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A07275 Summary:

COSPNSRHunter, Blankenbush
Relates to maintaining the continued viability of the state's existing large-scale, renewable energy resources.
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A07275 Actions:

04/17/2017referred to energy
04/28/2017amend (t) and recommit to energy
04/28/2017print number 7275a
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A07275 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
  TITLE OF BILL: An act in relation to maintaining the continued viability of the state's existing large-scale, renewable energy resources   PURPOSE: New York State has been a leader in renewable energy, beginning with the hydroelectric power plant at Niagara Falls in 1895. The Clean Energy Standard mandates that by 2030, 50% of electricity consumed in the state will come from renewables and establishes programs to develop new capac- ity. However, economic factors threaten NY's existing large-scale renew- able generators, in many cases the most cost-effective sources of clean power. This bill establishes utility support for these facilities to protect critical infrastructure and ensure that the 50 by 30 goal is achieved as economically as possible. New York recognizes the social cost of greenhouse gas (GHG) emissions and the value of clean power sources. This is reflected in the compen- sation provided to nuclear generators through the Zero Emission Credit program. Legacy large-scale renewables (LSRs), however, are compensated at the same rates as natural gas or coal generators despite their carbon benefits. Low fuel prices have brought these rates below the long-term viability threshold of many legacy renewable resources. Approximately 10% of New York's electricity currently comes from inde- pendently owned hydroelectric facilities, which also provide flood control and water levels management to support communities and the envi- ronment. Biomass plants are a critical economic component of the fores- try industry in Northern NY and power the US Army installation at Fort Drum. These facilities face an uncertain future and may be compelled ultimately to retire or export from the state. This would not only endanger their community and economic benefits, it would also undermine the cost-effective achievement of the state's GHG targets. The current Maintenance Tier program does not adequately address these issues. Through the Renewable Portfolio Standard, New York ratepayers have invested heavily in the development of wind, solar, and biomass facili- ties. Without fair compensation going forward, at the expiration of the RPS contracts these generators will likely export into neighboring ener- gy markets or terminate operations. This will mean that despite being located in NY, these resources will not contribute to the 50 by 30 goal, depriving NY ratepayers of continuing benefit from their investment. New capacity will need to be built at a higher cost to achieve the same target. This bill provides compensation for the clean energy attributes of lega- cy large-scale renewable generators at a variable per-kWh rate equal to 75% of the cost of new renewables. This ensures that it will save rate- payers money in the achievement of the CES goal by preserving existing renewable producers at 25% less than the cost of new. This does not place any additional burden on ratepayers to purchase renewable energy, rather, it ensures that NY will first look to purchase electricity from existing, cheaper resources before paying a high price for new renewa- bles to achieve the mandate already established by the CES.   SUMMARY OF PROVISIONS: Section one of the bill provides the Legislative findings and intent of the bill. Section two defines various terms. Sections three and four provide a framework for the program including deliverability, annual targets, load serving entities' obligations, the establishment of a Tier 2 Renewable Energy Credit (REC) priced at a level of 75% the cost of new renewables, the enabling of a process to show financial hardship in specific cases of need, and provision of an outline of procedures to implement the Tier 2 REC program at the PSC and NYSERDA. Section five provides the effective date.   JUSTIFICATION: It is often noted that ratepayers in NY face some of the highest elec- tricity costs in the nation. This is largely due to utility costs, fees, and taxes, and conceals wholesale prices at historic lows. The low price of natural gas, above-market support for new renewables, proliferation of residential solar, and low demand growth have all contributed to a decline in compensation for baseload electricity generators. Recognizing this, in its draft CES, Department of Public Service Staff recommended a "Tier 2" REC program to provide support for legacy renewables. This program was eliminated without warning when the CES was released. The North Country alone contains over 500 MW of independent hydro. These facilities are long-lived and low impact, and are core infrastruc- ture, often located at the center of towns and managing water levels for lakes and reservoirs. Direct competition with natural gas, which has lower costs and no such responsibilities, is proving unsustainable. The RPS established a Maintenance Tier program for a subset of renewable generators that predated the RPS. The program does not apply to all vintage renewable resources and, even where it does has had mixed results, allowing biomass and hydro plants to close. This bill takes lessons from recent closure and provides improvements to the program to streamline the application process and fix support at a level sufficient to maintain viability. Wind facilities developed under the RPS between 2003 and 2016 were given ten-year support contracts. With electricity rates low, at the expira- tion of those contracts they must seek additional revenue. Though the NY CES does not allow existing generators to participate in procure- ments, RPS programs in neighboring states do. The location of a genera- tor does not determine where its energy is consumed or which state gets to count its production toward clean energy goals. This export threat is imminent, with many states already seeking to procure this generation and transmission lines already being sited across Lake Champlain specif- ically to deliver wind power into the ISO-NE. This bill follows the model for Tier 2 established by DPS Staff in the original CES draft, and will be available to all legacy large scale renewable generators. The compensation for Tier 2 RECs will be 75% of Tier 1. The Tier 1 price for new renewables is established by compet- itive bidding through NYSERDA-managed procurements, and reflects the additional compensation needed above available wholesale rates to make a renewable project viable. As wholesale rates rise, REC prices fall. This ensures that ratepayers will not overpay for LSRs, and will never pay to develop new generators while existing ones can be kept online for less.   LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATIONS: None to the state.   EFFECTIVE DATE: Immediately.
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A07275 Text:

