Memorandum in Opposition - A.2710/S.3917

This memo is submitted by Energy Coalition New York in opposition to the subject bill which would require utilities to pay the retail rate for excess electricity produced by fuel cell or micro combined heat and power generators.

Energy Coalition New York consists of New York State's major gas and electric utility companies: Central Hudson Gas & Electric Corporation, Consolidated Edison Company of New York Inc., National Fuel Gas Distribution Corporation, National Grid, New York State Electric & Gas Corporation, Orange and Rockland Utilities, Inc., and Rochester Gas and Electric Corporation. Coalition companies collectively employ more than 32,000 people, service more than 8.5 million customers and pay more than $3 billion in state and local taxes, assessments and fees. The member companies annually invest billions of dollars to make capital improvements to the electric and natural gas infrastructure located in New York State.

Customer generators using fuel cells or micro combined heat and power generators currently receive the avoided cost for excess electricity produced. Fuel cells are powered by natural gas and may operate 24/7. In contrast to wind and solar, fuel cell technology is neither interruptible nor renewable. Fuel cells are effectively mini power plants which are operated and managed by customers. This forms the policy basis for providing the avoided cost rather than the retail rate for fuel cells and micro combined heat and power generators.

This bill would mandate reimbursement of the fuel cell operator at the retail rate. This enhanced reimbursement rate would reward fuel cell generators for production of electricity with high rates particularly during price spikes, such as those experienced last winter during the polar vortex. Fuel cells which are properly managed by customers may provide dramatic economic benefits to customers who produce power at points when it is highly valued. In fact, a generator might choose not to use the fuel cell during lower price periods while taking advantage of price spikes. This option is not available to renewables. The increased subsidy provided by this bill would ultimately be transferred to customers through higher electric rates. This cost shift comes at the expense of customers who are not able to afford this technology.

Payment of the retail rate to fuel cells would, in some cases, approximately double the wholesale rate. Applying the retail rate in New York City to operating fuel cells would generate a cost shift of up to $650,000 per fuel cell system. This number would increase exponentially based on the number of fuel cells cited.

The sponsor's memo argues that fuel cells should be treated equally to renewables. This argument rings hollow. The issue should be whether the economics and energy efficiencies of this technology support the subsidy required from electric customers. There is no evidence provided in the sponsor's memorandum to underpin this change to a retail rate.

Chapter 510 of the Laws of 2015 requires the Public Service Commission to study the implications of net metering cost shifting. It is respectfully requested that until the costs and implications of expanded net metering are fully understood, expansion of the current net metering statute should be held in abeyance. This legislation provides no specific rationale for its economic necessity or its energy efficiency benefits. Without a specific justification which would require customers to subsidize specialized interests, there is no sound public policy reason to increase electric costs for electricity customers in New York State.

There is clearly a significant role for fuel cell technology in New York's energy market but it should not be at any price.

Based on the foregoing, Energy Coalition New York opposes the passage of the subject legislation.