As prices of solar installations large and small have continued to plummet, market participants are diversifying ways of producing and distributing that energy. As a result, retail customers are increasingly able not only to consume energy, but to produce it as well. In so doing, they are also affecting the future development of both the renewable energy market, and the larger national grid system.
The rise of the ‘prosumer’ also has implications for other sectors (for example, the development of software to ensure secure transactions of solar credits and funds) as well as posing challenges for regulators struggling to balance energy innovation and democratization with a reliable grid for all.
Community Choice Energy/Aggregation (CCE/CCA)
A new report by the Lawrence Berkeley National Laboratory (LNBL) analyzing the benefits and impacts of renewable portfolio standards in the U.S. finds that almost all of the 29 states with RPS programs on track to successfully meet their renewable goals, collectively creating 215 TWh of demand in 2015. However, more ambitious goals have also led to a rise in compliance costs over the last few years (from $11MWh in 2013 to $12MWh in 2014), and the current structure of most RPS portfolios are not sufficiently incentivizing the creation of new generation capacity. The study also noted that, while RPS programs have been very successful in meeting their stated goals, they have not led to a consensus on what the larger goals of such programs should be.
Even though no two state policies are the same, the national RPS achievement average in 2014 was 95%. And while the adoption of new RPS programs has stalled (largely due to the politicization of renewable energy), states with existing portfolios have continued to increase their RPS targets. Both New York and Hawaii set targets of 50% renewables by 2030 and Hawai’i aiming to reach 100% by 2045.
The debate over the future of New York’s retail energy market continues to heat up, with several bills addressing the role of third-party energy suppliers recently introduced into the New York State Assembly.
Two of the proposed measures seek to limit ESCOs role in the market. A9593 would repeal ESCOs’ sales tax exemption on the delivery of electricity and natural gas. A9652 would add language to the current state statutes (governing wheeling) in order to limit the sale of electricity or natural gas by ESCOs to non-residential customers only.
Supporters of the measures, including Assembly Member Dinowitz (who introduced both bills), and Assembly Members Cook, Ortiz, Steck, and Zebrowski, cite the need to protect residential consumers from deceptive marketing, and criticize the current sales tax exemption as a distorting factor on the energy markets and prices.
Less certain, however, is the timeline or likelihood of the two bills clearing the committee (both are currently in the Energy Committee) and moving to a vote.
On Tuesday, April 6, an Albany County Supreme Court judge issued a Stipulation extending Temporary Restraining Order placed by the on the Commission’s “Order Resetting Retail Energy Markets and Establishing Further Process” (aka the February 23 Order’) until April 25th. The Stipulation (which was agreed to by both plaintiffs and the New York Public Service Commission) also pushed the deadline for reply comments from April 10th to April 25th. The hearing on whether to grant a Preliminary Injunction (which would essentially extend the TRO until after a trial or settlement) is now set for May 5th instead of the original April 14th.
The February 23 Order was designed to restructure the energy market for residential and ‘small commercial’ consumers by limiting the types of energy ‘products’ energy suppliers could offer, and to increase the penalties that could be imposed on suppliers’ violations of sales and marketing practices. The TRO ‘pressed pause’ on Ordering Paragraphs 1, 2, and 3 of that Order:
- Paragraph 1 restricts ESCOs to offering either a price guaranteed to match or beat the utility price or offer 30% renewable product.
- Paragraph 2 requires ESCOs to receive affirmative consent from a mass market customer prior to renewing that customer from a fixed rate or guaranteed savings contract into a contract that provides renewable energy but does not guarantee savings.
- Paragraph 3 requires the CEO or equivalent to certify compliance with the Order.
While this is good news for ESCOs looking for additional breathing room to update their products and internal compliance measures, the TRO did not affect the PSC’s new ‘One-Strike’ Rule, which increases the penalties it can impose on companies violating sales and marketing regulations.
And, while companies do not have to comply with the two requirements listed above – at least for now – it is it is important to remember that the legal battle is separate from the active PSC docket, which will be instrumental in shaping the future of the New York energy market.
Below is a list of upcoming deadlines and Commission actions, and a list of the filings by the Impacted ESCO Coalition. Please feel free to email firstname.lastname@example.org with any questions.
