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NY regulators approve REC auctions, wrap up energy efficiency program

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Essential Energy Insights - September 17, 2020

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NY regulators approve REC auctions, wrap up energy efficiency program

New York utility regulators approved a plan to achieve renewable targets under the state's Clean Energy Standard through quarterly auctions of renewable energy credit through 2021 while voting to end the existing energy efficiency program. The New York State Public Service Commission on Nov. 16 approved recommendations from Department of Public Service staff and the state-run New York State Energy Research and Development Authority on how to implement the Cuomo administration's Clean Energy Standard.

Originally greenlighted by regulators in August 2016, the energy transition strategy aims to procure half of the electricity consumed by New Yorkers from renewable sources, such as wind and solar, by 2030. The first phase of its implementation plan was approved by the commission in February.

The new order limits the sale and transfer of renewable energy credits, or RECs, for new renewables, categorized as Tier 1, and creates a "divergence test" to identify and correct any significant supply-demand imbalances for Tier 1 RECs. These credits will be procured starting in 2018 through long-term contracts by the New York State Energy Research and Development Authority, or NYSERDA. Any RECs unsold at the end of each quarterly sale will be offered again in the subsequent auction.

In order to align REC sales with the Value of Distributed Energy Resources Order and "expected evolution of REC trading rules in future years," the order extended a ban on load-serving entities trading RECs for the 2018 compliance year. The order said the quarterly REC sale process will "limit the potential exposure of [a load-serving entity] over or under procuring RECs from NYSERDA, thus eliminating the need of trading NYSERDA purchased RECs among [load-serving entities]."

The commission also rejected a request by environmental groups to evenly distribute renewable targets from 2018 through 2021. The environmentalists recommended that distribution in order to offer developers a chance to take advantage of expiring federal tax credits.

In addition to managing RECs, NYSERDA is also in charge of monitoring power generators' greenhouse gas emissions and setting mandated renewable portfolio targets for load-serving entities in advance on a rolling three-year basis. Going forward, NYSERDA will publish a methodology for calculating New York's statewide fuel mix and develop criteria to allow the combining of aggregated and colocated facilities for single Tier 1 bids in 2019.

End of EEPS is near

In a separate case, the New York PSC voted to end the state's Energy Efficiency Portfolio Standard program, or EEPS, and awarded $56.5 million to New York's 11 investor-owned utilities for achieving 97% of their energy efficiency targets for electricity and $12.4 million for meeting 93% of their gas target. First approved in 2008 to reduce energy consumption, the EEPS paid electric utilities an incentive of $38.85 per incremental megawatt-hour of reduction and gas utilities $3 per incremental thousand cubic feet at capped annual limits.

Investor-owned utilities still have until the end of 2017 to conclude all EEPS spending, while NYSERDA has a deadline of Feb. 29, 2020.

Commissioner Gregg Sayre applauded the decision to conclude the EEPS and put the "successful program" into the rearview mirror. His colleague Diane Burman voted against the order and said the PSC should glean lessons from EEPS' shortcomings.

Burman said EEPS was implemented "in an extremely tight and probably unreasonable time frame" to spur energy efficiency and criticized the commission's February 2015 retroactive authorization of overspending by utilities for the program. (Case Nos. 15-E-0302, 07-M-0548)