STATE OF NEW YORK PUBLIC SERVICE COMMISSION

STATE OF NEW YORK PUBLIC SERVICE COMMISSION Petition of Consolidated Edison Company of New York, Inc. for Approval of a Pilot Program for Providing Shared Solar to Low Income Customers CASE 16-E-0622 Pace Energy and Climate Center Dated: January 3, 2017

Pace Energy and Climate Center Comments on the Petition of Consolidated Edison Company of New York, Inc. for Approval of a Pilot Program for Providing Shared Solar to Low-Income Customers Case 16-E-0622 January 3, 2017 On October 31, 2016, Consolidated Edison Company of New York, Inc. ( Con Edison ) submitted to the New York Public Service Commission (the Commission ) a petition seeking approval of a pilot community distributed generation ( CDG ) project to provide solar energy access to low-income customers (the Petition ). 1 The Pace Energy and Climate Center ( Pace ) provides the following comments in response to the Petition. Pace has been a leading voice for increased access to the benefits of clean distributed generation ( DG ) penetration for all New Yorkers, especially low- and moderate-income customers. In addition to commenting on the Staff Straw Proposal for a Net Metering Program 2 and participating in the collaborative, Pace has published reports and analyses on deployment of DG and microgrids in New York State, 3 and has commented and testified before the Commission on the value of DG to the grid in a number of proceedings, most recently in Consolidated Edison s rate case. 4 Two of our staff, Karl Rábago and Jordan Gerow, served on the Study Committee for the Shared Clean Energy Facilities report by the Connecticut Academy of Science and Engineering delivered to the Connecticut General Assembly in April 2015. Pace also houses the Northeast Solar Energy Market Coalition ( NESEMC ), a project of the U.S. Department of 1 Case 16-E-0622, Petition of Consolidated Edison Company of New York, Inc. for Approval of a Pilot Program for Providing Shared Solar to Low-Income Customers ( Con Edison Petition or the Petition ) (October 31, 2016). 2 Case 15-E-0082, Proceeding on Motion of the Commission as to the Policies, Requirements and Conditions for Implementing a Community Net Metering Program, Comments of the Pace Energy and Climate Center on the Staff Proposal for a Community Net Metering Program (April 7, 2015). 3 See, e.g., Valuing and Supporting the Expanded Deployment of Grid-Connected Distribution Generation in New York State, published July 2011, or Deployment of Distributed Generation for Grid Support and Distribution System Infrastructure, published 2011, both available at energy.pace.edu/publications. 4 See, e.g., Case 13-E-0030, Consolidated Edison Rate Case, filings by Pace Energy and Climate Center, including Comments in Support of Joint Proposal to Extend Electric Rate Plan (June 9, 2015); NGO Group Comments Response to Con Edison s Storm Hardening and Resiliency Collaborative Report (January 10, 2014); Pace Energy and Climate Center s Statement in Support of the Joint Proposal (January 9, 2014); Initial Post-Hearing Brief of Pace (August 30, 2013); Pace Direct Testimony of Thomas G. Bourgeois (May 31, 2013); and Pace Morris Testimony (May 31, 2013). 2

Energy s SunShot Initiative, bringing together solar energy business associations and other stakeholders in the Northeast to harmonize regional solar energy policy and advance the solar energy market. 5 Pace staff members are also actively engaged in work seeking to provide equitable access to renewable energy in New York, including engagement in the Clean Energy Advisory Council s Low and Moderate Income Clean Energy Initiatives Working Group; and engagement with the Network for Energy, Water, and Health in Affordable Buildings (NEWHAB) Energy Justice Challenge Group. Pace commends the Commission on its implementation of CDG as described in the July 17, 2016, Order approving the program, 6 and on the Commission s commitment to serving the needs of low-income customers by fostering low-income customer participation in CDG. 7 As Pace and others initially commented, the benefits of CDG are numerous. CDG allows all electricity consumers to share the benefits of clean distributed generation when they otherwise would not be able to support traditional onsite generation for financial and property related reasons. In addition to households that physically cannot support onsite generation, many lowand moderate-income households rent their housing and therefore face large obstacles and disincentives to procuring onsite generation such as rooftop solar, even when the location may be suitable. CDG offers a pathway for these households to control their energy future and participate in the clean energy economy fostered by New York State. Through phased implementation of CDG, the Commission sought to create opportunities for low-income customer participation by allowing CDG projects to go forward in the first phase only if the project met specific geographic requirements or if at least 20% of the project participants were low-income customers. 8 No projects were able to take advantage of the 20% low-income provision. The Commission also established a collaborative to identify, and develop mechanisms to remove, barriers to low-income customer participation in CDG. 9 The Collaborative and Staff were unable to identify solutions that could be easily implemented to overcome barriers to low-income customer participation. Accordingly, the Collaborative was 5 See Northeast Solar Energy Market Coalition, www.nesemc.com. 6 Case 15-E-0082, Proceeding on Motion of the Commission as to the Policies, Requirements and Conditions for Implementing a Community Net Metering Program, Order Establishing a Community Distributed Generation Program and Making Other Findings (July 17, 20115) ( CDG Order ). 7 See, e.g., CDG Order at 3, 19, 22. 8 CDG Order at 19-22. 9 Id. at 31. 3

