2004 -- H 7375 SUBSTITUTE A AS AMENDED

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LC00091/SUB A/2

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2004

____________

A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS -- RENEWABLE ENERGY

STANDARD

     Introduced By: Representatives Moura, Fox, Ginaitt, Long and Naughton

     Date Introduced: January 27, 2004

     Referred To: House Corporations

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 Carriers" is

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hereby amended by adding thereto the following chapter:

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     CHAPTER 26

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RENEWABLE ENERGY STANDARD

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     39-26-1. Legislative findings. -- The General Assembly finds that:

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     (a) The people and energy users of Rhode Island have an interest in having electricity

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supplied in the state come from a diversity of energy sources including renewable resources;

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     (b) Increased use of renewable energy may have the potential to lower and stabilize

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future energy costs;

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     (c) Increased use of renewable energy can reduce air pollutants, including carbon dioxide

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emissions, that adversely affect public health and contribute to global warming;

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     (d) Massachusetts, Connecticut, and other states have established renewable energy

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standard programs to encourage the development of renewable energy sources;

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     (e) It is in the interest of the people, in order to protect public health and the environment

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and to promote the general welfare, to establish a renewable energy standard program to increase

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levels of electric energy supplied in the state from renewable resources.

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     39-26-2. Definitions. -- When used in this chapter:

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     (1) Alternative compliance payment: means a payment to the Renewable Energy

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Development Fund of fifty dollars ($50.00) per megawatt-hour of renewable energy obligation, in

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2003 dollars, adjusted annually up or down by the consumer price index, which may be made in

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lieu of standard means of compliance with this statute;

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

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     (3) Compliance year: means a calendar year beginning January 1 and ending December

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31, for which an obligated entity must demonstrate that it has met the requirements of this statute;

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     (4) Customer-sited generation facility: means a generation unit that is interconnected on

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the end-use customer’s side of the retail electricity meter in such a manner that it displaces all or

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part of the metered consumption of the end-use customer;

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     (5) Electrical energy product: means an electrical energy offering, including but not

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limited to last resort and standard offer service, that can be distinguished by its generation

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attributes or other characteristics, and that is offered for sale by an obligated entity to end-use

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customers;

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     (6) Eligible biomass fuel: means fuel sources including brush, stumps, lumber ends and

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trimmings, wood pallets, bark, wood chips, shavings, slash and other clean wood that is not

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mixed with other solid wastes; agricultural waste, food and vegetative material; energy crops;

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landfill methane; biogas; or neat bio-diesel and other neat liquid fuels that are derived from such

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fuel sources;

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     (7) Eligible renewable energy resource: means resources as defined in section 39-26-4 of

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this chapter;

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     (8) End-use customer: means a person or entity in Rhode Island that purchases electrical

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energy at retail from an obligated entity;

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     (9) Existing renewable energy resources: means generation units using eligible renewable

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energy resources and first going into commercial operation before December 31, 1997;

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     (10) Generation attributes: means the nonprice characteristics of the electrical energy

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output of a generation unit including, but not limited to, the unit’s fuel type, emissions, vintage

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and policy eligibility;

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     (11) Generation unit: means a facility that converts a fuel or an energy resource into

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electrical energy;

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     (12) NE-GIS: means the generation information system operated by NEPOOL, its

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designee or successor entity, which includes a generation information database and certificate

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system, and that accounts for the generation attributes of electrical energy consumed within

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NEPOOL;

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     (13) NE-GIS certificate: means an electronic record produced by the NE-GIS that

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identifies the relevant generation attributes of each megawatt-hour accounted for in the NE-GIS;

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     (14) NEPOOL: means the New England Power Pool or its successor;

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     (15) New renewable energy resources: means generation units using eligible renewable

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energy resources and first going into commercial operation after December 31, 1997; or the

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incremental output of generation units using eligible renewable energy resources that have

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demonstrably increased generation in excess of ten percent (10%) using eligible renewable

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energy resources through capital investments made after December 31, 1997; but in no case

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involve any new impoundment or diversion of water with an average salinity of twenty (20) parts

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per thousand or less;

