In a proceeding which began in February of 2003 and involved over 150 active participants, the New York Public Service Commission (“PSC”) has now voted to adopt a renewable portfolio standard (“RPS”) program. Case No. 03-E-0188, Proceeding on Motion of the Commission Regarding a Retail Renewable Portfolio Standard, Order Regarding Retail Renewable Portfolio Standard (September 24, 2004) (the “Order”). The program’s objective is to increase the percentage of electricity retailed in New York State generated from renewable resources from the current level of 19.3% to a level of 25% by 2013. The program differs from the RPS programs of other states in that it does not require individual retail sellers of electricity to meet minimum targets for the procurement of renewable resources or make penalty payments into alternative compliance funds if they are unable to meet those targets, but instead calls for a “centrally administered, incentive-based procurement mechanism” to be managed by the New York State Energy Research and Development Authority (“NYSERDA”).

PSC staff is charged with the task of developing an implementation plan that addresses the details of the program, but in broad outline, the program will require investor-owned utilities to collect additional revenues from their retail customers for NYSERDA’s use in “providing incentives to increase the percentage of electricity used by retail customers” to increase the current level of electricity generated by renewable electricity to 24%. At least one additional percentage point increase is expected to result from “green market programs” designed to encourage customers to voluntarily pay added costs associated with electricity generated from renewable resources, resulting in a total goal of 25%. The Order does not detail the relationship between NYSERDA and the utilities under which the utilities are to receive power from NYSERDA for distribution to their customers, but states only that the utilities are “directed to enter such contracts or agreements with NYSERDA as are necessary to implement [the PSC’s] choice of NYSERDA as procurement administrator.”

The PSC explained its decision to opt for central procurement on the ground that central procurement would “expedite the start of the program and provide more immediate feedback and control of the initial procurements.” Also, the PSC reasoned that “administrative costs should be reduced because the central procurement model provides economies of scale and entails a competitive selection process.” It also pointed to the need for long-term contracts to enable potential developers to obtain financing, and stated that the central procurement model would “maximize the ease with which such contracts [could] be secured.” The PSC ultimately seeks to migrate from its central procurement model to “a more market-based system” and, as part of a comprehensive review of the program in 2009, the PSC will require NYSERDA to file a proposed plan for transitioning to such a market-based system.

The PSC acknowledged that the program would likely increase costs, but expects the added cost will be partially “offset by reductions in wholesale energy costs, as New York reduces its reliance upon fossil fuels,” and projects that the impact to ratepayers will be modest. The PSC aintains that the added cost is justified by reductions in air emissions, decreased “exposure to wholesale oil and natural gas price spikes and supply interruptions,” and regional benefits in New York State through economic development associated with, among other things, the manufacture of renewable energy equipment, fuel procurement, and the construction and operation of renewable generating facilities.

Eligible resources for renewable generation under the program include a “Main Tier” of medium to large scale electric generation facilities using biogas, biomass, liquid biofuel, fuel cells, hydroelectric power, photovoltaics, ocean or tidal power and wind. A second “Customer-Sited Tier” includes fuels cells, photovoltaics, and wind resources located “behind-the-meter.” Collection of the additional charge from ratepayers to support the RPS program will begin in the fourth quarter of 2005 to support a program start date of January 1, 2006.

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716