suspended and Commission Staff will be issuing a whitepaper addressing the issues surrounding low-income participation in CDG. 10 To date, there does not appear to be any CDG project in New York, planned or in operation, serving or seeking to serve low-income customers. The Commission recognized in the REV Track One Order that where a market is not developing for DER, public interest may warrant utility investment in DER, and that utilityownership may be warranted to provide DER access to low- or moderate-income customers so that these customers can reduce their energy burden and participate in the REV market: Where system benefits and/or substantial customer benefits can be achieved with DER projects, in areas that are not being served by markets, utilities will be able to propose programs to achieve them. 11 Con Edison now seeks to take advantage of this utility-ownership exception through its Petition proposing a low-income shared solar pilot project (the Project or the Pilot Project ) to serve customers enrolled in Con Edison s bill assistance payment program. Pace supports the general concept of utility ownership of CDG dedicated solely to providing DER access to lowincome customers under the exception. Allowing utility ownership in these limited circumstances is warranted by the lack of a developing market for DER that serves low-income customers and will help to overcome the barriers that have to date prevented low-income customer access to DER. Pace does, however, have two concerns with the proposed design of the Pilot Project: (1) the proposed limited involvement of community-based organizations, and (2) the anticipated participant savings in relation to the anticipated cost of the Pilot Project. 10 Case 15-E-0082, Proceeding on Motion of the Commission as to the Policies, Requirements and Conditions for Implementing a Community Net Metering Program, Staff Report on the Collaborative Regarding Community Distributed Generation for Low-Income Residential Customers (August 15, 2016), at 12. 11 Case 14-M-0101, Reforming the Energy Vision, Order Adopting Regulatory Policy Framework and Implementation Plan (February 26, 2015), at 68, 69. 4

1. Limited Involvement of Community-Based Organizations Low-income customers tend to have a high level of distrust towards utilities and utility employees. 12 This distrust, along with other factors, leads to difficulties in communicating with and acquiring low-income customers for participation in programs. One effective method of overcoming these difficulties is to engage community-based organizations ( CBOs ) during outreach to and acquisition of low-income customers. Pace therefore commends Con Edison s proposal to partner with CBOs with experience working with and administering programs for local low-income communities, in marketing and outreach for, and the application for enrollment in, the Pilot Project. 13 Con Edison does not, however, propose any continuing involvement of CBOs beyond the potential customer application-processing stage. Pace is concerned about this aspect of the proposed Pilot Project and believes that ongoing involvement of CBOs with appropriate experience and expertise is essential to the success of the Project. 14 First, simply enrolling low-income customers into this Pilot Project is not going to dissolve the general distrust these customers have towards utilities and their representatives, and Project participants are likely to have questions and problems arise after enrollment. The national experience is that new solar customers frequently express confusion about how solar has impacted their bills and don t fully understand the relationship between all the parties. Interstate Renewable Energy Council ( IREC ) and Solar Energy Industries Association ( SEIA ) for example have found it necessary to develop consumer protection and information guidelines for the growing residential solar market. 15 CDG arrangements are even more complex, and lowincome customers are not well served by top-down information delivery systems. CBOs can help to serve as a trusted source of information and assistance for Project participants, and help to facilitate communication and mediate issues that may arise between participants and Con Edison. 12 See, e.g., Anne Evens, Utility of the Future and low-income Households, 43 Electricity Journal 28 (2015); Jorge Madrid & Adam James, Power for the People: Overcoming Barriers to Energy Efficiency for Low-Income Families, Think Progress (Feb. 15, 2012), https://thinkprogress.org/power-for-the-people-overcoming-barriers-to-energyefficiency-for-low-income-families-fb8ac177f288#.le0iqsg0n; Rocky Mountain Institute & Reos Partners, Voices on Energy Issues in Low-Income Communities: A Synthesis of Interviews with New York Stakeholders (May 2015), http://www.rmi.org/content/files/elab_leap_voices_on_energy_issues_reports_reos.pdf. 13 Con Edison Petition at 16. 14 Properly implemented, a CBO-based engagement program could easily achieve a metric of zero formal complaints. That should be the standard at the early stage of low-income CDG development. 15 See, IREC, Shared Renewable Energy for Low- to Moderate-Income Consumers: Policy Guidelines and Model Provisions (2016); IREC, Model Rules for Shared Renewable Energy Programs (2013); SEIA, Issues and Policies, http://www.seia.org/policy. 5

