Dive Brief:

• The New York Public Service Commission on March 16 issued an order adopting a new cost allocation methodology for standby and buyback service rates that advanced energy solutions providers say will improve the value proposition for distributed energy resources like electric vehicles, storage and demand management.
• The order lays out a decision tree — a series of questions indicating various outcomes — designed to help utilities determine which grid costs are local to a customer and which could be shared with others.
• Regulators determined the new approach would result in rates that "more accurately align individual customers’ contribution to system costs with the rates such customers pay, thereby sending improved price signals to those customers." 

Dive Insight:

New York is adjusting energy market rules to better integrate DERs. In particular, the new methodology to more accurately align individual customers’ contribution to system costs with the rates they pay could help deploy more battery resources in the densest urban environments, according to Advanced Energy Economy.

"We expect that the rates that result from this methodology will have significantly reduced fixed charges that will improve the value for storage, especially in New York City," AEE Regulatory Policy Director Danny Waggoner said.

Standby rates compensate the utility for being available in case a customer's distributed generation fails, while buyback rates cover a customer's export rate, according to AEE.

The decision tree methodology is a series of eight questions that determine "what portion of a given cost should be considered customer, shared, or local, and thereafter form the basis for the revenues which should be recovered through Customer Charges, Daily As-Used Demand Charges, or Contract Demand Charges, respectively," according to the PSC order.

Regulators said that customers choosing voluntary standby service rates "will have an increased ability to manage their bills," while the adoption of a limited exemption from buyback rates for standalone energy storage systems that export energy to the grid "will help to further develop and grow the energy storage market in New York that will be necessary to enable the state’s clean energy goals."

The new methodology was supported by the City of New York, which told the commission the new allocated cost of service methodology is designed to result in more uniform, fair, and transparent standby and buyback service rates across the state.

Consolidated Edison, the largest utility in New York, said it was still reviewing the order but reiterated its support for rate structures that "reflect the costs of operating the electric distribution system and that treat all customers fairly."

"Cost-based rates benefit customers by encouraging efficient actions and investments and use of the electric system to lower costs for all who rely on it," the utility said in a statement.