New York

Summary New York was one of the first states to establish a system benefits charge (SBC) to support energy efficiency and other public benefits energy programs. These programs are required by regulatory orders issued by the New York Public Service Commission (NYPSC). Following an NYPSC order in June 2008, the regulated electric utilities in the state increased funding for the programs to approximately $334 million per year. The investor-owned natural gas utilities increased funding to approximately $13.2 million per year. In 2007, New York's utilities spent $115.1 million on electric efficiency programs, saving 219,612 MWh. A state government authority, the New York State Energy Research and Development Authority (NYSERDA), administers the SBC programs, collectively known as "New York Energy $mart™." NYSERDA and its contractors implement the programs. The June 2008 order allows the utilities to administer some of the new, fast-track “expedited” programs that they have developed. Two unregulated, publicly-owned utilities, the New York Power Authority and the Long Island Power Authority, offer SBC-funded programs to their customers. New York has an Energy Efficiency Portfolio Standard with three-year targets for energy savings with a goal of reducing the state’s energy consumption by 15% by 2015. After a June 2007 NYPSC order, electric and gas utilities in the state began filing proposals for decoupling mechanisms in ongoing and new rate cases. Decoupling reduces the financial disincentive for utilities to support energy efficiency by separating utilities’ profits from their levels of sales. Electric utilities can earn performance incentives based on the energy savings resulting from their energy efficiency programs. Natural gas utilities may participate in this program and earn similar incentives.

Customers of New York’s regulated electric distribution utilities and natural gas utilities (Central Hudson Gas and Electric Corporation, Consolidated Edison Company of New York, Inc., New York State Electric and Gas Corporation, Niagara Mohawk Power Corporation, Orange and Rockland Utilities, Rochester Gas and Electric Corporation (RG&E), National Fuel Distribution Corporation, Corning National Gas Corporation, St, Lawrence Gas, Company, Inc., KeySpan Energy Delivery New York and KeySpan Energy Delivery Long Island) support the statewide energy efficiency and other public benefits energy programs.

Customers support the programs by paying a non-bypassable system benefits charge (SBC) on their utility bills. A non-bypassable charge is a charge applied to all customer bills in a given region whether they receive service from a local utility or from a competitive supplier. The New York system benefits charge supports a comprehensive set of programs for customers, including residential, multifamily, low-income, commercial/industrial, and research and development programs. A state government authority, the New York State Energy Research and Development Authority (NYSERDA), administers the SBC programs, collectively known as "New York Energy $mart™." NYSERDA and its contractors implement the programs. The New York Public Service Commission’s (NYPSC’s) June 2008 Order Establishing Energy Efficiency Portfolio Standard (EEPS) and Approving Programs (Case 07-M-0548) allows the utility companies to administer some of the new, fast-track and expedited programs. Two nonregulated public power authorities, the New York Power Authority and the Long Island Power Authority, also offer SBC-funded programs.

New York’s energy efficiency programs are the result of NYPSC cases dating back to 1996. On May 20, 1996, in Opinion No. 96-12, Cases 94-E-0952 et al., the NYPSC initiated a statewide system benefits energy efficiency program including natural gas and electric programs. On January 30, 1998, in Opinion No. 98-3, Case 94-E-0952, the NYPSC established SBC funding levels for July 1, 1998 to June 30, 2001 and named NYSERDA as administrator of the programs. A July 2, 1998 NYPSC order set the final budget for the 1998-2001 New York Energy $mart™ programs. Approximately seventy-five percent of the budget was allotted to electric and gas energy efficiency programs. (RG&E ran its own SBC-type programs for this first three-year period). A NYPSC Order, issued January 24, 2001 in Case 94-E-0952, continued and expanded the SBC programs from July 2002 through June 2006 and funded the programs at $150 million per year.

On December 14, 2005, the NYPSC issued an order in Case 05-M-0090 approving a five-year extension of the SBC program from 2006-2011. New York Energy $mart™ programs were funded at approximately $175 million annually. Approximately seventy-five percent of the budget was allotted to electric and gas energy efficiency programs.

The NYPSC’s June 2008 Order Establishing Energy Efficiency Portfolio Standard (EEPS) and Approving Programs (Case 07-M-0548) supported a 15% reduction in electricity usage by 2015. The order approved specific "fast track" energy efficiency programs for immediate implementation, required utilities to file energy efficiency and load management programs consistent with the order, and directed utilities to collect $159 million per year for electric programs and $13.2 million for natural gas programs. This funding will support the EEPS through 2011. The incremental funds are being collected through the SBC.

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The NYPSC’s EEPS order in June 2008 initiated a charge on customers’ natural gas bills. Total spending on electrical efficiency programs in New York in 2007 was $115.1 million. This includes not only the SBC-funded programs, but those offered by the New York Power Authority and the Long Island Power Authority and other publicly owned utilities (some municipal and cooperative utilities).

