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NY Staff Revamps Nuclear REC Program; ESCOs Wouldn't Be Allowed to Trade, Source RECs, Must Purchase from NYSERDA At Regulated Cost

July 11, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Staff of the New York PSC have issued a revised proposal for a zero emission credit (ZEC) program, designed to provide out-of-market subsidies to nuclear power plants, which would require ESCOs and other LSEs to purchase ZECs.

Of note is that under Staff's revised proposal, ESCOs would be required to purchase ZECs directly from NYSERDA at a uniform, administratively determined price, with no ability for ESCOs to trade ZECs or source their own ZECs (though a provision is made for LSEs to propose their own sourcing discussed below). However, while such a design begs the question of why the ZEC program isn't treated as a nonbypassable charge on the delivery side of the utility bill, Staff proposes that ESCOs and LSEs would remain individually responsible for compliance with the ZEC standard, and that ZEC charges would appear as part of the commodity charge on the bill.

Specifically, NYSERDA would be responsible for the procurement of ZECs and would be the sole party to enter into contracts with nuclear plants. NYSERDA would purchase ZECs at an administratively determined price set by the PSC

Each Load Serving Entity would be required to purchase an amount of ZECs per year of the total amount of ZECs purchased by NYSERDA in proportion to the electric energy load served by the Load Serving Entity in relation to the total electric energy load served by all load serving entities in the New York Control Area. The ZECs obligation is separate from any obligation for Load Serving Entities to comply with any clean energy standard that is to be developed

Each Load Serving Entity would enter into a contractual relationship with NYSERDA to periodically purchase ZECs during a program year based on initial forecasts of load and a balancing reconciliation at the end of each program year so that after the reconciliation process, each Load Serving Entity will have purchased the correct proportion of ZECs on an annual basis, Staff proposed

The price charged by NYSERDA per ZEC shall be at the price established administratively by the Commission, plus an adder to cover NYSERDA's incremental administrative costs and fees associated with the ZEC program and ZEC revenues, Staff said.

Staff proposed that cost recovery from ratepayers shall be, "incorporated into the commodity charges on customer bills." Utilities will charge their commodity customers on a volumetric basis, Staff said

"ZECs will not be tradable except between NYSERDA and the Load Serving Entities in the balancing process," Staff proposed

However, Staff proposed that the PSC, "will entertain proposals by Load Serving Entities and perhaps self-supply customers to alternatively meet their ZECs obligations by entering into combined energy and/or capacity and ZEC contracts with the nuclear facilities if such contracts are structured in a way as to not unfairly shift ZECs costs onto other ratepayers."

Staff's revised proposal also modifies the proposed mechanism to value ZECs, now basing the price on a formula that starts with published estimates of, "the social cost of carbon."

See Staff's revised proposal here

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