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<title>October 2004: New York Adopts Central Procurement Model For RPS Program</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<p ALIGN="left"><u><b>October 2004<br>
</b></u><font size="6"><b>New York Adopts Central
Procurement Model For RPS Program<br>
</b></font><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>5/01/08</font><font size="2">)</font></p>
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<p align="justify">In a proceeding which began in February of 2003 and involved over 150 active
participants, the New York Public Service Commission (“PSC”) has now voted
to adopt a renewable portfolio standard (“RPS”) program. Case No. 03-E-0188,
Proceeding on Motion of the Commission Regarding a Retail Renewable
Portfolio Standard, Order Regarding Retail Renewable Portfolio Standard
(September 24, 2004) (the “Order”). The program’s objective is to increase
the percentage of electricity retailed in New York State generated from
renewable resources from the current level of 19.3% to a level of 25% by
2013. The program differs from the RPS programs of other states in that it
does not require individual retail sellers of electricity to meet minimum
targets for the procurement of renewable resources or make penalty payments
into alternative compliance funds if they are unable to meet those targets,
but instead calls for a “centrally administered, incentive-based procurement
mechanism” to be managed by the New York State Energy Research and
Development Authority (“NYSERDA”).<br>
<br>
PSC staff is charged with the task of developing an implementation plan that
addresses the details of the program, but in broad outline, the program will
require investor-owned utilities to collect additional revenues from their
retail customers for NYSERDA’s use in “providing incentives to increase the
percentage of electricity used by retail customers” to increase the current
level of electricity generated by renewable electricity to 24%. At least one
additional percentage point increase is expected to result from “green
market programs” designed to encourage customers to voluntarily pay added
costs associated with electricity generated from renewable resources,
resulting in a total goal of 25%. The Order does not detail the relationship
between NYSERDA and the utilities under which the utilities are to receive
power from NYSERDA for distribution to their customers, but states only that
the utilities are “directed to enter such contracts or agreements with
NYSERDA as are necessary to implement [the PSC’s] choice of NYSERDA as
procurement administrator.”<br>
<br>
The PSC explained its decision to opt for central procurement on the ground
that central procurement would “expedite the start of the program and
provide more immediate feedback and control of the initial procurements.”
Also, the PSC reasoned that “administrative costs should be reduced because
the central procurement model provides economies of scale and entails a
competitive selection process.” It also pointed to the need for long-term
contracts to enable potential developers to obtain financing, and stated
that the central procurement model would “maximize the ease with which such
contracts [could] be secured.” The PSC ultimately seeks to migrate from its
central procurement model to “a more market-based system” and, as part of a
comprehensive review of the program in 2009, the PSC will require NYSERDA to
file a proposed plan for transitioning to such a market-based system.<br>
<br>
The PSC acknowledged that the program would likely increase costs, but
expects the added cost will be partially “offset by reductions in wholesale
energy costs, as New York reduces its reliance upon fossil fuels,” and
projects that the impact to ratepayers will be modest. The PSC aintains that
the added cost is justified by reductions in air emissions, decreased
“exposure to wholesale oil and natural gas price spikes and supply
interruptions,” and regional benefits in New York State through economic
development associated with, among other things, the manufacture of
renewable energy equipment, fuel procurement, and the construction and
operation of renewable generating facilities.<br>
<br>
Eligible resources for renewable generation under the program include a
“Main Tier” of medium to large scale electric generation facilities using
biogas, biomass, liquid biofuel, fuel cells, hydroelectric power,
photovoltaics, ocean or tidal power and wind. A second “Customer-Sited Tier”
includes fuels cells, photovoltaics, and wind resources located
“behind-the-meter.” Collection of the additional charge from ratepayers to
support the RPS program will begin in the fourth quarter of 2005 to support
a program start date of January 1, 2006.</p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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