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NYSEIA / Clean Energy Parties Comments Regarding Marginal Cost of Service (MCOS) Study Method and VDER Compensation

July 20, 2023

NYSEIA, in collaboration with other clean energy trade assocations and member companies (the "Clean Energy Parties") submitted comments to the Public Service Commission in response to the marginal cost of service (MCOS) white paper published by DPS staff this spring.

NYSEIA and its members are invested in the utilities' method for calculated their marginal cost of service because more complete MCOS estimates translate directly into higher and more accurate compensation for solar + storage projects via the Value of Distributed Energy Resources (VDER) tariff.

Our comments, which were drafted with support from consultant Energy Tariff Experts, include the following major points:

  • An accurate MCOS study requires high quality inputs of growth-related construction costs, inclusive of multi-value projects if applicable. For utilities that use ongoing and historical growth-related construction costs for their inputs, a robust dataset is needed.

  • The “run” and planning horizon of the MCOS studies should be a minimum of 10 years to ensure that the analysis includes both short-term and medium-term capital investments that can be deferred through DER deployment, demand response and efficiency.

  • Load forecasting methodologies must align with state energy policy goals including the Climate Leadership and Community Protection Act (CLCPA), specifically so that the forecasts adequately reflect expectations for load growth driven by beneficial electrification within buildings and transportation.

  • Load forecasts should use probabilistic scenario analysis and counterfactual assumptions regarding DER capacity additions.

  • The escalator used to estimate the inflation rate for investment annualization calculations should be comprised of a blended rate that considers current inflation that is presently pressuring industry supply chains as well as a publicly available forward looking inflation measure such as the 10-Year Breakeven Inflation Rate published by the Federal Reserve Bank of St. Louis.

  • Including avoided non-jurisdictional transmission costs in MCOS studies is supported by Commission precedent in other areas and is needed to accurately reflect the benefits of DERs to the transmission system.

  • In addition to producing accurate MCOS studies, it is critical that these study results be used to create clear, effective price signals for distributed generation projects to respond to. The CEP encourage the Commission to expeditiously initiate stakeholder discussions regarding how MCOS results translate into VDER value stack compensation so improvements can be implemented in parallel with MCOS improvements.

Click "READ MORE" to view the Clean Energy Parties' full comments.

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