TCI Announcement Demonstrates Benefits of Transition to Clean Transportation, Highlights Need for Strong Program
BOSTON — Today, 12 states and the District of Columbia announced the details of a new, regional program to cut tailpipe pollution while delivering much needed investment in clean, equitable, modern transportation options. Working together through the Transportation and Climate Initiative (TCI), these jurisdictions have developed a multi-state cap-and-invest program to address rising transportation emissions and the need for greater investment in a clean transportation future.
Launching this program will be a major accomplishment at a substantial scale: the TCI region, were it a single country, would represent the world’s third largest economy.
“States are leading the way with subnational action on climate,” said Daniel Sosland, Acadia Center’s President. “By working together, this region can achieve globally significant carbon reductions while delivering billions of dollars each year for grants and investments to help every community thrive. From rural towns to the region’s biggest cities, TCI can fund investments to make better transportation options more accessible, affordable, and reliable.”
Along with the policy details in the draft Memorandum of Understanding (MOU), the TCI jurisdictions released modeling results demonstrating that regional action to reduce transportation pollution will deliver economic, health, and environmental benefits. Under the most ambitious policy analyzed, the region would see the following impacts in 2032:
A 25% reduction in CO2 emissions from vehicles (from 2022 levels);
Nearly $7 billion in proceeds for investment in clean, equitable transportation solutions; and
$10 billion in health savings from reduced tailpipe pollution in 2032 alone.
The modeling makes it clear that launching a TCI program will be a tremendous step forward if the participating jurisdictions implement an ambitious emissions cap. As the modeling shows, each increasingly more ambitious policy scenario delivers greater health savings and more resources for clean, equitable transportation investment.
Given these findings, the TCI states should establish a cap that declines by at least 25% from 2022 to 2032, if not more. Of the policy scenarios analyzed, the 25% cap comes closest to ensuring the necessary cuts in transportation pollution to meet state economy-wide climate requirements. While the 25% cap would represent progress, the TCI jurisdictions have an opportunity to chart an even bolder path; a more ambitious emissions cap will ensure that participating states meet their climate requirements while delivering greater health savings and enabling more transformational investments. Those investments in public transit, electric vehicles, active mobility, and other clean transportation projects will provide greater access to the clean, affordable, reliable transportation options that this region needs.
The importance of strategic investment has been demonstrated through the region’s experience with the Regional Greenhouse Gas Initiative (RGGI). The investment of over $3 billion in RGGI auction proceeds has helped participating states become national leaders on energy efficiency while creating high quality, local jobs. Those RGGI-funded investments have contributed to the fact that electricity prices in the RGGI states have declined since the program launched, while prices have increased in the rest of the country.
Through TCI, states in the Northeast and Mid-Atlantic can build on RGGI’s success while improving the model. Investments funded by TCI must be dedicated to reducing pollution and delivering a more equitable transportation system, and complementary policies will be essential to the rapid and just transition to a clean transportation future.
“Investment in better transportation options while reducing tailpipe pollution is a winning combination,” said Jordan Stutt, Carbon Programs Director. “Acadia Center applauds the TCI jurisdictions for developing this program, and we call on every participating Governor to ensure that the program is both robust and equitable; the program’s success will be determined by their ambition.”
 The TCI jurisdictions are: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia and Washington, D.C.
[…] Instead of buying and installing solar panels on your home or property, you subscribe to a piece of a large local solar project nearby, often along with a few dozen to a few hundred other people who live in the area.
A portion of the electricity generated by these projects gets credited directly to your utility bill, you get a discount on electricity, and you don’t have to pay anything to join.
Community solar allows households to receive the benefits of solar energy without the cost or hassle of a rooftop installation. Roughly half of residences in the U.S. can’t host a solar installation because the occupants don’t own the property, or the roof is too old, too shady, or faces the wrong way for optimal sun exposure. Community solar eliminates these issues, making solar power more accessible to more people than ever before.
Initially, there was an incentive for customers to build DER at locations where congestion was anticipated, LeBel added. But setting that locational value “has proved to be more administratively complicated than expected and commission staff has proposed eliminating it.”
The utilities did “guesstimates and concluded congested locations should get 50% more than other locations,” he said. “They are not coming to terms with the details.”
Lebel agreed. Getting to that vision “would be a massive change for the utilities,” he said. “But it has happened. It took decades to get from PURPA to restructuring. Maybe, in the 2030s, we will look back at the 2014 start of the New York REV and see a similar transformation. And maybe things will still be changing.”
Since 1997, New York has allowed customers with certain types of distributed generation systems, including rooftop solar (sometimes referred to as “mass market” solar) and community solar, to participate in net metering. This simple billing method allows a customer’s consumption and generation to be “netted” at the end of every month. If a customer has consumed more energy from the grid than she has generated from her solar panels, she will pay for the net consumption. However, if a customer has generated more power than she has consumed, then that net generation will be rolled over into the next month’s bill and credited toward future consumption at the retail rate—i.e. the same amount that the customer is charged for using a kWh of electricity.
This form of compensation (sometimes referred to as “retail rate net metering”) has supported solar expansion with a simple, predictable formula. However, because this form of net metering relies only on retail rates, which tend not to vary by time or location, solar systems are not always installed in areas where they are most needed or combined with other technology like energy storage to provide additional value to the grid. Some areas of the grid need more congestion relief, some hours of the day have higher electricity demand, and some distributed energy sources are cleaner than others.
New York has decided to move away from retail rate net metering and toward a smarter and fairer pricing scheme that reflects clean energy resources’ value to the grid. The state is now grappling with creating such a system while at the same time ensuring that this transition is gradual and understandable to consumers.
In 2015, the Public Service Commission (PSC) initiated the Reforming the Energy Vision (REV) process, which seeks to create a new utility business model that incorporates more distributed energy while ensuring that energy remains affordable, resilient, and reliable. Recognizing the need to develop a more accurate way of valuing these clean energy resources, in March 2017 the PSC issued an order transitioning from retail rate net metering to a net metering program referred to as Value of Distributed Energy Resources (VDER) that attempts to more accurately reflect the costs and benefits of these clean resources on the grid.
The first phase of the VDER process applies to larger solar installations including remote net metering (where the electricity produced from a solar installation at one location is credited toward electricity consumption at a different location) and community solar but not to residential rooftop solar. Phase One compensates these projects using a “Value Stack,” which identifies certain components that together represent the value of that clean energy to the grid. The values in the Phase One Value Stack include certain costs that the utility no longer has to incur, which are referred to as “avoided costs” and which are assigned a monetary value. These include:
The cost of the energy that the utility would otherwise have to generate or purchase (referred to as “wholesale” energy);
The amount of energy-producing resources that the utility would have to procure to meet demand (referred to as “capacity”); and
The cost of delivering that energy to customers, as well as the higher costs of delivering the energy in certain congested areas of the grid.
In addition to these avoided costs, the Value Stack also includes a credit for the environmental attributes of certain types of clean energy, primarily the fact that they do not emit greenhouse gases.
A second phase of this transition (referred to as Phase Two Value Stack) is in process to further refine these values. After January 1, 2020, VDER will also apply to new residential rooftop projects under a new compensation method to replace traditional retail rate net metering.
New York’s Solar Gap
Because retail rate is a more straightforward, if blunt, method of net metering, developers may initially struggle to make an easy economic case for solar while transitioning to a value-based compensation structure. However, if done well, this new structure will allow solar to expand more efficiently in New York, with better outcomes for consumers and the climate. Continued expansion of solar is important, because in contrast to other Northeast states such as Massachusetts and Vermont, New York has relatively modest amounts of installed distributed solar given its population (Figure 1). It must accelerate to meet state and regional climate goals.
New York has set a goal of procuring 50% of its energy needs from renewable energy resources by 2030. As shown in Acadia Center’s EnergyVision 2030, with further strategic action New York can reduce greenhouse gas emissions 45% by 2030, a target that will put the state on a path to meet minimum EnergyVision 2030 recommends that, in addition to sharply increasing grid scale wind and solar generation, New York needs to add 13.7 GW of distributed solar, more than 10 times the amount that has been installed to date.
Figure 1 – Per Capita Installed PV
New York’s need for more distributed solar can be addressed from multiple angles: first, by making the transition to value-based compensation as gradual and understandable as possible; and second, by supporting solar expansion through complementary programs. Acadia Center has been an active participant in the VDER proceeding since its inception. Recently, staff from the Department of Public Service approved several changes to the Phase One Value Stack to expand the types of eligible renewable energy resources and make it easier for customers to participate and receive compensation. These changes include:
Removing certain size limits from eligible clean energy resources
Expanding the VDER compensation structure to storage and new forms of renewable energy such as tidal energy
Removing location-based restrictions within utility territories
Acadia Center supported these changes and submitted comments with these and other recommendations for improving various elements of the value stack to make it easier for customers to receive compensation and to ensure these resources are appropriately compensated for the value they add to the system.
Acadia Center also supports solar expansion in New York through statewide initiative and grassroots campaigns. One such state initiative is NY Sun, a program administered by NYSERDA that seeks to add 3 GW of installed solar capacity in the state by 2023. The program works by establishing cash incentives for developers that decline over time as solar installation increases in certain regions of the state. Recently, NYSERDA made improvements to the program by expanding the incentives, supporting larger projects, and encouraging solar installations in a greater variety of locations. In addition, Acadia Center is a founding member of Million Solar Strong, which seeks to double this statewide goal to 6 GW of solar capacity by installing solar on 1 million homes by 2023, including 100,000 low-income households. The campaign has been meeting with public officials and building support around the state.
New York must make the leap to close its solar gap, and both regulatory solutions and grassroots support will be necessary. Together, these efforts have the capacity to make lasting change for this key technology.
The document is meant to get power-sector stakeholders down to brass tacks on how, in practical terms, New York can put a price on carbon if the U.S. government won’t.
Parties are digesting the proposal as they prepare for a May 14 meeting. The minute details will be heavily debated, but so far, many just seem glad the process is underway.
“NYISO’s draft proposal for a carbon adder would send an important and overdue price signal to the market necessary for New York to achieve its ambitious carbon reduction policies in place to meet long-term greenhouse gas reduction targets,” said Deborah Donovan, Massachusetts director for the Acadia Center, an advocacy organization focused on clean-energy issues in the Northeast.
Read the full article from E&E Energywire here (article may be behind paywall).
NEW YORK — On April 18, Central Hudson Gas and Electric proposed a settlement in its ongoing rate proceeding, in which it agrees to reduce its current electric and gas residential customer charge from $24 to $19.50 over three years. Central Hudson’s customer charge reduction makes it the first New York utility to reduce its customer charge in more than a decade.
Jen Metzger, Director of Citizens for Local Power, said: “Central Hudson’s historically high fixed charges have been a burden on many seniors and low- and moderate-income households, which tend use less energy. We welcome this important step in the right direction to alleviate this burden and make rates fairer by tying them more closely to how much energy customers actually use.”
Cullen Howe, Acadia Center’s New York Director, said: “Central Hudson’s agreement to reduce these regressive fees will benefit the majority of its residential customers. As the state looks to ramp up its efforts on energy efficiency and clean energy, Acadia Center believes it is crucial that New York utilities and regulators provide the right incentives to invest in these resources. Though Central Hudson’s fixed charge is still high and must continue to be lowered, other utilities should follow its example and begin reducing their customer charges as well.”
Also referred to as basic service or fixed charges, customer charges are flat fees that every customer pays, regardless of the amount of electricity or gas used. Across the country, fixed charges for residential electric customers typically range from $5 to $10 a month, but in some states — notably New York — these charges are significantly higher. Central Hudson’s current customer charges are the highest in New York and among the highest in the nation.
High electric customer charges disproportionately burden low-income customers, who typically use less electricity than average and generally benefit from lower customer charges. They also conflict with New York’s goals for a clean, modern, consumer-friendly electric system by removing any incentive for customers to lower their electricity bills through conservation, investment in energy efficiency, or renewable energy technologies like solar power.
While these reductions are an important step, other New York utilities have continued to maintain, or seek increases to, these charges. On March 15, for example, the Public Service Commission approved a decision allowing National Grid to maintain its existing monthly customer charge at $17, and Orange & Rockland County Utilities recently filed a rate proceeding seeking to increase its current $20 customer charge to $22. The New York Customer Charge coalition has set up a web site at www.lowerfixedcharges.org to continue advocating for lowering these charges and providing rate relief to low-income and low-usage New York energy consumers.
Jessica Azulay, Program Director at Alliance for a Green Economy, said: “We hope the Central Hudson agreement is the first step in a process to reduce fixed charges for all utilities across New York State. New York has set ambitious energy affordability and climate goals. Reduction in fixed charges is a major tool that utility regulators can and should use to accomplish both of those goals. We urge the Public Service Commission to use this tool aggressively to ease energy burdens for residential customers and incentivize conservation, energy efficiency, and investments in distributed renewable energy.”
Richard Berkley, Executive Director of the Public Utility Law Project of New York, said: “We are grateful to Central Hudson for taking the lead in beginning what will hopefully be a statewide reduction of New York’s extremely high customer charges. In a state where approximately half of residential energy consumers have trouble paying their utility and other vital bills such as food, medicine, mortgages or rent, taking concrete steps toward greater affordability by reducing these regressive charges is something we can all support, and we are equally grateful to our coalition partners and to the Department of Public Service for its assistance in bringing about the first reductions of these charges.”
“Fixed customer charges in New York are too high and are bad policy. This settlement marks an important step toward reducing the harmful effects that these charges have on customers, and in aligning rates with the New York vision for electricity markets,” said Karl R. Rábago, executive director for the Pace Energy and Climate Center and a former utility regulatory commissioner. “We are pleased that our years of work in rate cases in New York against these unfair utility charges is bearing fruit.”
Jonathan Bix, Executive Director of Nobody Leaves Mid-Hudson, said, “This nearly 20% reduction in Central Hudson’s fixed charge will increase affordability and decrease shutoffs for low-income customers. Although this reduction is a critical victory, Central Hudson and other utilities must continue to lower their regressive fixed charges, including Orange & Rockland Utilities through their current rate proceeding.”
Residential electricity rates are typically comprised of two basic parts — a volumetric charge based on energy used and a monthly fixed charge, which is typically referred to as a customer charge. Customer charges are flat fees that every customer pays, regardless of the amount of electricity or gas used. Because utilities have a fixed revenue requirement, higher customer charges lead to lower volumetric charges, and vice versa.
Over the past several years, utilities across the country have pushed for higher customer charges, in part because they provide a guaranteed revenue stream. Acadia Center has developed materials showing that fixed charges for residential electric customers in most states typically range from $5 to $10 a month, but are much higher in New York, averaging close to $18. Central Hudson Gas and Electric’s current customer charge of $24 is the highest in New York and among the highest in the nation.
Why lower customer charges?
High customer charges disproportionately impact low-income customers, who typically use lower than average amounts of electricity and who are often forced to spend significant amounts of their income on utility bills. While high customer charges might represent only a small fraction of a bill for higher-income consumers, these charges can represent a large portion of a low-income consumer’s bill, making energy costs proportionately greater for those on whom the burden is already greatest.
High customer charges conflict with New York’s goals for a clean, modern, consumer-friendly electric system by decreasing incentives for customers to lower their electricity bills by investing in energy efficiency or distributed energy resources like solar power.
High customer charges don’t align with state goals
Importantly, high customer charges reduce the incentive for investment in energy efficiency. This is problematic as New York seeks to ramp up its efforts to improve statewide energy efficiency by announcing a plan to set a 2025 energy efficiency target by Earth Day. As Acadia Center has pointed out in its recently released EnergyVision2030 Progress Report for New York, New York’s electric energy efficiency annual savings level is only 0.5%, compared to savings levels of 3.24% in leading states such as Massachusetts. As New York seeks to establish ambitious energy efficiency targets, it needs to set the right incentives to invest in these resources by ensuring that utilities reduce these charges.
Working toward rate relief
Things may be starting to change. On April 18, thanks in part to Acadia Center’s advocacy, Central Hudson Gas and Electric agreed to reduce its current electric and gas residential customer charge to $19.50 over three years in its ongoing rate proceeding, becoming the first New York utility to reduce its customer charge in more than a decade.
Acadia Center has set up a website with several other organizations at www.lowerfixedcharges.org to continue advocating for lowering customer charges to levels that provide rate relief to New York energy consumers and set New York on a path to meet its clean energy and energy efficiency goals.
A chorus of opposition from upstate consumers and advocacy groups made a difference as state regulators severely limited National Grid rate increases. The new plan also sets the stage for expanded discounts for low-income households. The state Public Service Commission, in a ruling issued Thursday, allowed the company to phase in higher rates beginning April 1.
Read the full article from the Niagara Gazette here.
Jordan Stutt, policy analyst, Acadia Center, said: “The states are convening these conversations at an opportune time. Congested roads, outdated infrastructure and heavily polluting vehicles are a drag on the economy and our health. By working together, these states can implement regional solutions for clean and modernized transportation that will improve quality of life and reduce health risks from pollution.”
The groups that oppose the rate settlement include the Alliance for a Green Economy, PUSH Buffalo, Acadia Center and Syracuse United Neighbors. They jointly released a statement earlier this week opposing the plan, which would gradually increase the typical monthly residential gas and electric bill for upstate National Grid customers by $16 by 2020. The coalition said the rate plan did not go far enough to make gas and electric service affordable for low-income customers or do enough to push renewable sources of energy.