2009 -- S 0111

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LC00299

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2009

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A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS

     Introduced By: Senators Miller, Paiva-Weed, Sosnowski, Picard, and Connors

     Date Introduced: January 29, 2009

     Referred To: Senate Environment & Agriculture

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 39 of the General Laws entitled "PUBLIC UTILITIES AND

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CARRIERS" is hereby amended by adding thereto the following chapter:

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     CHAPTER 26.1

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LONG-TERM CONTRACTING STANDARD FOR RENEWABLE ENERGY

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     39-26.1-1. Purpose. – The purpose of this chapter is to encourage and facilitate the

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creation of commercially reasonable long-term contracts between electric distribution companies

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and developers or sponsors of newly developed renewable energy resources with the goals of

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stabilizing long-term energy prices, enhancing environmental quality, creating jobs in Rhode

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Island in the renewable energy sector, and facilitating the financing of renewable energy

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generation within the jurisdictional boundaries of the state or adjacent state or federal waters or

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providing direct economic benefit to the state.

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     39-26.1-2. Definitions. – Terms not defined in this chapter shall have the same meaning

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as contained in chapter 26 of title 39 of the general laws. When used in this chapter:

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     (1) "Commercially reasonable" means terms and pricing that are reasonably consistent

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with what an experienced power market analyst would expect to see in transactions of a similar

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nature. Commercially reasonable shall include having a credible project operation date, as

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determined by the commission, but a project need not have completed the requisite permitting

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process to be considered commercially reasonable. If there is a dispute about whether any terms

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or pricing are commercially reasonable, the commission shall make the final determination after

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evidentiary hearings;

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     (2) "Commission" means the Rhode Island public utilities commission;

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     (3) "Electric distribution company" means a company defined in subsection 39-1-2(12),

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supplying standard offer service, last resort service, or any successor service to end-use

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customers, but not including the Block Island Power Company or the Pascoag Utility District;

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     (4) "Eligible renewable energy resource" means resources as defined in section 39-26-5

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and any references therein;

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     (5) "Long-term contract" means a contract of not less than ten (10) years;

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     (6) "Newly developed renewable energy resources" means electrical generation units that

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use exclusively an eligible renewable energy resource, and that have neither begun operation, nor

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have the developers of the units implemented investment or lending agreements necessary to

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finance the construction of the unit; provided, however, that any projects using eligible renewable

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energy resources and located within the state of Rhode Island which obtain project financing on

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or after January 1, 2010, shall qualify as newly developed renewable energy resources for

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purposes of the first solicitation under this chapter;

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     (7) "Minimum long-term contract capacity" means ninety (90) megawatts of which five

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(5) megawatts must be solar or photovoltaic projects located in the state of Rhode Island. In

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determining whether the minimum long-term contract capacity has been reached, the capacity

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under contract shall be adjusted by the capacity factor of each renewable generator as determined

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by the ISO-NE rules, as they may change from time to time. By way of example, a contract with

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a one hundred (100) megawatt facility with a thirty percent (30%) capacity factor would be

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counted as providing thirty (30) megawatts to the minimum long-term contract capacity

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requirement.

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     39-26.1-3. Long-term contract standard. – (a) Beginning on or before July 1, 2010,

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each electric distribution company shall be required to annually solicit proposals from renewable

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energy developers and, provided commercially reasonable proposals have been received, enter

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into long-term contracts with terms of up to fifteen (15) years for the purchase of capacity, energy

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and attributes from newly developed renewable energy resources. Subject to commission

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approval, the electric distribution company may enter into contracts for term lengths longer than

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fifteen (15) years.

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      (b) The timetable and method for solicitation and execution of such contracts shall be

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proposed by the electric distribution company, and shall be subject to review and approval by the

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commission prior to issuance by the company; provided that the timetable is reasonably designed

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to result in the electric distribution company having the minimum long-term contract capacity

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under contract within four (4) years of the date of the first solicitation; it is not necessary that the

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projects associated with these contracts be operational within these four (4) years, as the

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operational dates shall be specified in the contract. The electric distribution company shall,

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subject to review and approval of the commission, select a reasonable method of soliciting

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proposals from renewable energy developers, which shall include, at a minimum, an annual

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public solicitation, but may also include individual negotiations. The solicitation process shall

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permit a reasonable amount of negotiating discretion for the parties to engage in commercially

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reasonable arms-length negotiations over final contract terms. Each long-term contract entered

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into pursuant to this section shall contain a condition that it shall not be effective without

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commission review and approval. The electric distribution company shall file such contract,

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along with a justification for its decision, within a reasonable time after it has executed the

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contract following a solicitation or negotiation. The commission shall hold public hearings to

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review the contract within forty-five (45) days of the filing and issue a written order approving or

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rejecting the contract within sixty (60) days of the filing; in rejecting a contract the commission

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may advise the parties of the reason for the contract being rejected and direct the parties to

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attempt to address the reasons for rejection in a revised contract within a specified period not to

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exceed ninety (90) days. The commission shall approve the contract if it determines that: (1) the

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contract is commercially reasonable; (2) the requirements for the annual solicitation have been

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met; and (3) the contract is consistent with the purposes of this section. A report on each

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solicitation shall be filed with the commission each year within a reasonable time after decisions

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are made by the electric distribution company regarding the solicitation results, even if no

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contracts are executed following the solicitation.

