Utilities in New York are stealthily adjusting their income-generating methods, according to silent restructuring by regulators
The New York Public Service Commission (PSC) has taken a significant step towards encouraging utilities to improve their community solar billing and crediting practices. In a July commission order, the PSC stated that the inability of utilities to apply bill credits has undermined the community solar program, leading to customer cancellations and dissuading potential customers and developers.
To address this issue, the Commission has approved a so-called negative revenue adjustment (NRA), a fine assessed on the basis of the utilities' performance on community solar billing and crediting practices. This move is a part of a novel approach in New York to regulate utilities, aiming to align their incentives with broader clean energy goals.
Under the old regulatory regime, there was no financial incentive for utilities to take these factors into account. However, the new order introduces a $10 monthly credit for customers when utilities don't apply credits, providing relief for customers and an additional financial incentive for utilities to improve their performance.
The commission order also requires utilities to begin tracking some of the other proposed metrics, potentially leading to additional NRAs if utilities fail to meet performance expectations. The final commission order only approved two of the six proposed billing and crediting metrics and had a combined financial exposure of about $15 million per year across all New York utilities.
The New York community solar program has delivered real monthly bill savings of 10-20% to over 240,000 customers who wouldn't otherwise benefit from rooftop solar, with 35% of the benefits going to disadvantaged communities. The utilities in New York have been criticized for their inability to apply bill credits from community solar farms to customers' bills on a monthly basis, leading to accumulated credits that customers have to pay in large amounts.
A coalition of community solar subscriber organizations and solar access advocates, led by Austin Perea, drafted a proposal outlining six billing and crediting metrics that utilities should track to measure the timeliness and accuracy of bill credit application. The PSC's decision marks the first time that a negative revenue adjustment is being utilized to incentivize better utility performance on a clean energy goal, specifically community solar.
Electric utilities are natural monopolies and may have perverse incentives to overbuild the distribution grid to boost their financial return. In recent years, grid resilience, energy equity and access, and broader adoption of renewable energy and distributed energy resources have become essential policy goals due to the growing climate crisis. The NRA is a step towards achieving these goals by encouraging utilities to prioritize community solar and improve their billing and crediting practices.
Performance Based Ratemaking (PBR) is a measure that aims to redefine utility objectives by aligning their financial incentive with state policy goals. Utilities in Hawaii and Connecticut have been incentivized to take actions such as speeding up interconnection timelines for rooftop solar and increasing EV charger adoption through PBR measures. The New York Department of Public Services published a straw proposal in January 2024 that drew from many of the recommendations made by the coalition.
The specific problem the NRA is seeking to address revolves around community solar billing and crediting practices, which can be esoteric and complicated. The PSC's approval of the NRA is a significant step towards simplifying these practices and ensuring that customers receive the benefits of community solar in a timely and accurate manner.
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