2009 -- H 5002 SUBSTITUTE A AS AMENDED

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LC00102/SUB A/2

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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: Representative Gordon D. Fox

     Date Introduced: January 06, 2009

     Referred To: House Environment and Natural Resources

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 involving

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newly developed renewable energy resources. Commercially reasonable shall include having a

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credible project operation date, as determined by the commission, but a project need not have

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completed the requisite permitting process to be considered commercially reasonable. If there is

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a dispute about whether any terms or pricing are commercially reasonable, the commission shall

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make the final determination after 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, 2009, 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 three

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(3) 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. Notwithstanding any other provisions of this chapter, on or before August 15,

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2009, the electric distribution company shall solicit proposals for one newly developed renewable

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energy resources project as required in section 39-26.1-7. Proposals for the sale of output from an

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offshore wind project received under the provisions of this section shall be diligently and fully

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considered without prejudice, regardless of the status of any proceedings under sections 39-26.1-7

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or 39-26.1-8.

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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 chapter. 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 power purchase contracts with renewable generation projects

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for power, renewable energy certificates, or any other attributes with terms of more than three (3)

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years in meeting its applicable annual renewable portfolio standard requirements set forth in

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section 39-26-4 or pursuant to any other provision of the law.

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      (2) Except as provided in section 39-26.1-7 and 39-26.1-8, an electric distribution

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company shall not be required to enter into long-term contracts for newly developed renewable

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energy resources that exceed the following four (4) year phased schedule:

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

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

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

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     By December 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 promulgated by the commission

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pursuant to this chapter, an electric distribution company may, at its sole election, immediately

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and from time to time, procure additional commercially reasonable long-term contracts for newly

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developed renewable energy resources on an earlier timetable or above the minimum long-term

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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 company

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

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incentives described in this subsection shall apply only to long-term contracts for newly

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developed renewable energy resources. The financial remuneration and incentives shall be in the

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form of annual compensation, equal to two and three-quarters percent (2.75%) of the actual

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annual 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) or

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(c) 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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     39-26.1-7. Town of New Shoreham Project.-- (a) On or before August 15, 2009, the

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electric distribution company shall solicit proposals for one newly developed renewable energy

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resources project of ten (10) megawatts or less that includes a proposal to enhance the electric

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reliability and environmental quality of the Town of New Shoreham. The electric distribution

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company shall select a project for negotiating a contract that shall be conditioned upon approval

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by the commission. Negotiations shall proceed in good faith to achieve a commercially

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reasonable contract. Should the distribution company and the selected party agree to a contract,

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the contract shall be filed with the commission no later than October 15, 2009 for commission

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approval. The commission shall review the contract and issue an order approving or disapproving

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the contract on or before December 31, 2009. If the parties are unable to reach agreement on a

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contract prior to October 15, 2009, an unsigned copy shall be filed by the electric distribution

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company prior to that same date, and the commission shall have the discretion to order the parties

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to arbitrate the dispute on an expedited basis. Upon approval of the contract, the provisions of

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section 39-26.1-4 and the provisions of paragraphs (a), (b), (c), (d), and (f) of section 39-26.1-5

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shall apply, and all costs incurred in the negotiation, administration, enforcement, and

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implementation of the agreement shall be recovered annually by the electric distribution company

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in electric distribution rates. To the extent that there are benefits for customers of the Block Island

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Power Company or its successor, the commission shall determine an allocation of cost

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responsibility between customers of the electric distribution company and customers of Block

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Island Power Company or its successor after the cost estimates are filed with the commission, but

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the commission need not determine the final cost allocation at the time the commission considers

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and/or approves the contract between the electric distribution company and the project developer.

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The allocation of costs shall assure that individual customers in the Town of New Shoreham pay

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higher charges related to the project on their individual bills than any charges for the same project

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that may be included in individual bills of customers of the electric distribution company. The

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commission shall provide for an appropriate rate design and billing method between the electric

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distribution company and Block Island Power Company at the appropriate time.

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     (b) The solicitation shall require that each proposal include provisions for a transmission

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cable between the Town of New Shoreham and the mainland of the state. The electric distribution

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company, at its option, may propose to own, operate, or otherwise participate in such

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transmission cable project, subject to commission approval. The electric distribution company,

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however, has the option to decline to own, operate, or otherwise participate in the transmission

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cable project, even if the commission approves such arrangements. Should the electric

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distribution company own, operate, and maintain the cable, the annual costs incurred by the

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electric distribution company shall be recovered annually through a fully reconciling rate

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adjustment from customers of the electric distribution company and/or from the Block Island

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Power Company or its successor, subject to any federal approvals that may be required by law;

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provided, however, the parties shall use all reasonable efforts to obtain socialization of the costs

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of the cable in New England transmission rates administered by the ISO New England, to the

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extent permitted. The allocation of the cable costs shall be determined by the commission and

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assure that individual customers in the Town of New Shoreham pay higher charges related to the

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cable on their individual bills than any charges for the same project that may be included in

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individual bills of customers of the electric distribution company.