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     (16) Obligated entity: means a person or entity that sells electrical energy to end-use

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customers in Rhode Island, including, but not limited to: nonregulated power producers and

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electric utility distribution companies, as defined in section 39-1-2, supplying standard offer

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service, last resort service, or any successor service to end-use customers; including Narragansett

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Electric, but not to include Block Island Power Company as described in section 39-26-7 or

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Pascoag Utility District;

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     (17) Off-grid generation facility: means a generation unit that is not connected to a utility

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transmission or distribution system;

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     (18) Reserved certificate: means a NE-GIS certificate sold independent of a transaction

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involving electrical energy, pursuant to Rule 3.4 or a successor rule of the operating rules of the

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NE-GIS;

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     (19) Reserved certificate account: means a specially designated account established by an

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obligated entity, pursuant to Rule 3.4 or a successor rule of the operating rules of the NE-GIS, for

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transfer and retirement of reserved certificated from the NE-GIS;

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     (20) Self-generator: means an end-use customer in Rhode Island that displaces all or part

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of its retail electricity consumption, as metered by the distribution utility to which it

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interconnects, through the use of a customer-sited generation facility;

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     (21) Small hydro facility: means a facility employing one or more hydroelectric turbine

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generators and with an aggregate capacity not exceeding thirty (30) megawatts. For purposes of

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this definition, “facility” shall be defined in a manner consistent with Title 18 of the Code of

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Federal Regulations, section 92.201 et seq.; provided, however, that the size of the facility is

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limited to thirty (30) megawatts, rather than eighty (80) megawatts.

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     39-26-3. Purposes. -- The purpose of this chapter is to facilitate the development of new

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renewable energy resources to supply electricity to customers in Rhode Island with goals of

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

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Island in the renewable energy sector.

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     39-26-4. Renewable energy standard. -- (a) Starting in compliance year 2007, all

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obligated entities shall obtain at least three percent (3%) of the electricity they sell at retail to

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Rhode Island end-use customers, adjusted for electric line losses, from eligible renewable energy

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resources, escalating, according to the following schedule:

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     (i) At least three percent (3%) of retail electricity sales in compliance year 2007;

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     (ii) An additional one half of one percent (0.5%) of retail electricity sales in each of the

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following compliance years 2008, 2009, 2010;

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     (iii) An additional one percent (1%) of retail electricity sales in each of the following

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compliance years 2011, 2012, 2013, 2014, provided that the commission has determined the

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adequacy, or potential adequacy, of renewable energy supplies to meet these percentage

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requirements;

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     (iv) An additional one and one half percent (1.5%) of retail electricity sales in each of the

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following compliance years 2015, 2016, 2017, 2018 and 2019; provided that the commission has

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determined the adequacy, or potential adequacy of renewable energy supplies to meet these

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percentage requirements;

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     (v) In 2020 and each year thereafter the minimum renewable energy standard established

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in 2019 shall be maintained unless the commission shall determine that such maintenance is no

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longer necessary for either amortization of investments in new renewable energy resources or for

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maintaining targets and objectives for renewable energy.

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     (b) For each obligated entity and in each compliance year, the amount of retail electricity

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sales used to meet obligations under this statute that is derived from existing renewable energy

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resources shall not exceed two percent (2%) of total retail electricity sales.

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     (c) The minimum renewable energy percentages set forth in subsection 39-26-4(a) above

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shall be met for each electrical energy product offered to end-use customers, in a manner that

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ensures that the amount of renewable energy of end-use customers voluntarily purchasing

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renewable energy is not counted toward meeting such percentages.

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     (d) To the extent consistent with the requirements of this chapter, compliance with the

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renewable energy standard may be demonstrated through procurement of NE-GIS certificates

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relating to generating units certified by the commission as using eligible renewable energy

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sources, as evidenced by reports issued by the NE-GIS administrator. Procurement of NE-GIS

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certificates from off-grid and customer-sited generation facilities, if located in Rhode Island and

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verified by the commission as eligible renewable energy resources, may also be used to

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demonstrate compliance. With the exception of contracts for generation supply entered into prior

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to 2002, initial title to NE-GIS certificates from off-grid and customer-sited generation facilities

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and from all other eligible renewable energy resources shall accrue to the owner of such a

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generation facility, unless such title has been explicitly deemed transferred pursuant to contract or

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regulatory order.

