New cost allocation methodology for standby and buyback service rates would benefit DERs like energy storage, electric vehicles, and demand management.
Washington, D.C. – March 28, 2022 – The New York Public Service Commission (PSC) issued an Order adopting a new cost allocation methodology for standby and buyback service rates that will improve the value proposition of distributed energy resources. The long-awaited Order,* issued on March 16, referenced comments submitted by Advanced Energy Economy (AEE) multiple times and accepted many of AEE’s recommendations.
“This is an important order that will expand the market for energy storage and other distributed energy technologies in New York, and New York City in particular,” said Danny Waggoner, regulatory policy director for AEE. “The rates developed under this new methodology will reduce certain demand-like charges that are fixed for a time and difficult for customers to reduce, and also improve the economics of energy storage systems. They could provide benefits for electric vehicle charging, as well as demand management services for customers that opt into these rates. This order sets the stage for advanced energy companies to innovate and grow in New York.”
Standby rates are charged to customers with distributed generation (DG) so that their utility will be available in case their DG or storage does not meet their full capacity requirements. Buyback rates are bidirectional, paid by and to certain DG owners that are not eligible for net energy metering (such as standalone storage facilities and institutions with combined-heat-and-power systems) for exports of electricity to the grid. These exports are valued less than the rates paid for exports under net energy metering.
In a series of comments, Advanced Energy Economy Institute, on behalf of AEE and the Alliance for Clean Energy New York, argued that customers are being overcharged for the customer-specific components of standby rates. The new methodology adopted by the PSC is intended to more accurately align rates to a customer’s contribution to system costs, and therefore will offer those customers better opportunities to manage costs with DERs. Electric vehicles owners will also benefit by charging during times when that charging does not contribute to system costs. Changes to the methodology for standby rates will also apply to buyback rates, meaning reductions in charges that some DERs pay who are next exporters of capacity to the grid. The order also provides a limited exemption from buyback rates for standalone energy storage systems that export power to the grid. Lastly, the order allows for any customer to opt in to these rates, giving all customers, large and small, new opportunities to manage costs with a wide range of DERs or through changes in consumption patterns. The PSC noted in its order that customers with other DERs choosing voluntary standby service rates “will have an increased ability to manage their bills.”
*Note: AEE offers free, complimentary access to its PowerSuite online platform tracking all federal and state energy legislation and regulatory filings, plus RTO/ISO policy action, to credentialed media. Sign up for a free trial and contact Adam Winer for permanent media access.
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