Energy Committee Update
January 9, 2013
Staff Contact: Darren Suarez
State of the State
The State of State provides a packed energy itinerary that includes creating a $1B Green Bank, extending the NY-Sun Solar program, providing incentives for the public plug in electric vehicle charging stations, creating a cabinet level energy czar. In response in-part to Super Storm Sandy the Governor is recommending decreasing the RGGI CO2 cap, hardening the electric system, develop smart micro-grids, establishing time of use rates for residential customers. Additionally, the Governor is recommending increasing the oversight and authority of the PSC.
- Create a $1 Billion Green Bank
- Extend the NY-Sun Solar Jobs Program
- Create the Charge NY Plan
- Create a Cabinet-Level Energy Czar
- Increase Alternate Local Renewable Power Sources
- Harden Fuel Delivery System
- Harden Utilities
- Improve Oversight and Regulation of State's Utilities
Create a $1 Billion Green Bank to Leverage Public Dollars with a Private Sector Match to Spur the Clean Tech Economy
Governor Cuomo proposes to create a $1 billion NY Green Bank to leverage public dollars with a private-sector match to spur the clean economy.
The proposal is similar to a Connecticut Green Bank which established the newly constituted Clean Energy Finance and Investment Authority (CEFIA).
The new entity will function like an investment bank or fund that can leverage its capital to provide low-cost financing to clean projects that a commercial bank wouldn’t likely touch. To this end, the bank will be funded by a surcharge on residential and commercial electricity bills, which was previously paid into the state’s Clean Energy Fund, amounting to $30 million a year. CEFIA will also administer the $18 million Green Loan Guaranty Fund. The total $50 million investment by the bank will enable Connecticut to leverage limited state resources with much larger amounts of private capital, and in this way will catalyze a self-sustaining flow of low-cost capital for innovative clean energy deployment projects, whether it be large-scale rooftop solar plants or commercial building retrofits or even high-voltage lines.
The NY Green Bank is intended to overcome a number of obstacles and uncertainties in the clean energy sector, including unstable federal funding and policy, uncoordinated action and disparate one-time subsidies at the state level, a lack of appropriate financial instruments, and apprehension in the investor community. To fund the Bank, a portion of Energy Efficiency Portfolio Standards, Renewable Portfolio Standards, and/or System Benefit Charge funds will be leveraged to attract private investment, and the State will support new borrowing by the Green Bank to support loans for energy efficiency improvements.
This year, Governor Cuomo proposes to extend the NY-Sun program, continuing through 2023 the existing annual funding levels established under the program. The program will be funded at $150 million annually for ten years.
The Governor’s has proposed to spend $50 million spent over five years, including funding from the New York Power Authority (NYPA), NYSERDA, and tax credits to create a statewide network of 3,000 public and workplace charging stations, and funding primarily from investor-owned utilities for incentives for PEV deployment.
Governor Cuomo has asked Richard Kauffman to join his Cabinet as Chairman for Energy Policy and Finance for New York State. As a senior advisor to the nation’s Secretary of Energy Steven Chu, Mr. Kauffman has been one of the country’s leading experts in private sector investment in clean energy. One of his first responsibilities will be to develop the Governor’s newly proposed NY Green Bank
Governor Cuomo has committed to work with the other states in RGGI to set the emissions cap at a level below current levels. Additional revenue from reducing the cap will provide a $100 to 150 million to invest in repowering existing inefficient power plants to reduce carbon emissions and assisting communities that lose a big part of their tax base when coal-fired power plants are retired. Additionally, a portion of those auction proceeds will be dedicated to strengthening the natural infrastructure, to better prepare New York for the storm events like Sandy.
Governor Cuomo supports the deployment of smart grids as a means to minimize the impacts of future natural disasters on consumers, by helping to enable individual premises and microgrid “islanding” to provide power to pockets of consumers when central power plants or portions of the transmission and distribution system are inoperable.
Additionally, the SOS expressed support for time of use energy rates. The Governor has stated that utilities should charge prices that vary by time-of-use, reflecting the actual cost of energy production in real-time, coupled with advanced metering, the system efficiency will increase by reducing peak demand, to reduce the need to build costly infrastructure to meet peak demand.
