NY’s ‘Change of Status’ Rule Poses Challenges, Opportunities for Commercial Real Estate Industry

Before the Covid-19 lockdown, Special Case Resource’s Change of Status Rule wasn’t much of a concern for commercial real estate organizations participating in demand response (DR) in New York City.

Way back in 2019, when most commercial buildings were at or near full occupancy, energy consumption was high as were participating curtailable loads that could be called by the NYISO in times of grid stress or unusually high energy prices. 

What a difference a year makes. 

Anyone in the commercial real estate sector participating in DR in 2020 should take notice. That’s because the revenue previously earned from successful DR curtailment could soon flow in the wrong direction as underperformance penalties are assessed on organizations that have committed to curtailing loads they no longer have due to low occupancy in their buildings.

Established in 2009 and updated in 2014, SCR’s Change of Status rule defines the criteria of a qualified change of load condition as defined in Section 2.17 of the NYISO Services Tariff. The rule’s intent has always been to negate credit for passive curtailment in cases where a participating organization no longer had load to curtail for demand response. 

With occupancy in their buildings at record lows due to the Covid-19 lockdown, the Commercial Real Estate organizations in New York participating in lucrative demand response programs now find themselves in the crosshairs of a rule with steep penalties for non-compliance.

Here’s why:

Low building occupancy means low electrical consumption, resulting in a baseline for a given commercial building that will inevitably be far lower in 2020 during the lockdown than was established in 2019 when the building operated at normal occupancy. 

Here’s the problem for commercial buildings in New York participating in demand response in 2020: the baseline in 2019 is the one that counts for this year’s DR participation. 

Consider a commercial real estate organization that is currently operating at a fraction of last year’s occupancy and is enrolled in DR for the summer of 2020. If the organization’s summer load is less than 70% of its baseline established in 2019, the organization will likely face heavy penalties since they no longer possess enough load to curtail and will underperform in the Special Case Resource DR program.   

Here is what DR participants in New York’s commercial real estate industry can do to mitigate the rule’s penalties:

Contact your curtailment service provider (CSP) and ask them to provide a plan for navigating SCR’s Change of Status rule. A good CSP should be able to outline a set of actions aimed to minimize underperformance risks and maximize possible DR revenues.  

Such an outline of appropriate mitigation tasks might look like this:

• Analyze load data
• Review baselines
• Review performance factors
• Review previous seasons’ DR performances
• Identify and/or update curtailment opportunities
• Work with facility staff/engineering team to understand their energy systems operations and changes, occupancy changes, any other load changes, baseline changes
• Conduct engineering analysis, preparing, reviewing and updating curtailment plans, as needed
• Provide technical support and recommendations 
• Provide enrollment recommendations for other DR programs that might fit the organization

In other words, a thorough CSP will work side-by-side with your organization and devise a customized mitigation plan based on your unique needs and capabilities.

Your CSP should work with you on a month-by-month basis to help you understand any enrollment changes and adjustments that need to be done to minimize the possible penalty risks associated with SCR’s Change of Status. 

The Covid-19 pandemic and lockdown have levied enough uncertainties on the commercial real estate industry in 2020. Whether or not demand response participants will earn or owe money this season in New York doesn’t have to be one of them. 

Peter Dotson-Westphalen and Arusyak Ghukasyan also contributed to this article.