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<title>June 2005: Pennsylvania and New Jersey Join The Growing Number Of Utility
Commissions To Litigate REC Ownership</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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<p ALIGN="left"><b><u><br>
<br>
J</u></b><u><b>une 2005</b></u><font size="6"><b><br>
Pennsylvania and New Jersey Join
The Growing Number of Utility
Commissions To Litigate REC Ownership<br>
</b></font><strong>by Robert Olson and Maria Reinemann -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>5/07/04)</font><font size="6"><b><br>
<br>
</b></font>The Pennsylvania Public Utilities Commission is
currently determining whether utilities or non-utility generators (“NUGs”)
own the environmental attributes of NUG generation under established,
long-term contracts for the sale of NUG power. The Commission opened Docket
No. P- 00052149 in response to a petition filed by Pennsylvania Electric
Company (“Penelec”) and Metropolitan Edison Company (“Met Ed”) to resolve a
dispute between these utilities and the York County Solid Waste and Refuse
Authority, which owns and operates a 34.7 MW trash- to-energy facility and
sells the energy produced at the facility to the utilities under a 30-year
PURPA contract. Penelec and MetEd have claimed that, because their contract
with the Authority is silent on the transfer of environmental attributes,
those attributes were transferred to the utilities as part of a bundled
transaction. The utilities further argue that there is no public policy
reason to compensate NUGS for the environmental attributes of their
generation when the avoided cost rates that they receive are above market.
According to Penelec and MetEd, a ruling that PURPA contracts transfer
ownership of the environmental attributes of NUG generation is necessary to
protect the utilities’ ratepayers. The Authority has taken the position that
the attributes were not mentioned in the contract because they were not
bargained for or paid for by the utilities and so remain the property of the
Authority. Although the Commission would not issue a general notice to all
Pennsylvania NUGs that their contracts would be affected by the Commission’s
eventual ruling, the Commission has permitted a number of NUGs and trade
groups to intervene and participate in the proceeding. The Commission has
designated an administrative law judge to hear the matter, and to decide
whether to conduct separate hearings on the general issue and on
utility-specific contracts. The administrative law judge will hold the first
pre-hearing procedural conference in mid-June.<br>
<br>
Meanwhile, the New Jersey Board of Public Utilities, Division of Energy
issued an opinion in BPU Docket No. EO04080879 in which the Board held that
under New Jersey’s legislative scheme and rules for the approval of PURPA
contracts, a sale of energy from a renewable resource includes the renewable
attributes of that energy. In support of its ruling, the Board found that
the avoided costs in New Jersey PURPA contracts included a payment for
renewable attributes, because avoided costs for qualifying facilities (“QFs”)
were set 10% higher than the marginal cost of incremental power within the
PJM specifically to reflect the value of the energy efficiency and renewable
attributes associated with such facilities. Because the price set for QF
power included this premium, the environmental attribute of QF generation
could not be separated and separately traded from energy and capacity. As a
matter of policy, the Board reasoned that allowing QFs ownership of
environmental attributes under existing PURPA contracts would not fulfill
the New Jersey legislature’s goal of encouraging development of new
renewable generation. The Board was also of the belief that avoided cost
rates in existing contracts tend to be highly favorable to QFs and that
fairness and equity required a determination that RECs belong to utility
customers who must pay above market prices for QF power.<br>
<br>
Regulatory boards in Maine and Connecticut have issued rulings similar to
the ruling issued by the New Jersey
BPU. Order, Investigation of GIS Certificates Associated with Qualifying
Facility Agreements, Docket No. 2002-506
(Sept. 6, 2002); Order, Application of Minnesota Methane, LLC, Docket No.
96-07-21RE01 (March 19, 2004).</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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