The Governor proposes that gas stations in strategic locations be required to have back-up power capacity because it is essential to maintaining the ability to distribute fuel during a power outage. Additionally, the State will establish a Strategic Fuel Reserve to protect New York during a fuel shortage or prolonged disruption to the supply chain. Access to a reserve of fuel could provide a way to relieve short-term problems during major weather events or provide supplemental volume in the event of critical supply disruptions, ensuring that first responders and residents alike can access gasoline.
The Governor has proposed that the Public Service Commission must require the utilities to submit plans for the following critical actions:
- strengthening substations against flooding (raised walls, elevated equipment, relocation if necessary);
- reconfiguring network boundaries to separate flood areas from non-flood areas to limit the impact of flooding to a much smaller area;
- elevating critical distribution transformer installations to protect against flooding;
- replacing the most critical distribution wood poles with steel poles to limit the risk of damage; and
- installing state-of-the-art, remote condition monitoring equipment to allow real-time monitoring of lines without manual inspection.
Natural gas utilities will be required to accelerate pipeline replacement programs in flood prone areas and to evaluate their infrastructure and prepare plans for strengthening critical systems. Utilities will also be required to install remotely operate natural gas control valves to limit the impact of any disruptions.
The SOS stated “Based upon a review of the Public Service Law, PSC rules and regulations, past PSC orders, and interviews with New York State Department of Public Service (DPS) personnel, the Moreland Commission found that (i) the PSC does not adequately utilize its existing statutory authority to full effect; and (ii) its existing statutory enforcement authority is inadequate and should be strengthened and updated.”
Among the recommendations that will be adopted are the following:
- The PSC will be statutorily authorized to levy administrative penalties against each utility for violations of PSC orders and regulations or upon a finding that such utility has failed to provide safe and adequate service under a “reasonable business” standard (comparable to the prudence standard). The size of the potential penalties will be increased, and provisions will be adopted to ensure that the penalties are paid out of shareholder capital and not passed on to ratepayers.
- The PSC will be authorized to issue an order that directs a utility to comply with recommendations made pursuant to management and operations audits.
- The PSC will recommence operational audits at least every five years as currently required under the Public Service Law.
- To implement the strengthened auditing functions of the PSC, consideration will be given to having a dedicated auditing unit to help ensure that the PSC is well-situated to fully exercise its statutory authority and perform both management and operational audits.
- Consideration will also be given to creating a dedicated unit for investigating and enforcing utility compliance with PSC orders and recommendations and with utility tariffs.
- Statutory changes should be considered to explicitly authorize the PSC to formally review the performance of each of the Investor-Owned Utilities to provide safe and adequate service, and order appropriate relief including divestiture of some or all of a utility’s assets, subject to both due process standards and the need for continuity of service. To ensure compliance with the recommendations put forth by the PSC after a review, the Commission also recommends the clear establishment of the PSC’s authority to revoke the Certificate of Public Convenience and Necessity.
- DPS staffing and budgetary levels will be reviewed to ensure they are sufficient to carry out the newly-designed core functions of the PSC, and procedures should be reviewed to ensure cross-training of the existing workforce, implementation of performance management standards and technology upgrades. Given the substantial retirements at DPS in recent years, the agency currently is not staffed to the level authorized in the FY 2012-13 budget of 524 full-time employees (FTE). Based upon the additional mandates that the Commission recommends, the DPS staffing authorization will be maintained in the FY 2013-14 budget and DPS will recruit and hire up to the 524 FTE allotment to assist in implementation and enforcement of the new mandates.
- Similar to Sarbanes Oxley where CEOs need to certify the validity of their financial statements, consideration will be given to requiring senior officers of each utility to annually certify to the PSC that the utility is acting in compliance with all applicable State laws, rules, regulations, orders, and procedures, including the statutory requirement to provide safe and adequate service.
- All appointees to the PSC will have demonstrated competence in some aspect of utility regulation as well as a concern for the public well-being.
The Governor has proposed the privatization of LIPA, which would entail the disposition of LIPA’s assets to a qualified Investor-Owned Utility (IOU) that would serve as the sole utility manager and operator to the existing LIPA service area.