This post was originally published in Up For Debate on Bloomberg Government. 

While much attention is focused on legal challenges to EPA’s Clean Power Plan, profound change is brewing far from D.C. Across the nation, state regulators and electric utilities are remaking the regulatory frameworks and business models that have governed our electricity system for decades. This rethinking of the regulatory compact between the public and investor-owned utilities will ultimately transform the way we generate, manage, consume and pay for electricity. At the same time, it will enable rapid grid modernization and fuel a homegrown industry that is already larger than the pharmaceutical manufacturing industry.

The drivers of this transformation include rapidly changing technology; policy directives for more resilient, decentralized systems; and customer demand for more options and control over their energy options. The Clean Power Plan may ultimately speed it up, but it’s happening already, bubbling up from the states themselves. Electric utilities are coming to terms with, if not embracing, this change as a way to stay profitable for years to come.

The bellwether is a regulatory proceeding in New York called “Reforming the Energy Vision,” or REV. Just over a year ago, New York’s Public Service Commission issued an order directing local utilities to move from the current one-way system of electricity distribution toward a modern, flexible, customer-focused grid that can accommodate high levels of distributed energy resources. 

These resources include energy efficiency, demand response, combined heat and power, energy storage, and on-site generation – technologies and services that benefit customers, but may take away from utilities’ bottom lines.

Under New York’s vision, customers and third parties will deploy and own most of these distributed assets, with utilities like Consolidated Edison and National Grid integrating them into the grid. But instead of feeling competitive pressure from these distributed resources, utilities will be able to earn a rate of return on investments that support these offerings.

New York is not the only state undertaking such reforms. California is moving on multiple fronts with regulatory proceedings on smart-grid deployment, integrated distribution system planning, energy storage, demand response and more. Massachusetts utilities have submitted grid modernization plans as part of an ongoing proceeding. In Hawaii, where the penetration of distributed solar is highest in the country, the PUC continues to push its utility down the path to a distributed grid. Minnesota has initiated new rate design and grid modernization proceedings. Connecticut, New Hampshire, Pennsylvania, and Rhode Island are also beginning to explore ways to create a 21st century electricity system.

When it comes to technology and innovation, we in Washington, D.C., could learn a thing or two from leading states and utilities. We need to – if we want to be relevant in creating the power grid of the future.

For access to all energy regulation and legislation moving through states, check out PowerSuite: your one-stop-shop for energy policy nationwide.