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NY regulators further modify distributed energy value rates to avoid cost shifts

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NY regulators further modify distributed energy value rates to avoid cost shifts

To avoid unfair cost shifts, New York state regulators have further modified the methodology used for valuing distributed energy resources to more accurately align a customer's buyback and standby service rates with its contribution to system costs.

In a May 16 decision (PSC docket 15-E-0751), the New York State Public Service Commission adopted changes to its 2017 "VDER Transition Order," which replaces solar net metering with new value-based compensation methods for distributed energy resources, or DERs. The PSC in a press release said the latest order reduces or eliminates a number of barriers to deploying DERs. The changes also follow other recent modifications made to the "value stack" formula that were approved by the PSC in April.

The latest PSC decision asserted that modifying standby and buyback service rates under VDER will help promote "clean" distributed energy resources and avoid unfair cost shifts. The regulators said the move specifically will help enable the owners of distributed resources to manage usage by allowing them to choose optional standby service rates that can reduce their bills as well as the costs they impose on the utility system by using energy at times of low demand. According to the PSC, those modifications will result in rates that more accurately align individual customers' contributions to system costs with the rates those customers pay, thereby sending improved price signals.

As explained by the PSC, customers with distributed resources — such as solar, wind, combined heat and power, battery storage, electric vehicles and anaerobic digesters — reduce the amount of electricity flowing on New York's statewide power grid but continue to rely on the grid's availability. If the electricity bills of customers with DERs "decrease to reflect their reduced usage, without an element that reflects the continued need for availability, costs caused by those customers would be shifted to other ratepayers," the PSC said. "In addition, where excess generation from the DER is sold directly to the utility, that may impose similar grid availability costs."

"Refined price signals and compensation structures that reward investments that improve overall system efficiency, such as managing loads to reduce peak demand, is fundamental to [New York's Reforming the Energy Vision strategy]," the PSC said.

Along with allowing customers to voluntarily opt-in to their respective standby rate options regardless of whether they have an on-site DER system, the order requires utilities to submit demand-based rates to the PSC for residential and small commercial customers. In addition, the order seeks to strengthen price signals provided by standby service rates by requiring more granularity based on location and customer-specific "installed capacity" charges. And, among other changes, the order clarifies the application of grid access demand charges for energy storage systems and improves the accuracy and consistency of cost allocation underlying the standby service rates.