Upcoming Deadlines (as of April 6, 2016):
- April 18-19: PSC Technical Conference (Albany and via Webcast)
- April 25: Petitioner Reply Papers due (Article 78 Proceeding)
- May 6: TRO period ends / Hearing on Preliminary Injunction (Article 78 Proceeding)
Filings by the Impacted ESCO Coalition:
In a win for competitive suppliers entering into variable rate contracts, the U.S. District Court for the Eastern District of Pennsylvania last Friday granted summary judgment in favor of Ambit Energy in a suit brought by a former residential customer. And on March 16, 2016, the same court granted Starion Energy PA’s request to dismiss a potential class action suit brought by customers alleging that Starion’s rates were a breach of contract (Case 2:15-cv-00773-CDJ).
In the Ambit case, the judge found that Ambit’s contract language did not prevent it from taking various ‘legitimate’ factors into consideration when setting prices, and was not obligated to ‘only’ rely on market prices. In the Starion case, the judge also relied on the contract language – which allowed Starion to vary pricing based on conditions in several markets – to hold that simply a price difference between Starion and the utility could not amount to a breach of contract.
These two decisions are especially significant in the light of the recent upheaval in New York’s market (the PSC issued an Order last month requiring all energy suppliers to match utility prices or ensure all customers receive 30% renewable energy, and increasing penalties for violations of marketing regulations). While they do not indicate the position of Pennsylvania’s Public Utility Commission, it is perhaps a signal that other states will not be so quick to follow the lead of New York’s Public Service Commission, which has become increasingly skeptical of the role and value of energy suppliers in the residential market. The cases are also important in that they rely on and uphold the contractual terms and conditions, even when they result in customers paying more than they would with their utility.
Seven days left until the New York Public Service Commission’s (“Commission”) February 23 Order is implemented. The Order, which is premised on protecting mass market consumers, will place unprecedented limitations on ESCOs – far beyond what is required to protect mass market consumers. Among other things, the Commission has directed:
• Deep restrictions on commodity only products (natural gas and electric) by restricting ESCOs to two product offerings: Guarantee a price that beats the utility, or 30% renewable product.
• Imposes a “One strike and you may be out” policy for non-compliance with UBP.
• ESCOs servicing mass market electric and natural gas customers on month-to-month variable rate products must return these customers to default service, or “enroll” the customers onto a compliant product.
• The CEO or equivalent officer of an ESCO must certify to the PSC that it will comply with the “conditions of the Order” by March 4, 2106. Continue reading
As REV finally begins to kick off this year, it is still unclear what role traditional energy providers will play in this restructuring of the utility industry. Although this question has been asked repeatedly of the New York Public Service Commission (PSC), no answer has been provided. This is the first of a series of posts that will attempt to clarify the issue. This post will provide a brief synopsis of the REV proceeding’s thus far and outline the different tracks into which REV has been divided. The next post in the series will delve deeper into REV’s second track and the agenda for 2016.
REV was born out of a December 23, 2013 order by the New York Public Service Commission (PSC) and a subsequent Staff Report and Proposal detailing implementation of the REV plan. Reforming the Energy Vision (REV) entails a total reconfiguration of New York’s energy markets by changing the way electricity is distributed and used in New York State through a reformation of industry and regulatory practices. REV aims to incorporate new technologies into existing infrastructure and to enable customers to better manage and reduce their energy costs by enabling participation by both companies and customers in the retail market. REV also aims to integrate new electricity resources into the grid to ensure reliability and efficiency.
In an April 24, 2014 proposal, the PSC carved out a new role for regulated utilities as “Distribution System Platform (DSP) Providers” which would both coordinate and facilitate various distributed energy resources (DERs) on the grid. In essence, the PSC hopes to totally reconfigure the utility business model so as to better integrate DERs from third-party providers by encouraging utility companies to consider DERs as an alternative to traditional industry investments. This would be accomplished through the coordination of a wide range of DERs to manage load, optimize system operations, and enable clean distributed power generation. A combination of markets and tariffs would both empower and encourage customers to optimize their energy usage while both reducing their electric bills and spurring innovation within the industry.