                STATE OF NEW YORK
                               2017-2018 Regular Sessions
                   IN ASSEMBLY
                                     April 17, 2017
        Introduced  by  M.  of A. JENNE, HUNTER -- read once and referred to the
          Committee on Energy -- committee  discharged,  bill  amended,  ordered
          reprinted as amended and recommitted to said committee
        AN ACT in relation to maintaining the continued viability of the state's
          existing large-scale, renewable energy resources

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
     1    Section 1. Legislative findings and  intent.  The  legislature  hereby
     2  finds and determines:
     3    1. New York is a national leader in developing and implementing policy
     4  to  promote the development of renewable energy resources, the growth of
     5  which has significantly benefited the state in numerous ways,  including
     6  through  reductions  in  pollutants  that  contribute to climate change,
     7  associated reductions in adverse impacts on public health, and  substan-
     8  tial job growth in the clean energy sector.
     9    2.  In  2016,  more  than  twenty percent of the state's electric load
    10  (representing 2,354 gigawatt hours) was supplied by renewable  resources
    11  - solar, wind, hydroelectric, biomass, fuel cells and similar resources.
    12  To  further promote and incentivize the development of renewable energy,
    13  the New York state public  service  commission  recently  established  a
    14  clean  energy standard requiring, among other things, that fifty percent
    15  of the electric load in  the  state  be  served  entirely  by  renewable
    16  resources by the year 2030 (i.e., 50 by 30 target).
    17    3.  A  recent  study  shows  that  New  York's clean energy sector now
    18  employs more than 85,000 workers at more than 7,500 business  establish-
    19  ments  spread  out  across  the  state, in both the renewable energy and
    20  energy efficiency sectors. With implementation of the clean energy stan-
    21  dard, clean energy jobs are anticipated to grow by more than six percent
    22  per year or double the growth rate of the entire United  States  economy
    23  in  2016. Proper implementation of the clean energy standard will ensure
    24  that the state meets these job growth projections.
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        A. 7275--A                          2
     1    4. To promote achievement of the clean energy standard, and to  ensure
     2  the  continued job growth and other benefits attendant to a clean energy
     3  economy, New York needs to assure that its existing large-scale, renewa-
     4  ble energy sector is provided with adequate price signals and  financial
     5  incentives  to  remain  in  operation and to sell their renewable energy
     6  attributes in New York, allowing the state to count the resources toward
     7  the 50 by 30 target and retain the jobs and tax  payments  supported  by
     8  these  generators. Absent these assurances, it would be difficult if not
     9  impossible for the state to meet the recently established target.
    10    5. New York's ability to  meet  the  clean  energy  standard  will  be
    11  hampered  if  such  existing  resources  provide  their wholesale energy
    12  products for delivery to adjacent states, some  of  which  have  enacted
    13  laws  that provide for a robust market that provides a stronger opportu-
    14  nity to sell renewable energy attributes than is currently available  in
    15  New  York. There is a real and present danger that a significant portion
    16  of New York's existing fleet of large-scale, renewable energy  resources
    17  will  participate in the programs offered by these other states and thus
    18  will not be available for consideration in terms of meeting the 50 by 30
    19  target, and compete effectively with  other  renewable  classes  in  the
    20  clean energy standard.
    21    6.  It also is of paramount importance to ensure the fuel diversity of
    22  the state's energy sector for the purposes of providing energy security,
    23  system reliability and protection  of  consumers  from  potential  price
    24  spikes or shortages. For this same reason, it is important for the state
    25  to take measures to ensure the continued viability and competitive posi-
    26  tion of a wide variety of large-scale, renewable energy resources in the
    27  state.
    28    7.  Accordingly, the overlying intent of this act is to provide exist-
    29  ing large-scale, renewable energy  resources  in  New  York  state  with
    30  appropriate financial incentives to continue operations for the foresee-
    31  able future.
    32    §  2. Definitions.   1. "Large-scale, renewable energy resource" means
    33  an electric generating facility that:   (a)  sells  its  energy  in  the
    34  wholesale  markets operated by the New York independent system operator;
    35  (b) is deemed an eligible technology type pursuant to Appendix A of  the
    36  "Order Adopting a Clean Energy Standard" and, in the case of hydropower,
    37  has  a  generating  capacity  less  than 50 megawatts; (c) is physically
    38  located within the jurisdiction of the New York independent system oper-
    39  ator; and (d) the associated energy is delivered in  accordance  with  a
    40  New York delivery requirement as described in section three of this act.
    41    2. "Eligible large-scale, renewable energy resource" means an existing
    42  large-scale, renewable energy resource that: (a) at the time in question
    43  is  not  under  a contract for the sale of renewable energy credits with
    44  the New York state energy research and development authority pursuant to
    45  the renewable portfolio standard main tier or maintenance  tier  program
    46  or  clean  energy standard tier 1 program implemented by such authority;
    47  (b) is not under an existing contract for sale of renewable energy cred-
    48  its with a load serving entity; and (c) is otherwise found  by  the  New
    49  York  state  energy research and development authority to meet delivera-
    50  bility requirements specified in section three of this  act,  and  other
    51  eligibility requirements specified in subdivision one of this section.
    52    3. "Load serving entity" or "load serving entities" means and includes
    53  all  investor-owned distribution utilities (in their capacity as commod-
    54  ity suppliers), energy service companies, community  choice  aggregation
    55  programs  not  served  by  energy service companies, municipal utilities
    56  under the jurisdiction of the  public  service  commission,  and  retail

