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<title>October 2005: Northeast States Move Forward With Implementation Of
Renewable Portfolio Standards</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>
</u></b><u><b>October 2005</b></u><font size="6"><b><br>
Northeast States Move Forward With Implementation Of Renewable Portfolio
Standards<br>
</b></font><strong>by Robert Olson and
</strong><b>David J. Shulock</b><strong> -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>5/10/31)</font><font size="6"><b><br>
<br>
</b></font>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.</p>
<p ALIGN="LEFT"><b>Delaware<br>
</b>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. </p>
<p ALIGN="LEFT">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.</p>
<p ALIGN="LEFT">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.</p>
<p ALIGN="LEFT">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.
</p>
<p ALIGN="LEFT"><b>Pennsylvania<br>
</b>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.</p>
<p ALIGN="LEFT">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.</p>
<p ALIGN="LEFT"><b>New Jersey<br>
</b>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 PJMEIS GATS becomes operational. The PJM-EIS GATS is
expected to become operational and begin issuing certificates on October 7,
2005.</p>
<p ALIGN="LEFT"><b>Rhode Island<br>
</b>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. <br>
<br>
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.</p>
<p ALIGN="LEFT">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%. </p>
<p ALIGN="LEFT">The proposed rules are intended to go into effect on January
1, 2006. The first compliance year begins January 1, 2007.</p>
<p ALIGN="LEFT"><b>Massachusetts<br>
</b>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. </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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