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Track Two: REV Financial Mechanisms

Regulation: Order Adopting a Ratemaking and Utility Revenue Model Policy Framework [PDF]

Known as: REV Track Two Order

Issued: May 19, 2016, NYS Public Service Commission, Case 14-M-010

The Track Two Order creates a new regulatory model that incentivizes utilities to take actions to achieve REV objectives by better aligning utility shareholders’ financial interests with customers’ interests. Track Two builds on the way that conventional rates are set—based on the cost of service—and adds a combination of market-based and outcome-based earnings opportunities for utilities. These new earnings mechanisms reward novel approaches of supplying energy and providing services to customers.

Solutions That Reduce Utility Capital Spending

As the growth in system load often requires significant capital improvements, REV seeks to attract distributed energy resources (DER) to meet these needs at lower costs than conventional solutions. This cost difference provides a shared savings opportunity for customers and utilities, which can also earn on a return on the DER investment.

Non-wires alternatives (NWAs) are the best-known example of this type of earning opportunity. With NWAs, utilities can show the efficiency of procuring DER to meet system needs by comparing DER costs to the cost of conventional infrastructure.

Platform Service Revenues (PSR)

PSRs are utility earnings tied to selling products and services that facilitate the operation of DSP markets, shared revenue opportunities, and options for customers to pay a fee for value-added services such as advanced data analytics. As distributed system platforms (DSP) , utilities will earn PSRs by providing new services, with pricing and revenue sharing approved by the PSC. Many of the REV demonstration projects [PDF] are testing grounds for PSRs. Although still in the early stages, increased PSRs will encourage utilities to allow distributed energy resource providers access to their systems and offset costs charged to customers.

New York encourages innovative thinking and exploring the possible ways that a third-party company can develop PSRs in partnership with utilities.

Earning Adjustment Mechanisms (EAM)

EAMs are incremental performance incentives that utilities, as a DSP, can earn in return for achieving REV objectives. Each utility proposes the performance areas, metrics and targets, and the level of incentive it would earn individually with the Public Service Commission.

As of August 2018, the Commission has approved the EAM proposals for Con Edison as presented in its 2016 Joint Proposal [PDF], the 2017 Outcome-based EAM Collaborative Report [PDF], and the 2018 Outcome-based EAM Collaborative: Emissions Metric Report [PDF]; for Central Hudson as presented in its 2018 Joint Proposal [PDF]; and for National Grid (Niagara Mohawk Power Corporation) as presented in its 2018 Joint Proposal [PDF]. Currently, Orange & Rockland is in the process of filing and seeking approval for its EAMs.

New York encourages innovative thinking and exploring the possible ways that a third-party company can help the utilities achieve their EAM performance targets.

EAM Opportunity Areas

EAM Description
System efficiency and peak reduction Improve overall system efficiency to reduce capital investment, including peak reduction and load factor improvement
Energy efficiency Support greater overall energy efficiency savings and the transition to market-based approaches
Interconnection Improve processes for the interconnection of distributed generation (DG) projects, measured by a DG developer satisfaction survey
Customer engagement Increase customer uptake in specific innovative programs
Greenhouse gas reduction Support the electrification of transportation
Support electrifying building heating and cooling to become highly efficient functions
Reduce the cost of achieving New York’s Clean Energy Standard goal of getting 50% of the State’s electricity from renewable sources

This section will review the regulation underlying REV. To learn more about the more than 40 initiatives that comprise REV, read the New York State Energy Plan and visit

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