        A. 7275--A                          3

     1  customers  that  self-supply with electricity through the New York inde-
     2  pendent system operator.
     3    4.  "Renewable  energy  credit"  means a tradable, non-tangible energy
     4  commodity that represents proof that 1 megawatt-hour (MWh) of  electric-
     5  ity  was  generated from a renewable energy resource. To be eligible for
     6  sale in New York state and to meet the procurement obligations  of  load
     7  serving  entities,  each renewable energy credit must be registered with
     8  the New York generation attribute tracking systems.
     9    5. "Tier 1" means the program designated as tier  1  pursuant  to  the
    10  clean energy standard order.
    11    6. "Tier 2 renewable energy credit" refers to a renewable energy cred-
    12  it generated by an eligible large-scale, renewable energy resource.
    13    7.  "Order  adopting a clean energy standard" means the public service
    14  commission order dated August 1, 2016, and entered in case number  15-E-
    15  0302 et seq.
    16    §  3.  Deliverability.  Energy from an eligible large-scale, renewable
    17  energy resource shall be deemed to comply with the New York deliverabil-
    18  ity requirement if either it is: (a) delivered into  a  market  adminis-
    19  tered  by  the  New  York independent system operator for end-use in New
    20  York state; (b) delivered through a wholesale meter under the control of
    21  a utility, public authority or municipal electric company such  that  it
    22  can  be measured, and such that consumption within New York state can be
    23  tracked and verified by such entity  or  by  the  New  York  independent
    24  system  operator;  or  (c) delivered through a renewable energy resource
    25  dedicated generation meter,  approved  by  and  subject  to  independent
    26  verification  by  the  New  York  state  energy research and development
    27  authority, to a customer in New York state.
    28    § 4. Program for eligible  large-scale,  renewable  energy  resources.
    29  Notwithstanding  any  other provision of law to the contrary, including,
    30  but not limited to, any order, rule or regulation  promulgated  pursuant
    31  to  the public service law, the public authorities law, and/or the state
    32  administrative procedure act, the public service commission, in  consul-
    33  tation  with the New York state energy research and development authori-
    34  ty, shall adopt a program within 120 days of the effective date of  this
    35  act, to provide support to and for eligible large-scale, renewable ener-
    36  gy  resources  through  a  market for tier 2 renewable energy credits as
    37  defined herein to ensure the continued viability of eligible  large-sca-
    38  le, renewable energy resources for the purpose of meeting the state's 50
    39  by  30 target. In developing such program, the public service commission
    40  shall create an obligation on load serving entities to purchase  tier  2
    41  renewable  energy  credits  from  eligible large-scale, renewable energy
    42  resources through a process and requirements as fully described below:
    43    1. Annual targets for tier 2  renewable  energy  credits.  The  public
    44  service  commission  shall  provide  annual targets and mandates for the
    45  acquisition of tier 2 renewable energy credits by load serving  entities
    46  for the years 2017 to 2030 that ensures market demand for tier 2 renewa-
    47  ble  energy  credits for all resources that become eligible large-scale,
    48  renewable energy resources during such timeframe for purposes of achiev-
    49  ing the 50 by 30 target. The targets to be  established  by  the  public
    50  service  commission  should  reflect  the  quantity  of renewable energy
    51  generation that is serving  total  electric  load  in  New  York  state,
    52  excluding generation from facilities owned by the power authority of the
    53  state of New York and excluding hydropower from generators with a capac-
    54  ity greater than 50 megawatts.
    55    2.  Load  serving entities' tier 2 renewable energy credit obligation.
    56  Each load serving entity shall be responsible for  acquiring  a  defined

