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<title>November 2002: Maine PUC To Determine Rights To GIS Certificates</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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</center><p align="left"><b><u><br>
November 2002</u>
<br>
</b><font size="6">Maine PUC To Determine
Rights To GIS Certificates<br>
</font><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>2/11/26)</font></p>
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<p ALIGN="JUSTIFY">On September 6, 2002, the Maine PUC ("PUC") launched an
investigation to determine who owns the rights to Generation Information
System ("GIS") certificates associated with pre-existing power purchase
agreements ("PPA") with qualifying facilities ("QF") ("Notice of
Investigation," Docket No. 2002-506). Subject to a public comment period,
now closed, the Notice of Investigation sets forth the PUC’s tentative
conclusion: "[U]tilities that purchase power from QFs pursuant to PPA’s that
pre-date the GIS are entitled to the GIS certificates associated with the QF
generation." </p>
</font><font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
</font><font SIZE="3">
<p ALIGN="JUSTIFY">Maine has a so-called "portfolio requirement" for
competitive electricity providers. In general terms, the electricity
providers must obtain 30% of their electricity from generation facilities
that use renewable resources or meet minimum standards of efficiency. Other
New England states also have laws and regulations that take into account the
attributes of electricity. The New England Power Pool ("NEPOOL") recently
implemented the GIS to assist New England electricity suppliers in meeting
such requirements more efficiently. The GIS issues certificates to
electricity generating units that reflect various attributes of the
electricity generated. The certificates are transferable. This raises the
question of whether QFs that sell power to utilities under pre-existing
PPA’s must transfer the certificates to the utilities, and whether utilities
that have sold QF output at entitlement auctions must further transfer the
certificates to buyers of the entitlements.</p>
</font><font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
</font><font SIZE="3">
<p ALIGN="JUSTIFY">In reaching its tentative conclusion that there
certificates belong to the purchasing utilities and, by extension,
subsequent buyers of QF entitlements, the PUC discounts the fact that GIS
operating rules assign the certificates to the generating units. According
to the PUC, "this is explicitly done ‘without prejudice’ to the entity that
has the ownership rights to the certificates." The PUC points instead to the
fact that utilities are required to buy power from QFs, and that an entity
only qualifies as a QF under state and federal law if, among other things,
it meets certain fuel use and efficiency criteria. Thus, the PUC concludes,
electricity attributes are a fundamental part of the PPAs, and "[t]he QF
transactions were, in effect, a bundled sale of energy and attributes that
at the time represented a single product." </p>
</font><font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
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<p ALIGN="JUSTIFY">The PUC also points to the expectations of the buyers of
QF output from utilities at entitlement auctions. According to the Notice of
Investigation, the utilities informed potential buyers that the power was
"renewable or efficient cogeneration that would satisfy Maine’s portfolio
requirement." According to the PUC, deny the buyers the associated GIS
certificates would frustrate the buyers’ legitimate expectations, and the
PUC might be forced to recognize the entitlements as satisfying portfolio
requirements even if the GIS certificates were not transferred to the
buyers. </p>
</font><font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
</font><font SIZE="3">
<p ALIGN="JUSTIFY">Finally, the PUC stated that the failure to transfer GIS
certificates to the purchasing utilities could "unfairly enrich the QFs at
the expense of ratepayers and frustrate the reasonable expectations of the
Legislature in enacting the portfolio requirement." The PUC explains that
stranded costs are offset by entitlement sales. If the QFs sell certificates
to third parties, the QF will gain extra profit and the value of the
entitlements will decline, resulting in higher stranded costs for the
ratepayers.</p>
</font><font FACE="Palatino" SIZE="3">
<p ALIGN="JUSTIFY"></p>
</font><font SIZE="3">
<p ALIGN="JUSTIFY">The PUC states that it may change its mind upon review of
comments from interested parties, and specifically solicits comment as to
how other states have addressed the issue. However, the PUC’s current
"inclination is to issue a declaratory ruling . . . stating that purchases
of QF power . . . include purchases of the associated certificates."</p>
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<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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