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     (e) In lieu of providing NE-GIS certificates pursuant to subsection 39-26-4(d), an

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obligated entity may also discharge all or any portion of its compliance obligations by making an

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alternative compliance payments to the Renewable Energy Development Fund established

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pursuant to section 39-26-7.

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     39-26-5. Eligible renewable energy resources. -- (a) For the purposes of the regulations

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promulgated under this chapter, eligible renewable energy resources are generation units in the

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NEPOOL control area using:

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     (i) direct solar radiation;

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     (ii) the wind;

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     (iii) movement or the latent heat of the ocean;

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     (iv) the heat of the earth;

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     (v) small hydro facilities;

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     (vi) biomass facilities using eligible biomass fuels and maintaining compliance with

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current air permits; eligible biomass fuels may be co-fired with fossil fuels, provided that only the

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renewable energy fraction of production from multi-fuel facilities shall be considered eligible.

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     (vii) fuel cells using the renewable resources referenced above in this section;

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     (viii) waste-to-energy combustion of any sort or manner shall in no instance be

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considered eligible except for fuels identified in subsection 39-26-2(6).

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     (b) A generation unit located in an adjacent control area outside of the NEPOOL may

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qualify as an eligible renewable energy resource, but the associated generation attributes shall be

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applied to the renewable energy standard only to the extent that the energy produced by the

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generation unit is actually delivered into NEPOOL for consumption by New England customers.

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The delivery of such energy from the generation unit into NEPOOL must be generated by:

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     (i) a unit-specific bilateral contract for the sale and delivery of such energy into

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NEPOOL; and

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     (ii) confirmation from ISO-New England that the renewable energy was actually settled

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in the NEPOOL system; and

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     (iii) confirmation through the North American Reliability Council tagging system that the

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import of the energy into NEPOOL actually occurred; or

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     (iv) any such other requirements as the commission deems appropriate.

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     (c) NE-GIS certificates associated with energy production from off-grid generation and

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customer-sited generation facilities certified by the commission as eligible renewable energy

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resources may also be used to demonstrate compliance, provided that the facilities are physically

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located in Rhode Island.

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     39-26-6. Duties of the commission. -- The commission shall:

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     (a) Develop and adopt regulations on or before December 31, 2005, for implementing a

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renewable energy standard, which regulations shall include but be limited to provisions for:

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     (1) Verifying the eligibility of renewable energy generators and the production of energy

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from such generators, including requirements to notify the commission in the event of a change in

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a generator’s eligibility status.

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     (2) Standards for contracts and procurement plans for renewable energy resources, to

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achieve the purposes of this chapter.

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     (3) Flexibility mechanisms for the purposes of easing compliance burdens, facilitating

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bringing new renewable resources on-line, and avoiding and/or mitigating conflicts with state

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level source disclosure requirements and green marketing claims throughout the region; which

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flexibility mechanisms shall allow obligated entities to: (i) demonstrate compliance over a

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compliance year; (ii) bank excess compliance for two (2) subsequent compliance years, capped at

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thirty percent (30%) of the current year’s obligation; and (iii) allow renewable energy generated

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during 2006 to be banked by an obligated entity as early compliance, usable towards meeting an

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obligated entity’s 2007 requirement. Generation used for early compliance must result in the

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retirement of NE-GIS certificate in a reserved certificate account designated for such purposes.

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     (4) Annual compliance filings to be made by all obligated entities within one (1) month

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after NE-GIS reports are available for the fourth (4th) quarter of each calendar year. All electric

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utility distribution companies shall cooperate with the commission in providing data necessary to

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assess the magnitude of obligation and verify the compliance of all obligated entities.

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     (b) Authorize rate recovery by electric utility distribution companies of all prudent

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incremental costs arising from the implementation of this chapter, including, without limitation,

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the purchase of NE-GIS certificates, the payment of alternative compliance payments, required

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payments to support the NE-GIS, assessments made pursuant to subsection 39-26-7 (c) and the

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incremental costs of complying with energy source disclosure requirements.

