dissociating grid ownership from grid operations will greatly benefit the public and arguably the utilities, too. Specifically, we contend that the best way for a utility to embrace new innovations without disruption to the grid is to have the distribution utilities transfer their operations to an independent distribution system operator (IDSO) akin to an independent system operator (ISO) or a regional transmission organization (RTO) in the bulk transmission system.

Own the Grid, Not its Operation

Solar DG and other DERs (such as demand response, energy storage, microgrids, and advanced communications technologies) have been proven to provide valuable benefits to the larger grid when appropriately incorporated at the distribution level. These benefits include additional energy and capacity resources, improved grid resiliency, and ancillary services (such as voltage/VAR support, congestion relief and capacity support). In fact, benefits from DERs could potentially exceed those of traditional centralized generation. Federal Energy Regulatory Commission (FERC) Order 755 explicitly recognizes the advantages of DERs by requiring higher compensation to fast-response regulation services (typically provided by DERs) than to slower-responding regulation services from traditional central station generators. Similarly, in its initiative, The Integrated Grid, the Electric Power Research Institute (EPRI) acknowledges the vast promise of DERs that are planned and coordinated by the grid operator.

Nevertheless, today many DER assets - which often are not incorporated into the utility's resource planning mix - are owned by customers or third-party competitive providers. Furthermore, these third-party providers could and often do aggregate services that the DER assets provide, such as demand response. Therefore, allowing the current grid owner (the utility) also to operate the distribution grid presents a strong conflict of interest, especially if optimizing the use of those assets may reduce the need for grid expansion and utility investment. The grid operator has clear incentives to favor increasing the utility's assets rather than encourage customer-owned DERs.

To deploy DERs cost-effectively and fully realize their potential value to the grid, we recommend that utilities continue to own the grid while an objective and separate IDSO operates the distribution system. The concept has indeed been analyzed and advocated by others, including the Senior Vice President of the New York Independent System Operator Rana Mukerji and Open Access Technology International, Inc. in recent articles in Public Utilities Fortnightly (see, e.g.," From ISO to DSO ," by Farrokh Rehimi and Sasan Mokhtari, PUF, June 2014, p. 42.).

In short, the IDSO will be responsible for: (1) maintaining the safety and reliability of the distribution system; (2) providing fair and open access to the distribution grid and information from that system; (3) promoting appropriate market mechanisms; and (4) overseeing the optimal deployment and dispatching of DERs. The IDSO - which in certain instances could be the same entity as the ISO - will be under the jurisdiction of the state public utility commission.

The regulated utility will continue to maintain the distribution assets and rate-base obligatory grid investments under established protocols. It will also retain billing function to its customers for distribution service. The rates and tariffs for service would continue to be determined