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     (c)(1) No electric distribution company shall be obligated to enter into long-term

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contracts for newly developed renewable energy resources on terms which the electric

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distribution company reasonably believes to be commercially unreasonable; provided, however, if

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there is a dispute about whether these terms are commercially unreasonable, the commission shall

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make the final determination after an evidentiary hearing. The electric distribution company shall

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not be obligated to enter into long-term contracts pursuant to this section that would, in the

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aggregate, exceed the minimum long-term contract capacity, but may do so voluntarily subject to

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commission approval. As long as the electric distribution company has entered into long-term

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contracts in compliance with this section, the electric distribution company shall not be required

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by regulation or order to enter into contracts with terms of more than three (3) years in meeting its

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applicable annual renewable portfolio standard requirements set forth in section 39-26-4.

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     (2) An electric distribution company shall not be required to enter into long-term

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contracts for newly developed renewable energy resources that exceed the following four (4) year

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phased schedule:

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     By June 30, 2010: twenty-five percent (25%) of the minimum long-term contract capacity;

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     By June 30, 2011: fifty percent (50%) of the minimum long-term contract capacity;

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     By June 30, 2012: seventy-five percent (75%) of the minimum long-term contract capacity;

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     By June 30, 2013: one hundred percent (100%) of the minimum long-term contract

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capacity; but may do so earlier voluntarily, subject to commission approval.

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     (d) Compliance with the long-term contract standard shall be demonstrated through

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procurement pursuant to the provisions of a long-term contract of energy, capacity and attributes

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reflected in NE-GIS certificates relating to generating units certified by the commission as using

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newly developed renewable energy resources, as evidenced by reports issued by the NE-GIS

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administrator and the terms of the contract; provided, however, that the NE-GIS certificates were

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procured pursuant to the provisions of a long-term contract. The electric distribution company

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also may purchase other attributes from the generator as part of the long-term contract.

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     (e) After the adoption of the rules and regulations an electric distribution company may,

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at its sole election, immediately and from time to time, procure additional commercially

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reasonable long-term contracts for newly developed renewable energy resources on an earlier

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timetable or above the minimum long-term contract capacity, subject to commission approval.

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     39-26.1-4. Financial remuneration and incentives. – In order to achieve the purposes

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of this chapter, electric distribution companies shall be entitled to financial remuneration and

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incentives for long-term contracts for newly developed renewable energy resources, which are

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over and above the base rate revenue requirement established in its cost of service for distribution

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ratemaking. Such remuneration and incentives shall compensate the electric distribution

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company for accepting the financial obligation of the long-term contracts. The financial

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remuneration and incentives described in this subsection shall apply only to long-term contracts

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for newly developed renewable energy resources. The financial remuneration and incentives

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shall be in the form of annual compensation, equal to three percent (3%) of the actual annual

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payments made under the contracts for those projects that are commercially operating.

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     39-26.1-5. Commission approvals and regulations. – (a) Electric distribution

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companies shall submit to the commission for review and approval all long-term contracts for

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newly developed renewable energy resources proposed to be entered into in accordance with this

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chapter.

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     (b) Unless the commission approves otherwise, all energy and capacity purchased by an

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electric distribution company pursuant to this chapter shall be immediately sold by the electric

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distribution company into the wholesale spot market; provided, however, that all such sales shall

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be made through arms-length transactions.

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     (c) Unless the commission approves otherwise, any attributes including NE-GIS

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certificates purchased by an electric distribution company pursuant to this chapter shall be sold

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through a competitive bidding process in a commercially reasonable manner.

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     (d) Notwithstanding any term or provision to the contrary contained in subsection (b)

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hereof, subject to commission approval, electric distribution companies shall be permitted, but

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shall not be required: (1) to use the energy, capacity and other attributes purchased for resale to

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customers; and/or (2) to use the NE-GIS certificates for purposes of meeting the obligations set

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forth in chapter 26 of title 39; provided, however, that the commission finds that such sales would

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not have a detrimental impact on energy markets, on the market for NE-GIS certificates, and is

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otherwise in the interest of utility customers.

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     (e) The commission shall promulgate regulations by April 1, 2010, that shall, as a

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condition of contract approval, require all approved projects, regardless of their location, to

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provide other direct economic benefits to Rhode Island, such as job creation, increased property

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tax revenues or other similar revenues, deemed substantial by the commission.

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     (f) The electric distribution company shall file tariffs with the commission for

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commission review and approval that net the cost of payments made to projects under the long-

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term contracts against the proceeds obtained from the sale of energy, capacity, RECs or other

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attributes. The difference shall be credited or charged to all distribution customers through a

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uniform fully reconciling annual factor in distribution rates, subject to review and approval of the

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commission. The reconciliation shall be designed so that customers are credited with any net

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savings resulting from the long-term contracts and the electric distribution company recovers all

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costs incurred under such contracts, as well as, recovery of the financial remuneration and

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incentives specified in section 39-26.1-4.

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     39-26.1-6. Interaction with other laws. – The long-term contract standard set forth in

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this chapter shall be separate and distinct from the renewable energy standard set forth in chapter

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26 of title 39.

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     SECTION 2. This act shall take effect upon passage.

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LC00299

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS

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     This act would create long-term contracting standards for the development of renewable

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energy.

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     This act would take effect upon passage.

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LC00299

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