Group Petitions New York PSC To Allow Banking Of RECs For Compliance With ESCO 50% Renewable Compliant Product Under Retail Market Reset Order

April 17, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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STX Group, LLC filed a petition for clarification with the New York PSC asking that the PSC allow ESCOs to engage in REC banking for compliance with the directive in the New York PSC's retail market reset order that holds that one of the compliant products ESCOs will be able to offer under the reset order is a 50% renewable electricity product

As stated by STX, the Commission adopted a rule that ESCOs will be able to offer renewably sourced products with less than 100% renewable energy provided that 1) the renewable percentage mix is at least 50% greater than is required by the RES LSE obligation for the year; 2) the ESCO complies with the RES locational and delivery requirements when procuring RECs; and 3) there is transparency of information and disclosures provided to customers. With regard to eligible electricity, STX quoted the order as stating, "ESCOs will be required to satisfy their minimum renewable requirement in the same ways they satisfy their annual CES requirements and by entering into purchase agreements with any generator of any vintage that satisfies the CLCPA definition of 'renewable.'"

"The Commission broadly confers satisfying the renewable requirement in the same ways they satisfy their annual CES, and STX requests clarification regarding the Trading and Banking of Compliance Certificates," STX said

STX said that current rules for the CES assert, "an obligated LSE may use NYGATS certificates associated with production during one compliance year in excess of the compliance year obligation for compliance in the two subsequent compliance periods (banked certificates)," subject to some limitations.

STX said of the need for banking that, "An ESCO rolling out a renewable product faces some unique challenges- it does not know how many buyers will buy the product, and they have a one-month minimum enrollment period and no cancellation fee to remain competitive with other retail power options. This means that the ESCO doesn’t have any firm sense of how big its renewable obligation will be for any period of time, making long term PPAs an undesirable option."

STX said, "For an ESCO in a regime that allows banking RECs, a reasonable strategy would be to buy for existing customers and a surplus for growth of new customers. If growth matches expectations then the ESCO will be covered, and if not the ESCO can simply bank the excess and reduce procurement in the following year. There is some procurement risk if in the first year of product offering if customer growth exceeds expectations, but the risk decreases in future years as the ESCO may plan to have banked volumes for such risk. It is likely that all renewable attributes will be utilized and the ESCO can be certain of their costs ahead of time if it wishes."

STX said, "An ESCO without the option to bank RECs faces a more difficult prospect. It cannot over-procure ahead of time because it will take a loss on unused attributes. Instead it would under buy during the generation year, and cover the remainder of its obligation during after year end and before the reporting deadline. This will have the effect of crowding buyers into a shorter window each year, which increases the probability of price runs as buyers compete for RECs to avoid an ACP. Faced with either wasting renewable attributes or uncertainty of procurement costs during any given period, the ESCO will need to increase pricing of its renewably sourced commodity commensurably with these risks."

Case 15-M-0127 et al.

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