Evolutionary changes in the regulatory and operational climate of traditional electric utilities and the emergence of smaller generating systems such as microturbines have opened new opportunities for on-site power generation by electricity users. In this context, distributed energy resources (DER) - small power generators typically located at users' sites where the energy (both electric and thermal) they generate is used - have emerged as a promising option to meet growing customer needs for electric power with an emphasis on reliability and power quality. The portfolio of DER includes generators, energy storage, load control, and, for certain classes of systems, advanced power electronic interfaces between the generators and the bulk power provider. This white paper proposes that the significant potential of smaller DER to meet customers' and utilities' needs can be best captured by organizing these resources into MicroGrids.