NORTHEAST STATES
MOVE FORWARD WITH IMPLEMENTATION OF RENEWABLE PORTFOLIO STANDARDS
Oct 31, 2005 - PowerMarketers Industry
Publications
(from Robert Olson's Stateline, Merchant Power
Monthly, October 2005)
States in the northeast continue to implement and improve upon their
Renewable Portfolio Standard (“RPS”) programs. This article provides a
brief summary of the latest developments in three states in the PJM
control area: Delaware, Pennsylvania, and New Jersey, and two states in
the NEPOOL control area: Rhode Island and Massachusetts.
Delaware:
Delaware enacted its “Renewable Energy Portfolio Standards Act” in July,
2005. This act requires all retail sellers of electricity in the state,
with the exception of municipal electric companies, to provide a minimum
percentage of their energy from eligible energy sources. This percentage
escalates from 1% in 2007 to 10% in 2019. The state’s public utilities
commission, which is required to implement the Act, may increase or
decrease this escalation rate within parameters set by the general
court. Beyond 2019, percentage requirements are to be set by the
commission. The act requires the commission to adopt rules and to
develop a REC tracking and trading program to enable compliance by
retail sellers. Retail sellers may also comply by making alternative
compliance payments. Alternative compliance payments begin at $25 for
the first year in which an individual retail seller fails to meet the
RPS requirements through the purchase of RECs. If that retail seller
fails to meet the RPS requirements through the purchase of RECs in
subsequent years, the alternative compliance payment that that retail
seller must make increases to $35 in the second year of non-compliance,
$45 in the third year, and $50 in the fourth and subsequent years of
non-compliance.
To be eligible, generators must either be located in or sell their
energy into the PJM control area. Eligible technologies include solar,
wind, ocean, geothermal, fuel cells powered by renewable fuels,
anaerobic digestion, hydro (30 MW or smaller), biomass, and landfill
gas. Facilities that were in existence prior to January 1, 1998 are
eligible; however, for each retail seller, no more than 1% of each
year’s RPS requirement may be met from these resources. Beginning in
compliance year 2020, facilities that were in existence prior to January
1, 1998 will no longer be eligible.
Specific energy sources are eligible for multiple credits. Retail
sellers are to receive 300% credit for solar and fuel cells if they are
installed before December 31, 2014 and 150% credit for wind energy
installations sited in Delaware on or before December 31, 2012.
The Delaware Public Utilities Commission held its first work session on
September 28, 2005, and intends to complete its rule-making process by
July 31, 2006. The first compliance year begins on June 1, 2007.
Pennsylvania:
Pennsylvania’s RPS legislation is unique because it includes demand side
management and energy efficiency and load management programs and
technologies as among those resources eligible for alternative energy
credits (“AECs”). The legislation requires the Pennsylvania Public
Utility Commission to issue standards for tracking and verifying savings
from these resources and to develop a depreciation schedule for
alternative energy credits created by these resources. The Commission
issued its final order on these issues on September 29, 2005. In its
order, the Commission uses two means to establish qualifications for
AECs: a catalogue approach for standard energy savings measures that
cannot be metered and general guidelines for metered and custom energy
savings measures. The catalogue approach assigns energy savings to such
things as energy efficient appliances, light bulbs, and HVAC equipment.
Assigned energy savings are detailed in a reference manual that was
issued along with the order. The AEC qualification of metered and custom
demand side management and energy efficiency measures will be decided on
a case-by-case basis.
The issuance of demand side management and energy efficiency guidelines
represents the Commission’s first step toward establishing regulations
to implement the commonwealth’s RPS program. The first compliance year
is required to begin June 1, 2006.
New Jersey:
The New Jersey Legislature authorized the establishment of an RPS in
February 1999. The New Jersey Board of Public Utilities adopted rules
governing the RPS program in February 2005. On August 31, 2005, the
Board issued an order approving the use of Class I and Class II RECS
issued by the PJM-EIS GATS once the PJM-EIS GATS becomes operational.
The PJM-EIS GATS is expected to become operational and begin issuing
certificates on October 7, 2005.
Rhode Island:
Rhode Island’s legislature passed RPS legislation in 2004, which is now
codified at R.I.G.L. §39-26-1 et seq. That legislation requires the
Rhode Island Public Utilities Commission to adopt rules to implement the
state’s RPS program no later than December 31, 2005. Throughout 2005, a
group comprised primarily of regulators, utility, and wind energy
interests negotiated a set of rules for presentation to the Commission
on August 15, 2005. On September 23, the Commission issued a notice of
proposed rule-making and a set of draft rules that are based upon the
rules submitted by the rulemaking group. The proposed rules require all
sellers to end-users (including non-regulated power producers and
excluding Block Island Power Company and the Pascoag Utility District)
and all customers that buy electricity directly from wholesale markets
to provide a minimum percentage of their energy from eligible energy
sources. This percentage escalates from 3% in 2007 to 16% in 2019.
Increases in this percentage after 2010 (or 4.5%) are subject to a
Commission determination that there are existing or potential renewable
energy supplies to meet the increase. The rules also provide that the
Commission will determine whether the RPS requirement should extend into
2020 or cease. Alternative compliance payments are set at $50.00 to be
adjusted for inflation.
To be eligible under the proposed rules, generators must either be
located in or sell their energy into the NEPOOL control area under a
unit-specific bilateral contract. Eligible technologies include solar,
wind, ocean, geothermal, fuel cells powered by renewable fuels, hydro
(30 MW or smaller), and biomass (including landfill gas and biogas).
Biomass wood fuels must be free of resins, glues, laminates, paints,
preservatives or other treatments and not be mixed with other materials
that would burn, melt, or create any residue other than wood ash.
Facilities that were in existence prior to January 1, 1998 are eligible;
however, for each entity required to comply with the RPS, no more than
2% of each year’s RPS requirement may be met from these resources.
Although the statute does not so specify, the proposed rules provide
that a facility that was in existence prior to January 1, 1998 can be
considered “new” and therefore eligible to participate in the RPS above
the 2% limitation imposed upon retail sellers if it (1) is retired and
replaced with a new facility, or (2) replaces its “prime mover” (for
biomass, the entire boiler) and either materially increases its
efficiency or materially decreases its emissions and can show that 80%
of its resulting tax basis is attributable to capital expenditures made
after December 31, 1997. Also, facilities in existence prior to January
1, 1998 are not subject to the 2% limitation placed upon retail sellers
for the portion of their output attributable to efficiency improvements
or additions to capacity after December 31, 1997 that were both
sufficient to and intended to increase annual electricity output in
excess of 10%.
The proposed rules are intended to go into effect on January 1, 2006.
The first compliance year begins January 1, 2007.
Massachusetts:
Between July 1 and August 18, 2005, the Massachusetts Division of Energy
Resources conducted an inquiry into whether it should continue to
categorically exclude from RPS eligibility those biomass facilities that
use pile-burn stoker grate technology. Such facilities were excluded
from the RPS under the assumption that they could not meet
“low-emission” standards and were therefore not advanced combustion
technologies. Advancements in pollution control technologies for pile
burn facilities appear to have enabled compliance with low-emission
standards for these facilities.
by Robert A. Olson, Esq. and Philip R. Braley, Esq. Brown, Olson &
Gould, P.C.
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