Energy Choice
                            

Matters

New York Adopts Offshore Wind Obligation Assigned To ESCOs, LSEs

July 13, 2018

Email This Story
Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com

The New York PSC adopted a final order directing the centralized procurement of offshore wind that places a compliance obligation on LSEs, including ESCOs

"The Commission finds that it is appropriate to establish a distinct offshore wind LSE obligation that includes a compliance target for ORECs [offshore wind RECs] sufficient to achieve the offshore wind energy procurement goal of 2.4 GW by 2030. For purposes of the Phase 1 procurement, all LSEs serving retail load within a regulated distribution utility territory will be required to satisfy the compliance obligation and thereby be responsible for supplying a defined percentage of retail load with supply derived from eligible offshore wind resources. This will include investor-owned utilities serving in their role as electric commodity supplier of last resort, jurisdictional municipal utilities, competitive ESCOs serving electric commodity to retail customers, and community choice aggregators not otherwise served by an ESCO," the PSC said in its order

"As under the CES [clean energy standard] program, each LSE will be responsible for supplying a defined percentage of retail load with supply derived from eligible offshore wind resources. This will place compliance costs primarily on generation supply charges, where they are most appropriately applied," the PSC said in its order

"ESCOs that are concerned about their ability to flow through these additional costs to their supply customers will have ample time to build in these new compliance obligations into new contracts since the time difference between the procurement and obligation (i.e., the average time it takes to build an offshore wind development) will likely be at least five years, which is more than sufficient time to negotiate new supply contracts that generally have average tenures of only one to two years in duration," the PSC said in its order

ESCO compliance will be similar to the ZEC program in that ESCOs must purchase ORECs from NYSERDA

"NYSERDA will purchase ORECs from eligible offshore wind developers on behalf of LSEs, and then resell them to the LSEs for compliance with their obligations. Each LSE will be obligated to purchase the percentage of ORECs purchased by NYSERDA in a year that represents the portion of the electric energy load served by the LSE in relation to the total electric energy load served by all such LSEs in the New York Control Area," the PSC said in its order

"In the Zero Emission Credit (ZEC) program, the contracts between NYSERDA and the LSEs are based on forecasts of load, and utilize a balancing reconciliation at the end of each program year such that each LSE will have purchased the correct proportion of ZECs on an annual basis. The OREC program will use a similar methodology in calculating the LSE obligation. However, in a February 22, 2018 Order, the Commission directed Department of Public Service Staff (DPS Staff) and NYSERDA to develop and submit to the Commission for consideration, an implementation plan that would modify the way in which LSEs remit ZEC payments to NYSERDA from a payment structure based on a fixed ZEC obligation, calculated using the LSE’s historic share of the statewide load, to a flexible, 'pay-as-you-go' model, based on each LSE’s known actual load. The Commission will act on this proposed implementation plan in the future. Therefore, in this proceeding, the Commission will defer a decision on the methodology to be used for calculating the LSE OREC obligation until a decision is reached on the soon to be filed ZEC obligation payment implementation plan," the PSC said in its order

"As with the ZEC program, ORECs will not be tradable at this time, except between NYSERDA and the LSEs in the balancing reconciliation process," the PSC said in its order

"Also like the ZEC program, there will be no option to pay an Alternative Compliance Payment (ACP) instead of obtaining the required amount of ORECs," the PSC said in its order

"For purposes of Phase 1, jurisdictional LSEs will not have the option to procure ORECs through bilateral agreements with eligible offshore wind generators for combined energy, capacity and/or ORECs," the PSC said in its order

Concerning OREC procurement and pricing, the PSC ordered that, "A hybrid procurement approach is adopted. NYSERDA will prepare a solicitation that requires two separate bids from each participating bidder. One bid will be for a Fixed OREC price. The other bid will be for an adjustable OREC based on a bid Strike Price (using the Index OREC procurement method). The bidder must be prepared to commit to either a fixed price or an adjustable price regime if accepted, as determined by NYSERDA. The two raw bid prices will be weighted using a formula to be clearly articulated in the solicitation, and the 70% price component of the bid will be scored based on the combined weighted value of both bids. If NYSERDA awards a contract using the Index OREC method, the contract will specify conditions that may trigger a reversion to the Fixed OREC method and price that was bid."

This hybrid procurement approach is described in greater detail in Appendix B to the PSC's order in Case 18-E-0071. The Fixed OREC element of the bid will be established on the same terms as used in the CES solicitations. With respect to the Index OREC option, its operation is described in greater detail in Appendix C of the PSC's order

Certain ESCOs have favored solely a Fixed OREC approach to provide price certainty to LSEs over the contract term.

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Commercial Accounts Support Specialist -- Retail Supplier
• NEW! -- Sales Executive
• NEW! -- Direct Sales -- Retail Supplier
• NEW! -- Channel Sales - Associate -- Retail Supplier