Up until now, Electric Utilities have had no real incentive to incorporate solar energy systems into the overall electric grid, since they don’t design them, install them, or most importantly, profit from them. So, in the absence of a mechanism by which Utilities directly benefit from playing nicely with companies that install solar (and the customers who benefit from owning their own sources of electricity), utilities have been grudgingly cooperative in incorporating solar energy systems into the grid. In fact, if it weren’t for the much desired reduction in peak electric demand associated with solar energy, especially on hot sunny summer afternoons when air conditioners are cranking and electrical usage is at its annual peak, Utilities would probably be even less enthusiastic in their approach to solar than they have been so far.

Enter the New York Public Service Commission, the same folks who are responsible for setting electric utility rates in conjunction with the Utilities themselves, the rate-paying public, and the Governor. The Public Service Commission has now made the first attempt to bridge an explicit policy gap that has lurked in the background for some time– there really has been no direct way to encourage Utilities to accelerate the adoption of distributed renewable energy systems unless we start paying them to do exactly that. After all, the more solar energy, the smaller the Utility bill.

According to the New York Public Service Commission’s ORDER: “ADOPTING A RATEMAKING AND UTILITY REVENUE MODEL POLICY FRAMEWORK” of May 19th, 2016, “The ultimate purpose of the transition is to create “a business and regulatory model where utility profits are directly aligned with market activities that increase value to customers.”

So what does the Public Service Commission (PSC) intend to change? Well, for starters, the number of three letter acronyms that will now be bandied about in conversation. Get ready to start hearing about DERs, PSRs, and EAMs. Need a translator? Here we go: DERs are Distributed Energy Resources, or most commonly, solar energy installations that produce electricity at the same place where the energy is consumed– the customer’s site.

PSRs are Platform Service Revenues. Still confused? Think of a platform in the same sense that iTunes is a platform for the buying and selling of digital music. Platform Service Revenues are intended to compensate the Utilities for creating more efficient marketplaces for connecting outside companies and consumers with products and services that impact electric usage. A great example could be a service that helps commercial customers identify the cause of their peak monthly demand—something that’s often both mysterious and a source of large electric bills. By beginning to compensate Utilities for Platform Services, the Public Service Commission is opening up a whole new source of potential revenue for them when creating an environment where other companies can add value to the process of using electricity.

To complement the development of PSRs, the Public Service Commission has also recommended a set of new incentive measures or Earnings Adjustment Mechanisms (EAMs)

The EAMs recommended for immediate adoption relate to:

1. Peak reduction
2. Energy efficiency
3. Customer engagement
4. Affordability
5. Interconnection

And Interconnection is the big one for those of us interested in the policy implications for solar. For the first time in New York, there is now a path forward to incentivize Utilities to speed up the solar interconnection process. This could have as big an impact as anything else for solar installations, especially if it creates a real sense of urgency for Utilities scheduling solar interconnection inspections and “placed in service” dates.