New York PSC Approves Pay-As-You-Go Mechanism For ESCOs To Comply With Nuclear Payment (ZEC) Obligations

September 19, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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The New York PSC has approved a revised plan from NYSERDA to implement a pay-as-you-go mechanism for ESCO and LSE compliance with the zero emissions credit (ZEC) program, with the PSC directing limited modifications with respect to load modifiers

Currently, ESCOs' ZEC compliance is based on a forecast of load which is based on their historic load. ESCOs have said that this creates a financial burden for ESCOs which experience significant decreases in load. While ZEC payments are reconciled, such reconciliation occurs annually, and ESCOs experiencing a decline in load must still pay the higher ZEC obligations in the interim until such reconciliation.

As previously reported by EnergyChoiceMatters.com, the original pay-as-you-go ZEC proposal would have required LSEs to make monthly payments to NYSERDA based on the load served by each LSE for the previous month, essentially relying on LSE forecasts. The monthly obligation was to be subject to an interim reconciliation once the Version 2 generation data is provided by NYISO and recorded in NYGATS, which occurs approximately five months following the close of each month. A final reconciliation was to continue to occur after the close of each program year.

However, NYSERDA later modified that pay-as-you-go proposal in light of the fact that the New York Generation Attribute Tracking System (NYGATS) will now have access to Version 1 load data from the New York Independent System Operator (NYISO)

Under NYSERDA's final proposal, Version 1 load data would be used to establish the monthly 'pay-as-you-go' ZEC obligations of LSEs

"Based on agreement with the NYISO, NYGATS will now have access to the Version 1 load data that is used for initial settlement by the NYISO with LSEs each month. Using Version 1 data in the 'pay-as-you-go' methodology as opposed to requiring LSEs to submit load data to NYSERDA will obviate the need for a quarterly review process and the need for penalties that could have resulted from underpayments discovered months after they were due. The availability of the Version 1 data will allow for near immediate audit, significantly reducing the potential for both under and overpayments by LSEs," NYSERDA had said of its final proposal

Under the final proposal, the LSE’s Version 1 load data would be the basis for their monthly payment to NYSERDA

"While a final reconciliation will still be necessary, the financial magnitude of that reconciliation will be greatly reduced. If the Commission approves the 'pay-as-you-go' methodology as outlined in the Plan, NYSERDA proposes to submit a final Plan and a revised LSE agreement reflecting the Commission’s directives," NYSERDA had said

Under its final proposal, NYSERDA proposed that the final reconciliation will use NYISO Version 2 data. As noted above, NYSERDA has said that the new proposal relying on Version 1 NYISO data will "obviate" the need for penalties.

The PSC approved NYSERDA's final pay-as-you-go proposal, and Version 1 load data will be used to establish the monthly pay-as-you-go ZEC obligations of ESCOs and LSEs

The PSC noted that, "NYSERDA reached an agreement with the NYISO to have access to the Version 1 load data used by the NYISO in the initial settlement with the LSEs, thereby eliminating the need for penalties for underpayment and the quarterly review process. The Commission finds that this change in procedure regarding the use of Version 1 load data would improve the ZEC payment process and reduce potential overpayments and underpayments."

The PSC approved NYSERDA's proposed initial monthly ZEC settlement process, using the Version 1 load data with the elimination of a quarterly review and the penalty structure

The PSC did order a modification to NYSERDA's final proposal to address the joint utilities' (JU) concerns about load modifiers

The PSC noted that, "The ZEC Plan, as modified by the Supplemental Letter, anticipates that NYSERDA would receive the Version 1 load data on or around the 15th day of the following month. Using the Version 1 data, NYSERDA would provide each LSE with an invoice detailing each LSE’s monthly ZEC obligation. Each LSE would have 15 days from the issuance of the invoice to submit payment to NYSERDA."

