In an order issued on February 11, 2021, the New York State Public Service Commission (“Commission”) established a “host community benefit program” through which owners of large-scale renewable energy facilities (25 MW+) would pay $500/MW (for solar) or $1,000/MW (for wind) each year for the first 10 years of project operation to be distributed equally among all residential utility customers residing in the municipality where the facility would be located. See Case 20-E-0249, In the Matter of a Renewable Energy Facility Host Community Benefit Program, Order Adopting a Host Community Benefit Program (issued Feb. 11, 2021) (“Host Community Benefit Program Order”). Such benefits would complement—not replace—the numerous other benefits that renewable projects bring to local communities through payment in lieu of taxes (“PILOT”) agreements and other community agreements that fund local programs and initiatives.

The Host Community Benefit Program was established by the Commission in accordance with the Accelerated Renewable Energy Growth and Community Benefit Act (“Accelerate Act”). While the Accelerate Act authorized the Commission to establish a community benefit that could have taken several forms—such as an environmental benefit, bill discount or other compensatory measure—the Commission ultimately decided to structure the program as an individual bill credit to specific utility customers. Despite the Accelerate Act’s use of the term “community benefit” in the title and text of the law, the Commission narrowly interpreted its mandate as requiring the benefit to be structured in such a way that it accrues to individual residential utility customers, rather than to the community at large.

Structured in this manner, the program would appear to provide somewhat diluted benefits that would be distributed in an extraordinarily complex manner. A 25 MW solar project located in a town of 5,000 residences would provide less than $2.50 in annual bill credits to each account holder, a benefit that could be partially (or entirely) negated by the expense in administering those credits. Projects that straddle two municipalities would provide the credits equally to residents in both municipalities, further diluting the credit. The brunt of the administrative tasks have been allocated to the distribution utilities, which would identify all residential accounts in the towns or cities in which a facility would be located, calculate the per-customer credit and disburse the credit once per year on each eligible customer’s first electric bill of the calendar year. The utilities will apparently have to navigate the often-complex municipal boundaries using tax ID numbers to identify eligible customers, align those records with utility account numbers, and manage mid-cycle occupancy changes and account transfers to ensure the credit stays with the customer for that annual period. Much remains to be determined in the coming months as utilities prepare their implementation plans to be filed by July 31, 2021.

The Commission appears to have rejected the opportunity to create a flexible program, noting that “[w]hile the text of the [Accelerate] Act does allow the Commission to provide options for the Program, it does not require such an outcome.” Instead of providing that optionality, the Commission found that the bill credit option would be “the most direct way to apply a tangible benefit.” Host Community Benefit Program Order at 12.

The Host Community Benefit Program could have been designed to leverage the powerful environmental justice components of the Climate Leadership and Community Protection Act and the Accelerate Act’s directive to consider the potential impact on those communities in determining appropriate benefits. The New York Power Authority, among other stakeholders, advocated for such an approach that would have met the unique needs of disadvantaged communities in key strategic areas. Ultimately, it appears those interests have been considered only indirectly – by absorbing them into the calculus of generic benefits that accrue to all residents.

Some uncertainty remains, however, with respect to the manner in which the Program will align with other components of the Accelerate Act. Notably, Section 94-c of the Executive Law, which consolidated environmental review and permitting of large-scale renewable energy facilities into the Office of Renewable Energy Siting (ORES), appears to suggest a somewhat conflicting directive. Section 94-c requires ORES to include, as a provision in its final siting permit, a requirement that the applicant provide a host community benefit, which “may be a host community benefit as determined by the [Commission] … or such other project as determined by the office or as subsequently agreed to between the applicant and the host community.” Executive Law § 94-c(5)(f) (emphasis added). Moreover, ORES has immense control by virtue of Executive Law § 94-c(6), which states that no other state agency, department or authority may require any contract, agreement or other condition for the development of a major renewable energy facility for which a siting permit has been filed. It remains to be seen how ORES will align the Commission’s Host Community Benefit Program with its siting authority. At this point, it appears that ORES could bypass the Program in exercising its statutory discretion in a given case. ORES’s draft regulations are expected to be finalized in April 2021, after which ORES policy will develop as individual projects are permitted.

The Commission also appears to retroactively apply the Host Community Benefit Program to all major renewable energy facilities that entered into a Tier 1 renewable energy credit (REC) contract with the New York State Energy Research and Development Authority (NYSERDA) after April 3, 2020. Additionally, the Commission gives NYSERDA enforcement authority to withhold REC disbursements until Host Community Benefit Program funds have been transferred to the administering utilities. Nevertheless, the Commission acknowledges that NYSERDA will be required to update its REC contract language to include such authority (implying that without such language, NYSERDA currently lacks that authority). It remains to be seen how developers with NYSERDA-approved contracts that predate the Host Community Benefit Program will handle this discrepancy in light of the potential disruption to pre-established project economics.