Second, Pace commends Con Edison s commitment in the Petition that low-income customers will be protected from the possibility of a loss and participants will never pay more than they would have if they had not chosen to participate in the Project. 16 Merely ensuring that a participant does not pay more than it would if it had not participated in the Pilot Project is insufficient. It is essential that any CDG project dedicated to serving low-income customers seek to decrease participants energy burden to the greatest extent possible. Requiring Con Edison to partner on an ongoing basis with a CBO that specializes in serving low-income communities and has relevant energy program-related expertise, and providing that CBO with some oversight authority, will help to ensure that Con Edison appropriately balances maximizing savings for low-income CDG participants with Con Edison management s fiduciary responsibility to serve the best interests of its shareholders. 17 For example, what starts as a complaint that solar credits are inadequate could easily become a platform for discussion of targeted energy efficiency solutions. Energy burden measures and metrics must be a part the CDG proposal and are in keeping with the reason the Commission granted a utility ownership exception in the first place. In sum, Pace believes that the ongoing involvement of one or more appropriate and qualified CBOs is an essential component to any utility-owned CDG project dedicated to serving financially vulnerable low-income customers. 18 2. Anticipated Savings to Customers Compared to Cost of the Pilot Project Pace recognizes that participation in a CDG program can provide participants with multiple benefits beyond immediate cost savings, including stabilization of household energy bills and protection against future increases in electricity rates. Further, the inclusion of an efficiency component, as proposed by the Petition, is essential and will help to ensure participant savings are maximized. However, Pace is concerned with the estimated cost of the Pilot Project compared to the anticipated participant savings. 16 Con Edison Petition at 11, 18. 17 See James Tong & Jon Wellinghoff, Should Utilities be Allowed to Rate Base Solar?, Utility Dive (May 11, 2015), http://www.utilitydive.com/news/tong-wellinghoff-should-utilities-be-allowed-to-rate-base-solar/396283/ (noting investor-owned utility s fiduciary responsibility to its shareholders). 18 See, e.g., Case 12-M-0476, Proceeding on Motion of the Commission to Assess Certain Aspects of the Residential and Small Non-Residential Retail Energy Markets in New York State, Order Adopting a Prohibition on Service to Low-Income Customers by Energy Service Companies (Dec. 16, 2016), at 5, 9. 6

A simple, and perhaps imperfect analysis of the cost and savings data provided by Con Edison suggests that the pilot project will cost $5,500 in revenue requirement to generate $1,800 in lifetime savings. This is not sustainable. Pilot projects are properly and understandably more expensive than market-ready commercial options. And properly implemented, the engagement activities should allow the capture of valuable incremental energy efficiency savings fairly attributable to the project metrics as well. A good pilot identifies the cost elements that will be tracked most closely for potential reductions in future implementation versions, latent economies of scale, related cost and benefit impacts, and offers full and continuous transparency on costs, expenses, and benefits. All ratepayers have a stake in the financial model that the utility seeks to deploy. The petition does not explain in detail the basis for its anticipated savings and cost calculation. The rate of return allowed for Con Edison on its capital investments appears to be higher than that generally sought by investors financing solar development. 19 It is vital to understand the reasons, and need, for such differences to inform future implementation models, and perhaps to reveal modification options in this one. Ultimately, many elements of the project have well-developed commercial counterparts, and some could be identified for procurement by contract. Con Edison should seek to minimize the cost of developing the shared solar by, for example, seeking out grants or other funds to help defray the overall development costs. The combination of a lower rate of return and lower cost of development has the potential of transforming the proposed Pilot Project into one that makes sound economic sense and can result in significant reduction of the energy burden for participants. Conclusion Pace supports the general concept of utility ownership of CDG dedicated solely to providing DER access to low-income customers under the Commission s current exception. For the reasons identified above, Pace believes that Con Edison s proposed Pilot Project must be 19 See Case 13-E-0030, Proceeding on motion of the Commission as to the Rates, Charges, Rules and Regulations of Consolidated Edison Company of New York, Inc. for Electric Service, Order Approving Electric, Gas and Steam Rate Plans in Accord with Joint Proposal (Feb. 21, 2014) (approving 9.2% rate of return); James Tong & Jon Wellinghoff, Should Utilities be Allowed to Rate Base Solar?, Utility Dive (May 11, 2015) (noting that tax equity investors who are largely financing residential solar currently seek a market-determined rate of return that was, as of May 2015, 7-8%), http://www.utilitydive.com/news/tong-wellinghoff-should-utilities-be-allowed-to-rate-basesolar/396283/; see also Edison Electric Institute, Average Awarded ROE 1990 to 2013, http://www.eei.org/resources andmedia/industrydataanalysis/industryfinancialanalysis/finreview/publishingimages/line_aveaward.jpg. 7

modified to provide for ongoing involvement of appropriate community-based organizations, to encourage Con Edison to seek ways to reduce the overall cost of developing the Pilot Project, and to lower the rate of return authorized for Con Edison s investment in the solar projects. If appropriately modified, Pace believes that the Pilot Project has the potential to provide the dual benefits of low-income customer access to renewable energy and reduction of the energy burden, as well as serve as a model for future CDG projects dedicated to serving low-income customers. Accordingly, Pace strongly encourages the Commission to approve the Petition with these and other appropriate modifications. Thank you for your consideration. Respectfully submitted, Karl Rábago Executive Director Pace Energy and Climate Center 8