"The Commission recognizes the JU’s concerns regarding the need to adjust the load reported by the NYISO using its Version 1 data for the effects of load modifiers on the utilities’ final monthly load. Therefore, the Commission directs NYSERDA, in consultation with Staff, to discuss a process with the affected LSEs that accurately and efficiently incorporates load modifier data while maintaining timely monthly ZEC payments. This implementation detail shall be incorporated, as a modification to the standard agreement, into the revised Agreements for the Sale of Zero-Emission Energy Certificates between NYSERDA and the LSEs," the PSC said

The PSC declined a request from NYPA to use NYISO’s Version 3 load data for the final ZEC reconciliation.

"In their comments, NYPA suggests that the Commission adopt the final ZEC reconciliation based on the NYISO’s Version 3 load data. According to NYPA, while the Version 2 load data is based on the refinement and true-ups to the LSE metering data, it is still subject to challenges up to 150 days after the initial service month invoice, which can result in substantially modified load data. Staff has consulted with the NYISO on the variance in the load data between Version 2, which is currently used in the final reconciliation, and Version 3 load data. While it may be true that substantial modifications to the load data is possible from the initial service month invoice, the NYISO has advised that the magnitude of the changes between the Version 2 and Version 3 load data is minimal; the average true-up is less than 0.5% percent each month from the period between January 2014 to November 2018," the PSC said

"Using the Version 3 load data could add marginally greater accuracy to the settlement process; however, it would also add administrative difficulties. Foremost, using the Version 3 load data would add an additional month to the reconciliation process and delay the issuance of any potential refunds to LSEs. Additionally, NYGATS was built using the Version 2 load data and the Renewable Energy Standard (RES) also relies on the use of the Version 2 load data for the end of the year reconciliation. Changing the reconciliation process for the ZEC program would require the Commission to reevaluate the reconciliation process for the RES program. It would be administratively burdensome and costly to reprogram NYGATS to accommodate Version 3 load data, with potentially only minimal benefits to ratepayers. Therefore, the Commission authorizes NYSERDA to continue to use the NYISO Version 2 load data in the final ZEC reconciliation process to verify compliance with the program," the PSC said

The PSC also addressed the issue of a potential mid-year LSE ZEC rate adjustment

"Additionally, the JU raises the issue of the potential for a mid-year LSE ZEC Rate adjustment should there be an unexpected outage at one of the nuclear facilities, leading to lower annual ZEC production then initially forecasted. The Commission notes that there are several factors that must be evaluated beyond an unexpected plant outage before it can be determined if the LSE ZEC Rate should be adjusted mid-year," the PSC said

"Initially, as previously discussed, the LSE ZEC Rate would be based on the NYISO Goldbook load forecast. This forecast would inevitably be subject to some degree of variance from the actual load for the period covered by that forecast. The magnitude of such a variance must be factored into any potential rate adjustment. Additionally, the CES Framework Order calculation of the MWhs that would be subject to the annual ZEC cap was based on the historic period of July 1, 2015 through June 30, 2016. During this period, two separate facilities were off-line for refueling outages; each lasting approximately one month. Therefore, it is possible that, in aggregate, in a given year, the combined output of the facilities could exceed the annual ZEC cap and, therefore, the generation lost by one facility due to an unexpected outage could be offset by the output of another facility. Further, the anticipated duration of the unexpected outage and the timing of the outage in the program cycle must also be considered before any mid-year LSE ZEC Rate adjustment could be considered," the PSC said

"As part of its ZEC contract administration, NYSERDA maintains a working relationship with the operator of the at-risk nuclear facilities and should be readily aware of any unplanned outage that occurs at such facilities. In the event of an unexpected outage at one of these facilities, NYSERDA and Staff should evaluate the criteria discussed above, as well as any other pertinent information, and determine whether an LSE ZEC Rate adjustment is necessary and warranted. A final reconciliation would take place at the end of the compliance year to true up any potential overcollections," the PSC said

NYSERDA was directed to make the changes described above and file a revised plan. ESCOs will be required to sign a revised Agreement for the Sale of Zero-Emission Energy Certificates reflecting the changes to the ZEC program

Case 15-E-0302

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