An IDSO enables a community to take independent control and operation of its current investor owned electric utility distribution system to achieve the energy policy objectives of the community without having to go through condemnation proceedings to create a municipal utility or purchase the electric distribution assets and create a member owned electric cooperative. Think of an IDSO as a “Muni Light”.
It is a proven business model that now exists in seven large regions of the United States where Independent System Operators provide reliable efficient services for the bulk electric wholesale transmission system, six of which are regulated under the Federal Energy Regulatory Commission (FERC) and one regulated by the Texas Public Utilities Commission. These include the California ISO, the New York ISO, New England ISO, Midcontinent ISO and others. All of these independent entities control, operate, and plan on transmission assets that are owned by investor owned electric utilities. But they are operated by an independent management, overseen by an independent board, and all regulated by FERC. By this simple separation between control and ownership conflicts in achieving community energy policy objectives are avoided.
Problems With the Current Investor Owned, Operated, and Planned Distribution System
– Limited source of energy services and energy cost control options
– Rates and tariffs designed by utility to maximize profits while undervaluing consumer owned energy technologies such as rooftop solar, energy efficiency, and flexible demand
– Lack of transparency to utility distribution, operations, and planning data to give consumers visibility needed to make efficient, clean, and economic energy choices
Government Officials and Policy Makers
– Conflicting objectives. Investor owned electric distribution utilities have an obligation to their shareholders to maximize profits. While government policy makers are obligated to ensure reliable and efficient energy services are available to consumers at a reasonable cost.
– Access to data to make policy decisions is limited. Distribution utilities are exclusively in control of essential data to determine critical public policy decisions. To the extent that the distribution utility has conflicting financial objectives the access to and usefulness of that data for government policy makers may be limited.
– Operational and planning decisions are generally opaque and often not consistent with public policy goals.
Distribution Utility Owners
– Gaming the system. Due to the conflicts that exist between the utility’s objectives to maximize profits and public policy government objectives to optimize the efficiency of the system for customers, investor owned electric distribution system owners are forces to game the regulatory system to keep profits high while minimally satisfying public policy objectives.
– Risk of disallowance. Because the business objectives of the investor owned distribution utility conflict with the public policy objectives of the government policy makers there is a constant risk that the investment decisions of the utility will be opposed by government policy interests and disallowed for recovery by regulators.
The IDSO Solution
The creation of an IDSO provides a cost effective solution to all of the issues created by the traditional investor owned electric distribution utility with a minimum of cost and effort. It takes a proven model at the wholesale bulk electric power system level and transfers that model to the electric distribution utility for the benefit of consumers, government and public policy officials, and even the investor owned distribution utility itself.
IDSO Full Concept Paper Links: