Utilities can no longer own small-scale solar energy in New York State. What does it mean for you?

The New York Public Services Commission (PSC) has introduced measures to ensure that distributed energy technologies like rooftop solar panels remain affordable for all New Yorkers. As part of the state’s forward-thinking Reforming the Energy Vision (REV) initiative, state utilities will be barred from owning distributed generation equipment (such as your solar panel system). According to Governor Andrew Cuomo, the new rules will empower state residents to take control of their electricity usage – and reduce their power bills.

The key focus of the REV program is to bring New York’s electricity system into the modern era by improving network efficiency and introducing more renewable energy sources. As Governor Cuomo points out in the announcement of the new rule last month, New York’s approach to electricity infrastructure has undergone little change since the first grid was introduced in lower Manhattan back in 1884. “This state is in need of a modern and efficient energy system, and we are proud to take the steps to build a sustainable way to deliver energy to every home in New York,” he said.

Key takeaways: New York utilities can no longer own small-scale solar power

  • The New York Public Services Commission has introduced a new rule to bar electric utilities from owning distributed generation facilities such as rooftop solar panels and energy storage systems.
  • The aim of the PSC’s new rule is to ensure transparency and a free an open market for all electricity options in New York State. In particular, if you are considering going solar, it will ensure that you are able to choose from a wide range of solar installation companies and that your utility has no vested interest in preventing you from doing so.
  • The new rule is the latest in the utility industry’s long evolution towards being freer, opener and more impartial.
  • You can compare solar energy system quotes in New York State for free by shopping on the EnergySage Solar Marketplace
NYC underground dc mains

A map showing the first electricity grid in New York (and the world) by the Edison Electric Illuminating Company (now Consolidated Edison) in lower Manhattan. Image courtesy of ConEdison.





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The changing role of New York’s electric utilities: A brief history

The role that electric utilities play in New York State has changed gradually over the past few decades. The story of this evolution is worth understanding in order to put the PSC’s new rule into context. What it all comes down to is a slow but steady realignment of the overarching goals of a utility: a progression from focus on the electricity system to focus on electricity users – like yourself.

Electricity utillity example

The basic nature of the grid to date – large electricity generation plants send AC electricity long distances to homes, businesses and industry. Electricity infrastructure of the future will include distributed generation (like rooftop solar), more renewables and Image courtesy of ConEdison.

 

1. Originally, utilities both supplied and delivered your electricity

Historically speaking, it has not been in the interest of utilities to encourage their customers to use less electricity; until recently, the more electricity your utility sold you, the more money it would make. Until a few decades ago, utilities would both generate and deliver the electricity you used in your home – meaning that a utility would have a more or less complete monopoly on electricity for a given area. Back in those days, you as a customer would have had no choice of your electricity supplier, and regulatory oversight would have been very important in keeping your electricity bills reasonable. But even then, utilities would make more money if you consumed more electricity – and therefore had no incentive to educate you about energy efficiency or encourage you to get solar panels to cut down on your electricity usage.

Did you know? NYSERDA has recently granted EnergySage $400,000 to help reduce solar ‘soft costs’ in New York State. Read about EnergySage’s partnership with NYSERDA.

2. Now, ESCOs supply your electricity – utilities just deliver it

In the 1990s the “supply” and “delivery” aspects of the electricity value chain were separated. Utilities remained the administrators of your electricity bill account and the overseers of the electricity transmission & distribution infrastructure, while  “Energy Service Companies” or ESCOs stepped in to offer competitive supply contracts. This meant that, for the first time, customers had some choice when it came to electricity pricing – some ESCOs offered better rates and terms than others, so it was possible to save money simply by switching providers.

Utilities, meanwhile, continued to charge customers on a per kilowatt-hour (kWh) basis for the delivery of the electricity supplied by the ESCOs. Because they still charged per unit of electricity, it was still in the utilities’ interest for you to consume more electricity. Additionally, if electricity demand rose in a given utility’s area (because you and other customers were using more electricity), that electric utility could raise everyone’s rates to pay for updates and expansion of the infrastructure to accommodate this.

(Read more about ESCOs on the PSC’s website.)

3. ‘Revenue decoupling’ means that utilities are paid according to number of customers – not by units of electricity sold

It was only in 2007 that the PSC introduced a ‘Revenue Decoupling Mechanism‘ to remove disincentives for utilities to promote energy efficiency and on-site renewables among their customers. Under decoupling, utilities get paid according to the number of customers that they service – not according to how much electricity they sell to each customer. The decoupling order was arguably the state’s most important step towards reorienting the electricity system to be more customer-focused and less utility-focused: it puts utilities in a more neutral role, removing the impetus for them to invest in infrastructure to meet ever-growing electricity demand.

Instead, utilities are now in a position to approach the issue of growing demand in more even-handed and innovative ways. Rather than simply responding to anticipated growth by building out infrastructure (a strategy that the PSC has already determined is not cost-effective), they can encourage customers to use less power from the grid while generating more of their own (with solar panels, etc).

4. And now, utilities can’t own distributed energy systems (like solar)

The new rules barring utilities from owning distributed generation build on the progress made by the revenue decoupling order, setting the stage for a freer and more open market for rooftop solar energy (not to mention other on-site renewable technologies) throughout New York State. Revenue decoupling was introduced in part to remove incentives for utilities to continually build out network infrastructure to meet rising electricity demand without considering ways that they could slow the rise in the first place. If utilities were allowed to own rooftop solar and other distributed energy systems, a similar conflict of interest could theoretically still exist – the utilities would be in direct competition with solar installation companies courting their utility customers to go solar.

Future of electricity in NY: REV

Yesterday vs tomorrow’s electricity grid as envisioned by the NY REV initiative: A move from a centralized electricity system to distributed energy, with more consumer choice. Image courtesy of NYSERDA.

 

What does the new rule mean for you if you are thinking about going solar in New York?

The evolution of NY’s utilities described above moves in one direction: towards greater consumer choice. Whereas only a few decades ago you would have had no choice with regard to where your electricity came from, these days you can not only choose your supplier, but may even opt to generate your own electricity at home. The latest rule change clears the way for fair competition among solar installation companies in New York State – and makes it so that your utility (and its inherent powers) is not a competitor or a hindrance.

In fact, NYSERDA and the PSC have already consolidated and standardized grid connection guidelines for small-scale solar, replacing the various rules that each utility had implemented independently. This will reduce bureaucratic headaches for customers and installers alike – saving time and money in the process. It’s never been easier (or more affordable) to go solar in New York!

Interested in going solar in New York? We can help you compare options. Get an instant Estimate and join the EnergySage Solar Marketplace to learn about what’s available in your part of the state.

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