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     (c) Certify eligible renewable energy resources by issuing statements of qualification

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within ninety (90) days of application. The commission shall provide prospective reviews for

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applicants seeking to determine whether a facility would be eligible.

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     (d) Determine, on or before January 1, 2010, the adequacy, or potential adequacy, of

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renewable energy supplies to meet the increase in the percentage requirement of energy from

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renewable energy resources to go into effect in 2011 and determine on or before January 1, 2014,

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the adequacy or potential adequacy, of renewable energy supplies to meet the increase in the

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percentage requirement of energy from renewable energy resources to go into effect in 2015. In

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making such determinations the commission shall consider among other factors the historical use

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of alternative compliance payments in Rhode Island and other states in the NEPOOL region. In

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the event that the commission determines an inadequacy or potential inadequacy of supplies for

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scheduled percentage increases, the commission shall delay the implementation of the scheduled

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percentage increase for a period of one year or recommend to the general assembly a revised

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schedule of percentage increases, if any, to achieve the purposes of this chapter.

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     (e) Establish sanctions for those obligated entities that after investigation have been found

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to fail to reasonably comply with the commission’s regulations. No sanction or penalty shall

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relieve or diminish an obligated entity from liability for fulfilling any shortfall in its compliance

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obligation, provided, however, that no sanction shall be imposed if compliance is achieved

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through alternative compliance payments. The commission may suspend or revoke the

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certification of generation units, certified in accordance with subsection 39-26-6(c) above, that

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are found to provide false information, or that fail to notify the commission in the event of a

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change in eligibility status or otherwise comply with its rules. Financial penalties resulting from

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sanctions from obligated entities shall not be recoverable in rates.

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     (f) Report, by February 15, 2006, and by February 15 each year thereafter, to the

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governor, the speaker of the house and the president of the senate on the status of the

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implementation of the renewable energy standards in Rhode Island and other states, and which

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report shall include in 2009 and each year thereafter the level of use of renewable energy

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certificates by eligible renewable energy resources and the portion of renewable energy standards

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met through alternative compliance payments, and the amount of rate increases authorized

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pursuant to subsection 39-26-6(b) above.

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     39-26-7. Renewable energy development fund. -- (a) There is hereby authorized and

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created within the economic development corporation a renewable energy development fund for

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the purpose of increasing the supply of NE-GIS certificates available for compliance in future

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years by obligated entities with renewable energy standard requirements, as established in this

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chapter. The fund shall be located at and administered by the Rhode Island Economic

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Development Corporation and shall have a board of trustees of five (5) members as follows: the

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executive director of the economic development corporation, who shall be chairman, the director

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of the department of administration or a designee of the director, the administrator of the division

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of public utilities, and two public members appointed by the governor with advice and consent of

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the senate, who shall serve terms of three (3) years, provided however that no public members

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may serve more than two (2) consecutive three year terms. One of the public members shall be a

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representative of an organization that advocates for renewable energy development. Each

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member shall hold office for the term appointed and until the member’s successor shall have been

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duly appointed and qualified, or until the member’s earlier death, resignation or removal.

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Members of the board of trustees of the fund shall receive no compensation for the performance

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of their duties, but may be reimbursed for reasonable expenses incurred in carrying out those

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duties. The board of trustees shall recommend to the economic development corporation: (1)

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plans and guidelines for the management and use of the fund, and (2) its evaluation of proposals

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and/or actions to obligate, use and/or sell, dispose, trade or exchange assets held by the fund. The

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board of trustees shall have the power to adopt, with the approval of the economic development

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corporation, such by-laws as may be necessary or convenient for the conduct of its affairs.

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     (b) The economic development corporation shall enter into agreements with obligated

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entities to accept alternative compliance payments, consistent with rules of the commission and

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the purposes set forth in this section; and alternative compliance payments received pursuant to

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this section shall be trust funds to be held and applied solely for the purposes set forth in this

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section.

