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New York PSC Authorizes NYSERDA To Adjust Vintage REC Prices Used For LSE (ESCO) Compliance With Clean Energy Standard When Price Exceeds ACP

December 17, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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The New York PSC has approved a Phase 3 Implementation Plan for the Clean Energy Standard (CES, similar to RPS)

Notable in the PSC's order is that the Commission adopted the Phase 3 Proposal to allow NYSERDA to adjust the vintage year REC price in years when the vintage REC price exceeds the current year Alternative Compliance Payments (ACP) price. In those instances, the adjusted vintage REC price will be set equal to the current year’s REC price. Such a pricing scheme would make LSEs indifferent to meeting the current year LSE obligation with current year or vintage year RECs.

The change is intended to ensure that surplus vintage year RECs are purchased by LSEs rather than accumulating unsold. Without such change, if NYSERDA is unable to adjust the vintage REC price, and the weighted price of the subsequent program years are below the vintage year REC price, any surplus RECs will remain unsold.

The Commission confirmed that the vintage REC price will not be adjusted for periods when the subsequent years’ ACP prices exceed the vintage year REC price. In those instances, the lower price of the vintage year REC would make it an attractive alternative to the current, higher priced ACP.

The PSC noted that for the 2017 CES program year, approximately half of the LSE obligation was met using either ACPs or third-party supplied RECs and not RECs purchased from NYSERDA.

However, with a higher LSE obligation in 2018, NYSERDA has indicated that, through its first three quarterly REC sales held for 2018, LSE demand has outpaced NYSERDA’s ability to supply of Tier 1 eligible RECs. As a result, it appears unlikely that there will be surplus 2018 vintage RECs at the end of this current compliance year.

The Phase 3 plan maintains the current ACP calculation. For the 2019 ACP, and until otherwise modified in a future implementation plan, the ACP will be calculated based on the projected weighted average cost per MWh that NYSERDA anticipates paying to acquire the Tier 1 RECs expected to be offered in 2019, plus any Commission-approved administrative adder, plus 10 percent. The ACP is to remain constant throughout the compliance year and be paid directly to NYSERDA.

Tier 1 REC banking rules will remain unchanged for 2019 and beyond, which authorize NYSERDA and LSEs to bank Tier 1 RECs for two subsequent compliance periods. As previously reported, on July 16, 2018, the Commission issued an order that granted the members of the Joint Utilities unlimited banking of Tier 1 RECs from VDER projects for the compliance years 2018-2022, and therefore not subject to the 60% banking rule limit for these VDER projects. The Phase 3 plan states that the 60% banking limitation on non-VDER Tier 1 RECs remains in place for 2019, but that it may be revised for future compliance years.

The utilities had requested that the Commission consider expanding the ability of LSEs to trade RECs with other LSEs to create additional liquidity in the REC market and manage variability of REC output at renewable facilities when their Tier 1-minted RECs volumes exceed their REC obligations. The utilities had suggested that all RECs could be traded at the current NYSERDA price and the current ACP value would serve as the cap on overall REC prices. However, the PSC said that such changes were not necessary at this time

Case 15-E-0302

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