The system benefits fund is renewed at the discretion of the NYPSC. Since establishing initial funding for the systems benefits programs in 1996, the NYPSC has renewed funding levels for five-year periods. (See “Customer Energy Efficiency Programs” for more details). The NYPSC’s December 14, 2005 order in Case 05-M-0090 approved a five-year extension of the system benefits charge program from 2006-2011. The current New York Energy $mart™ energy efficiency, renewable energy, low-income and other programs were funded at approximately $175 million annually. Previous funding provided the programs with $150 million/year. Additional program funding was approved in June 2008 when the NYPSC issued an Order Establishing Energy Efficiency Portfolio Standard (EEPS) and Approving Programs (Case 07-M-0548). This order adopted a goal of a 15% reduction in electricity usage in the state by 2015. The order increased the annual level of electric system benefits charges from $175 million to $334 million as of October 1, 2008. These charges will be collected by the electric utilities and will continue until December 31, 2011. The order set the annual level of yearly natural gas system benefits charges at $13.2 million as of October 1, 2008. These charges will be collected by the natural gas utilities and will continue until December 31, 2011.

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In April 2007, a new policy goal was set to reduce electricity use in 2015 by 15% (“15 by 15”), relative to projected use in 2015.

In June 2008, the New York Public Service Commission issued an Order Establishing Energy Efficiency Portfolio Standard (EEPS) and Approving Programs (Case 07-M-0548). The order adopts specific, interim, three-year targets for MWh reduction with a forecast trajectory that will achieve the 15% efficiency goal by 2015. It also approves specific “fast track” energy efficiency programs for immediate implementation and requires the utilities and the New York State Energy Research and Development Authority (NYSERDA) to file energy efficiency program proposals.

The order also directs New York’s investor-owned utilities to use a System Benefits Charge (SBC) to collect additional funds to support the EEPS through 2011. The savings targets begin in 2008 at 0.5% savings relative to 2007 forecast sales and ramp up by a little over 2% each year through 2015.

In May 2009, the PSC established targets for natural gas efficiency programs. The targets are set at 4.34 Bcf annually through the end of 2011 and 3.45 Bcf annually beyond 2011. Combined with reductions from other sources, this target will result in a 14.7% reduction in estimated gas usage by 2020.The downward revision of the target reflects a likely change in program funding following the exhaustion of stimulus funding. These targets are estimated savings goals and do not represent binding commitments, but will be used for planning purposes.

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Following an April 2007 order (Cases 03-E-0640 and 06-G-0746), electric and gas utilities must file proposals for true-up based decoupling mechanisms in ongoing and new rate cases. A revenue-per-class decoupling mechanism has been approved for both Consolidated Edison and Orange & Rockland electric utilities. True-ups occur annually under these mechanisms. Con Ed’s revenue-per-customer gas decoupling program received approval to continue from the Department of Public Service (Case 06-G-1332, May 19, 2009). National Fuel Distribution also implements revenue-per-customer decoupling.

Consolidated Edison (gas) Case 06-G-1332, Order No. 1-102-06G1332 (September 2007); National Fuel Gas Distribution (gas) Case 07-G-0141, Order No. 1-102-07G0141 (December 2007); Consolidated Edison (electric) Case 07-E-0523, Order No. 1-301-07E0523 (March 2008); Orange & Rockland (electric) Case 07-E-0949, Order No. 1-302-07E0949 (July 2008).

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On August 22, 2008, the PSC established incentives for utility energy efficiency programs (Case 07-M-0548). The maximum potential incentives will be determined by the percentage of estimated overall program costs. The metric for utility performance is achieved megawatt-hour reductions. A unique trait of this incentive mechanism is the infusion of the risks of negative adjustments for utilities that achieve less than 70% of its efficiency target. Utilities achieving more than 80% of their targets receive incentives. On achieving 100% of its target, a utility is rewarded the maximum incentive. The total maximum amount of electric incentives will be $40 million annually. When taken with the total megawatt-hour savings targets in 2009, this equates to $38.85 per incremental MWh saved. Forty million dollars equates to roughly 20 basis points on the return on equity of New York’s major electric utilities and approximately 12% of estimated program costs.

For natural gas programs, utilities may opt to participate in the incentive mechanism adopted in the August 22, 2008 order. Utilizing similar reference points of approximately 19 basis points on return on equity and 10% of the estimated program costs, the maximum positive or negative adjustments of $13 million annually will be applied at the rate of $3.00 per incremental Mcf.

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The New York State Energy Planning Board uses the energy savings information from the New York Energy $mart™ program evaluations in the development of periodic "State Energy Plans." These plans contain 20-year forecasts of energy demand and prices and assessments of available energy supplies including energy efficiency, renewable energy, electricity, natural gas, petroleum and coal.

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• New York State Energy Research and Development Authority

• New York Energy $mart™ Program

• New York State Incentives for Renewables and Efficiency

• New York State Public Service Commission

• System Benefits Charge, Proposed Plan for New York Energy $mart™ programs (2006-2011)

   

Last Updated 09/09/2009

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