        A. 7275--A                          4
     1  quantity  of tier 2 renewable energy credits based upon the total tier 2
     2  load serving entity obligation target  allocated  to  all  load  serving
     3  entities  proportional  to  the  load  each  serves; i.e., determined by
     4  multiplying each load serving entity's actual load for the prior year by
     5  the  percentage  GWh  target  for  that  year. The New York state energy
     6  research and development authority shall publish each load serving enti-
     7  ty's annual obligation for each annual compliance period on its  website
     8  or  by  other  appropriate  means by December 1 of the year prior to the
     9  year such published annual obligation shall apply.
    10    3. Tier 2 renewable energy credit price. By each December 1  prior  to
    11  the annual compliance period, the public service commission shall estab-
    12  lish  a  tier 2 renewable energy credit price to be set at 75 percent of
    13  the weighted average cost per renewable energy credit that the New  York
    14  state  energy research and development authority paid to acquire renewa-
    15  ble energy credits from resources under the clean energy standard tier 1
    16  program in the prior calendar year.
    17    4. Financial hardship. Those eligible  large-scale,  renewable  energy
    18  resources for which the tier 2 renewable energy credit price is insuffi-
    19  cient  may  seek additional financial assistance from the New York state
    20  energy research and development authority  through  contracts  having  a
    21  minimum  duration of ten years for the purpose of ensuring the continued
    22  viability and availability of such resources toward meeting the 50 by 30
    23  target.  The New York state energy research  and  development  authority
    24  shall  apply  the  following  criteria in determining the eligibility of
    25  such eligible large-scale, renewable energy resources  to  receive  such
    26  financial assistance, which shall be paid as an increment above the tier
    27  2 renewable energy credit price determined pursuant to subdivision three
    28  of this section:
    29    (a) A showing of financial hardship;
    30    (b) The basis for and reasonableness of expected operating and capital
    31  costs.  This evaluation may include, among other things, a comparison to
    32  prior years' costs and a comparison to costs of like generation;
    33    (c) The existence of any other cash sources available  to  the  large-
    34  scale, renewable energy resource, such as: (i) tax benefits; (ii) subsi-
    35  dies;  (iii)  contracts; and (iv) other sources, including restructuring
    36  financing;
    37    (d) Whether market rules are increasing the costs of the  large-scale,
    38  renewable  energy resource and, if so, whether any steps can be taken to
    39  reduce such costs;
    40    (e) Whether the large-scale, renewable energy resource's real property
    41  tax assessment is consistent with the assessments imposed  in  similarly
    42  situated facilities elsewhere, and if not, what action has been taken to
    43  address such assessment;
    44    (f)  Whether the large-scale, renewable energy resource is required to
    45  operate as part of a package of assets that is financially viable  as  a
    46  whole;
    47    (g)  Whether  the  large-scale,  renewable  energy  resource generates
    48  enough revenue, based on expected output, to cover its  operating  costs
    49  and enjoy a reasonable return;
    50    (h)  Whether  the generation facility generates enough revenue to make
    51  necessary capital improvements;
    52    (i) Whether  the  large-scale,  renewable  energy  resource  generates
    53  enough  revenue  to  cover its fixed costs, including: (i) debt service;
    54  (ii) property taxes; (iii) security costs; and (iv) other costs;

