The New York Public Service Commission (PSC) has issued an Order Regarding Renewable Portfolio Standard (NYPSC Case 03-E-0188) that sets the final framework for Renewable Portfolio Standards to be implemented in New York beginning January 1, 2006.


Basic Structure of the RPS

PSC stated that the Renewable Portfolio Standard framework is designed to achieve PSC's goal of obtaining at least 25 percent of New York's electricity from renewable resources by 2013.

To achieve the goal, PSC will implement the Renewable Portfolio Standards through two components:

	1.	The "mandatory" component, to be administered by the New York State Energy Research and Development Authority (NYSERDA) and funded by utility ratepayers, will provide incentives to increase reliance on renewable resources.
	2.	The voluntary component will consist of voluntary green market programs.

Of the 25 percent total, the standard is designed to obtain 24 percentage points of the electricity from the mandatory component and at least 1 percentage point from the voluntary component. The standard was adopted on September 24, 2004.

The Renewable Portfolio Standard will consist of two tiers of eligible resources: A Main Tier and a Customer-Sited Tier. The Main Tier will consist primarily of medium to large electric generation facilities. The Customer-Sited Tier will consist of behind-the-meter technologies "that are not generally economically competitive with the Main Tier technologies."

To be eligible, electricity generated by a Main Tier facility must have originated in New York State or have been contractually delivered into New York State and sold to consumers in a retail sale. Electricity produced by a Customer-Sited Tier facility must be sufficient to be scheduled into the market administered by the New York Independent System Operator and may not have been sold to a local distribution utility under a mandatory net-metering regime.

Main Tier facilities include biogas, biomass, liquid biofuel, fuel cells, hydroelectric, photovoltaic, ocean or tidal power, and wind. Waste-to-energy facilities will be eligible only to the extent that electricity generated by a facility is derived from fuels identified as eligible biomass. Eligible Customer-Sited Tier technologies include fuel cell, photovoltaic and wind.


Eligibility Rules

To be eligible, a Main Tier facility generally must have commenced commercial operation on or after January 1, 2003. Customer-Sited Tier facilities must have been installed on or after January 1, 2003. In response to concerns about the continued viability of existing renewable facilities absent eligibility for RPS incentives, PSC adopted a limited vintage exception for certain hydroelectric, wind and biomass resources ("maintenance resources") that demonstrate the need to receive RPS financial support to continue operation. Maintenance resources consist of existing hydroelectric facilities of 5 MW or less in size, existing biomass facilities and existing wind facilities.

Maintenance resources can apply for eligibility by demonstrating that they require RPS benefits in order to remain financially viable. PSC stopped short of developing explicit details but stated that certain details should be considered as part of the required showing, including an examination of the finances of the facility owner/operator and possibly affiliates; what other sources of income are available to the facility; whether discriminatory market rules are increasing the costs of the facility; the degree to which the facility generates revenues sufficient to cover its operating costs; and the degree to which the facility generates revenues sufficient to make necessary capital improvements.


Procurement Model

To achieve the Renewable Portfolio Standard, PSC adopted a central procurement model, with NYSERDA named administrator of the program. Each of the state's electric public utilities will collect funding for renewable procurement from power customers through a non-bypassable volumetric wires charge and turn those funds over to NYSERDA for procuring renewably generated power. (Customers exempt from paying the societal benefits charge also will be exempt from paying the Renewable Portfolio Standard charge.)

Tracking incremental renewable resources will begin January 1, 2006. Collections from customers to fund the Renewable Portfolio Standard will begin in the last quarter of 2005 and initially will be set at the projected market cost for renewables, subject to later true-up based on actual costs. Because this central procurement model is intended to assure that a sufficient amount of renewable power is procured to satisfy the Renewable Portfolio Standard, PSC found that imposing alternative compliance payments will not be necessary.

To evaluate progress and to move toward a more market-based Renewable Portfolio Standard, PSC will conduct a review in 2009. As part of the review, PSC assigned NYSERDA to prepare a proposal to move toward a certificate-based trading system.


Delivery Requirements

PSC adopted the administrative law judge's recommendation to impose a delivery requirement, with a monthly matching component. According to PSC, "The ALJ's recommendation is innovative and strikes a good balance between the need to provide flexibility to accommodate the difficulties of scheduling intermittent renewable generation with the need to rely on imports to meet our goals and to preserve our ability to verify delivery of renewable electricity from renewable resources. We expect monthly matching will limit the potential for gaming or manipulation because it matches the energy transaction settlement period in use by the NYISO in the New York Control Area and that of other neighboring jurisdictions while providing sufficient flexibility to accommodate intermittent power sources and their potential to reduce wholesale prices." Thus, for electricity to be eligible, it must be demonstrated that the electrical output of the generation facility was scheduled into a market administered by the NYISO.

If you would like to receive legal reports and updates more quickly, by e-mail, click here and fill out the mailing list form.

For more information about the issues covered in this report, please contact Paul Berning in our San Francisco office at 415-369-7229 or at pwberning@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.





©2004 Thelen Reid Brown Raysman & Steiner LLP