-Queens demand management (BQDM) program demonstrates the clear benefits (and some challenges) of non-traditional utility investments. See excerpts below and the complete Utility Dive piece here. Access the foundational report and five case studies series here that AEE produced with RMI and APP.
 
Incentives inherent in the traditional cost-of-service utility revenue model discourage utilities from investing in non-traditional solutions. This is because non-traditional solutions, such as demand management programs and distributed energy resources (DER), are normally treated as operating expenses, which are passed through to customers without earning a return.

Instead, if a utility invests in a traditional "poles and wires" solution, it is given the opportunity to earn a rate of return — creating a profit motive. But it doesn't have to be this way...

Con Edison's Brooklyn Queens Demand Management (BQDM) program, where the New York Public Service Commission (PSC) adopted incentives to encourage Con Edison to contract for third-party services that drive down project costs, shows one way to create a win-win-win scenario for the utility, third-party companies and customers...

The original solution proposed, at an estimated cost of $1 billion, relied on traditional approaches, including a new distribution substation, expanding an existing 345 kV switching station and constructing a sub-transmission feeder to connect the two stations. Instead, the PSC ordered Con Edison to look at non-traditional investments as ways to manage demand growth, and offered innovative incentives to adopt these alternatives...

As of August 2017, the projected net benefits of the project were $94.9 million, including $65.5 million of benefits from delaying load transfers from 2017 to 2026... Because of the early success of the program, in July 2017, the New York PSC extended the BQDM program beyond the initial three-year scope with no termination date and without additional funding...

While early results from BQDM have been positive, it has not been without some challenges (see story for details)... The BQDM program has learned lessons from these challenges that will not only help Con Edison but also other utilities in future NWA projects...
 
Read the complete Utility Dive piece here. Access the foundational report and five case studies series here that AEE produced with RMI and APP.

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