SCOTTMADDEN, INC. | 11 NEW YORK REV TRACK 2: PUBLIC SERVICE COMMISSION RULES ON UTILITY REVENUE MODEL Track 2 Order provides a framework, but many specifics are to be determined. A Path Forward: Framework Addresses Rate Design and Utility Earnings • Building on previous REV actions, the NYPSC issued an order in May 2016, outlining reforms to the utility revenue model and rate design • The reforms are intended to encourage utilities to modernize the power system by better aligning utility shareholder financial interest with consumer interest • The order directs near-term rate-design changes and establishes four types of earning opportunities for utilities: Traditional cost-of-service earnings Earnings tied to reducing or deferring capital spending while providing consumer benefit through the development of non-wires alternatives projects (e.g., Brooklyn Queens Demand Management Program) Transitional outcome-based performance measures called earning adjustment mechanisms (EAMs) Market-facing revenues for providing value-added services through the distributed system platform called platform service revenues (PSRs) • But a number of the specifics are to be spelled out in future rulings (see Fig. 1) • Utilities are expected to file Track 2 proposals under a tight schedule (see Fig. 2) This [Track 2] order provides directional guidance for long-term reform and a carefully measured set of near-term actions designed to facilitate needed change while maintaining traditional principles of gradualism, equity, and opportunity to earn fair returns on investment. –New York Public Service Commission Figure 1: Myriad, Though Not Completely Coordinated, Mechanisms for Track 2 Implementation Rate Cases • EAMs • Capital expenditures • Cost of service Specific Commission Filings • For example, rate pilots Collaborative Efforts • For example, Joint Utilities efforts (system efficiency, interconnection, etc.)