        A. 7275--A                          5
     1    (j) Whether the large-scale, renewable energy resource  has  attempted
     2  to make use of other renewables programs available to it, such as volun-
     3  tary green markets; and
     4    (k)  The regional economic importance of the resource. This evaluation
     5  may include job creation and retention, regional spending for  fuel  and
     6  other  goods and services, contribution to local tax base, fuel diversi-
     7  ty, greenhouse gas reduction, enhanced  forest  health,  flood  control,
     8  municipal  water  supply,  ecological stewardship and other non-economic
     9  factors on a region-specific basis.  Any contract entered into  with  an
    10  eligible  large-scale, renewable energy resource pursuant to this subdi-
    11  vision shall include a reasonable return, and take the form of  a  fixed
    12  price  increment  to  the  tier 2 renewable energy credit price that the
    13  generator is receiving  from  a  load  serving  entity  or  a  financial
    14  contract  for  differences to adjust based on fluctuations in the tier 2
    15  renewable energy credit price. The totality of all  increments  provided
    16  to resources pursuant to this subdivision shall be recovered from deliv-
    17  ery  customers in the same manner as in the renewable portfolio standard
    18  program maintenance tier.
    19    5. Procedures.  To  implement  the  tier  2  renewable  energy  credit
    20  program,  the public service commission shall also adopt within 120 days
    21  of the effective date of this act the following procedures  and  related
    22  requirements:
    23    (a)  The public service commission shall establish procedures consist-
    24  ent with the procedures developed under the clean energy standard tier 1
    25  program to determine the eligibility of  large-scale,  renewable  energy
    26  resources to participate in the program adopted pursuant to this act and
    27  to  certify  such  eligible large-scale, renewable energy resources. All
    28  resources that have previously been found by the New York  state  energy
    29  research and development authority to meet the eligibility and delivera-
    30  bility  requirements  in force under the renewable portfolio standard or
    31  clean energy standard programs shall be deemed to meet  eligibility  and
    32  deliverability requirements of this act.
    33    (b) The public service commission, with the assistance of the New York
    34  state  energy research and development authority, shall develop an equi-
    35  table process by which load serving entities acquire  tier  2  renewable
    36  energy  credits  from  eligible large-scale, renewable energy resources,
    37  which may include the designation of the New York state energy  research
    38  and  development  authority as the central procurement entity for tier 2
    39  renewable energy credits, whereby the New York state energy research and
    40  development authority would ensure the registration of all tier 2 renew-
    41  able energy resources from generators in New York  generation  attribute
    42  tracking systems, purchase the required targeted amount of tier 2 renew-
    43  able  energy credits, and re-sell the tier 2 renewable energy credits to
    44  load serving entities on an annual basis in order  to  facilitate  their
    45  collective efficient compliance. The public service commission, with the
    46  assistance of the New York state energy research and development author-
    47  ity,  shall also develop and implement protocols in the event that there
    48  is an oversupply or undersupply  of  tier  2  renewable  energy  credits
    49  offered  for  sale, relative to the tier 2 renewable energy credit obli-
    50  gation applied to the load serving entities, provided that the protocols
    51  should recognize and prioritize the realization of economic benefits  in
    52  New York from generators located in New York.
    53    (c)  The  public  service commission shall develop procedures by which
    54  eligible large-scale, renewable energy resources  may  obtain  contracts
    55  from  the New York state energy research and development authority under
    56  subdivision four of this section in accordance with the requirements  of

        A. 7275--A                          6
     1  the  state  administrative  procedure  act.  Such procedures shall, on a
     2  case-by-case basis, authorize  eligible  large-scale,  renewable  energy
     3  resources  to  petition  the  public service commission for a finding of
     4  financial  hardship,  which  finding shall be based upon a determination
     5  that the established tier  2  renewable  energy  credits  determined  in
     6  accordance  with  subdivision  three of this section are insufficient to
     7  ensure the viability of the  resource.  The  public  service  commission
     8  shall  make  a  final  decision with respect to such contract within 120
     9  days after a hardship petition is received.
    10    (d) Each load serving entity shall  demonstrate  compliance  with  the
    11  requirements  of this section through an annual compliance filing pursu-
    12  ant to a process established by the public service  commission  that  is
    13  consistent  with the compliance filing requirements established pursuant
    14  to the tier 1 program.
    15    § 5. This act shall take effect immediately.
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