Unprecedented energy modernization reforms will create cleaner,

smarter electric grid, while providing greater cost savings to consumers

The New York State Public Service Commission (Commission) today approved historic structural reforms to the regulations governing electric utilities, providing more choice and cost-saving opportunities for New Yorkers by expanding clean and renewable power. This new framework, unprecedented in its breadth and scope, further advance New York State’s national leadership on climate change and energy innovation.

The State Public Service Commission today established new financial mechanisms that will help utilities meet the clean energy goals set forth in Reforming the Energy Vision (REV), Governor Cuomo’s strategy to lead the fight against climate change and grow New York's economy. Under these and other REV reforms, New York’s power system is on track to be 50% renewable by 2030, while providing new choice and value for New Yorkers.

“New York is taking a new direction today by creating the most-advanced and forward-thinking business model for electric utility rates anywhere in the country,” said Public Service Commission Chair Audrey Zibelman. “By aligning utility profits with market-enabling activities, residential and business customers can lower their energy bills through advances in digital technology and power-saving systems built for private homes and apartments, as well as entire neighborhoods.”

Today’s order moves New York away from decades of rate-setting decisions which encouraged investment in large, centralized power systems. The electric grid of the past century was built to meet the peak electric demand that occurs only a few days each year, resulting in an energy and financially inefficient system.

Utilities will be required to develop a more efficient and cleaner network through retail markets for distributed energy resources like solar, geothermal, wind, fuel cells, combined heat and power and battery storage, energy efficiency, and other advanced energy services. These new products and services help customers manage their energy usage and reduce their energy bills by creating a two-way, “transactive” grid between customers and energy providers.

One example already underway is the Brooklyn-Queens Demand Management Program (BQDM), which allowed Consolidated Edison to defer the construction of a $1 billion electrical substation in Brooklyn in favor of less-costly distributed energy resources like solar, batteries and energy efficiency. These technologies reduce consumer demand and improving overall efficiency, creating a cheaper and cleaner power system for all customers.

With today’s decision, each of the major electric utilities will be required to file an overall system efficiency proposal by December 1, 2016 to reduce high-cost, energy generation during times of peak energy demand. Utilities must identify new, more efficient ways to deliver power by promoting the deployment of smaller, cleaner power systems and enabling more control for customers in managing their energy bills.

• Reducing greenhouse gas emissions through cost-effective means;
• Energy efficiency achievements above and beyond current targets;
• Customer engagement in innovative programs that will help customers and utilities manage electricity usage;
• Faster pace of interconnections between the electric grid and new solar and other renewable power projects; and,
• Reductions in carbon emissions such as investments that support conversion to electric vehicles and geothermal heat pumps, along with reductions in costs related to the Clean Energy Standard -- Governor Cuomo’s “50 by 30” initiative to expand renewable power in order to meet half of New York’s electricity needs by 2030.

1. The focus of this decision is to create a modern regulatory model that challenges utilities to take actions to achieve objectives that align utility shareholder financial interest with consumer interest.
2. Like all of REV, the order seeks to improve the overall efficiency of the system, along with consumer value and choice, to achieve a more-productive mix of utility and third-party investment.  
3. The conventional cost-of-service ratemaking approach must be reformed by adding a combination of market-based, platform earnings and outcome-based earnings opportunities.
4. Under the new order, utilities will have four ways of achieving earnings:

• First is system efficiency, defined as a combination of peak reduction and load factor improvement. Each utility will be required to propose a system efficiency targets, with a strategy to achieve it, a demonstration of cost effectiveness, and an earnings incentive.