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     (c) The uses of the fund shall include but not be limited to:

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     (1) Stimulating investment in renewable energy development by entering into

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agreements, including multi-year agreements, for renewable energy certificates;

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     (2) Issuing assurances and/or guarantees to support the acquisition of renewable energy

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certificates and/or the development of new renewable energy sources for Rhode Island;

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     (3) Establishing escrows, reserves, and/or acquiring insurance for the obligations of the

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fund;

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     (4) Paying administrative costs of the fund incurred by the economic development

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corporation or the board of trustees, not to exceed ten percent (10%) of the income of the fund,

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including but not limited to alternative compliance payments.

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     (d) NE-GIS certificates acquired through the fund may be conveyed to obligated entities

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or may be credited against the renewable energy standard for the year of the certificate provided

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that the commission assesses the cost of the certificates to the obligated entity, or entities,

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benefiting from the credit against the renewable energy standard, which assessment shall be

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reduced by previously made alternative compliance payments and shall be paid to the fund.

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     39-26-8. Interaction with other policies. -- (a) Rhode Island has established a system-

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benefits charge (SBC) dedicated to supporting renewable energy, administered by the state

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energy office; other states have similar policies. The state energy office is hereby directed to

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collaborate with the commissions and the renewable energy development fund in maximizing the

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combined impact and efficiency of the SBC and the renewable energy standard.

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     (b) It is the intent of this chapter that generation attributes and NE-GIS certificates

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applied towards Rhode Island renewable energy standard compliance may not be used towards

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compliance with state renewable energy obligations relating to an obligated entity’s load in other

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states.

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     39-26-9. Energy source disclosure requirements. -- (a) The commission shall , by

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March 31, 2005 establish and enforce right-to-know regulations requiring any obligated entity to

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distribute energy source disclosures to all customers of each electrical energy product offered.

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     (b) The energy source disclosure shall indicate what sources of energy were used to

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generate electricity for each electrical energy product, expressed as a percentage of the total

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amount of energy used towards each electrical energy product. The energy source disclosure

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shall show the percentages of energy obtained from each of the eligible renewable energy

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resources, as well as the percentage energy obtained from nuclear plants, natural gas, oil (which

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may include any fossil fuel), hydroelectric plants that are not eligible renewable energy resources,

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coal, and any other sources that the commission may require to be included. The energy source

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disclosure shall also indicate the emissions created as a result of generating said electricity.

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     (c) Energy source disclosures shall be distributed to consumers on a quarterly basis. The

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obligated entities shall be allowed to recover in rates all incremental cots associated with

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preparation and distribution of the disclosure label.

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     (d) The commission shall allow for or require the use of NE-GIS certificates for the

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calculation of the energy source disclosure.

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     (e) The energy source disclosure presented to any particular end-use customer shall take

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into consideration and account for voluntary purchases of generation attributes or related

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products, including purchases made by the end-use customer from providers other than the

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obligated entity, even if the end-use customer is billed by the obligated entity and also served by

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that obligated entity’s electrical energy product.

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     39-26-10. Severability and construction. – If any provision of this chapter or its

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application to any person or circumstances is held invalid, the invalidity does not affect other

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provisions or applications of this chapter which can be given effect without the invalid provision

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or application, and to this end the provisions of this chapter are severable. The provisions of this

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chapter shall be liberally construed to give effect to the purposes thereof.

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     SECTION 2. Chapter 42-64 of the general laws entitled “Rhode Island Economic

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Development Corporation” is hereby amended by adding thereto the following section:

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     42-64-13.2 Renewable Energy Development Fund. -- The corporation shall, in the

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furtherance of its responsibilities to promote and encourage economic development, establish and

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administer a renewable energy development fund as provided for in chapter 39-26, and may

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exercise the powers set forth in this chapter, 42-64, as necessary or convenient to accomplish this

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purpose.

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     SECTION 3. This act shall take effect upon passage.

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LC00091/SUB A/2

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS -- RENEWABLE ENERGY

STANDARD

***

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     This act would establish renewable energy portfolio standards and energy source

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disclosure requirements by requiring the public utilities commission to adopt regulations

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specifically relating thereto.

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     This act would take effect upon passage.

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LC00091/SUB A/2

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