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     (c) Any charges incurred by the Block Island Power Company or its successor pursuant

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to this section shall be recovered annually in rates through a fully reconciling rate adjustment,

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subject to approval by the commission. If the electric distribution company owns, operates, or

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otherwise participates in the transmission cable project, pursuant to subsection 39-26.1-7(b) the

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provisions of section 39-26.1-4 shall not apply to the cable cost portion of the Town of New

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Shoreham Project. (d) Any contract entered into pursuant to this section shall count as part of the

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minimum long-term contract capacity.

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     39-26.1-8. Utility-Scale Offshore Wind Project – Separate Proceedings.-- (a) Upon

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certification by the department of administration identifying the developer selected by the state to

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develop a utility-scale offshore wind farm, such developer may file an application under this

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section within one hundred eighty (180) days of such certification by the department. For the

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purposes of this section, “utility-scale offshore wind farm” shall mean a wind power project

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located offshore in the waters of Rhode Island or adjacent federal waters of at least one hundred

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(100) megawatts but not more than one hundred fifty (150) megawatts. The purpose of the

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application shall be for the applicant to request that the commission require a long term contract

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with the electric distribution company. Should the commission approve a contract pursuant to this

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section 39-26.1-8, it shall not be counted towards the minimum long-term contract capacity

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specified in section 39-26.1-2(7).

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     (b) The commission shall hold proceedings to review the proposal contained in the

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application. In reviewing the application, the commission shall determine whether the proposal is

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in the best interests of electric distribution customers in Rhode Island. In making this

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determination, the commission shall consider the following factors: (i) The economic impact and

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potential risks, if any, of the proposal on rates to be charged by the electric distribution company;

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(ii) The potential benefits of stabilizing long-term energy prices; (iii) Any other factor the

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commission determines necessary to be in the best interest of the rate payers.

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     (c) The application will contain the following information:

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     (i) A complete description of the proposed project,

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     (ii) A description of the legal entity that will enter into a long term contract,

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     (iii) A time line for permitting, licensing, and construction,

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     (iv) Pricing projected under the long term contract being sought, including prices for all

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market products that would be sold under the proposed long term contract, subject to any contract

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negotiations between the applicant and the electric distribution company,

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     (v) Projected electrical energy production profiles,

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     (vi) The proposed term for the long term contract,

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     (vii) Economic justification for the proposal, including projection of market prices,

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     (viii) A description of the economic benefits to Rhode Island, including the creation of

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jobs in Rhode Island,

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     (ix) All filings with state and federal regulatory agencies related to the proposal,

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     (x) All interconnection filings related to the proposal,

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     (xi) A proposed initial term sheet for a long-term contract between the applicant and the

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electric distribution company.

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     The information submitted in the application shall be subject to modification as a result

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of any negotiation of a contract ordered by the commission.

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     (d) The commission shall promulgate rules and regulations governing the proceedings

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outlined in this section by April 30, 2010.

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     (e) The applicant must serve copies of the application to the electric distribution company

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with whom the applicant is seeking a long term contract, the division of public utilities and

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carriers, the office of energy resources, the department of administration, the economic

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development corporation and the attorney general. Prior to the filing of any information, the

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applicant may seek a protective order to protect the confidentiality of information for good cause

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shown, to the extent that such information is proprietary or confidential business information, but

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unredacted copies of the entire filing must be provided to the parties identified in this paragraph,

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who shall be bound by any protective order that may be issued regarding further disclosure.

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     (f) The electric distribution company, the division of public utilities and carriers and the

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office of energy resources shall be mandatory parties to the proceeding. The applicant must pay

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for the reasonable costs of consultants or counsel that may be hired by the commission and the

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division for the proceeding, but in no case shall the applicant be liable for the costs in excess of

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$100,000 for the division and $100,000 for the commission, respectively.

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     (g) The commission shall issue a final order in the proceedings required by section 39-

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26.1-8(b) within eight (8) months of the filing of the application. If the commission determines

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that the proposal meets the standard outlined in section 39-26.1- 8 (b), the commission shall

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require the electric distribution company to negotiate a long-term contract with the applicant. The

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applicant, however, may decline to continue with the project for any reason at any time during the

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process outlined in this section. The commission may require changes to the applicant’s proposal

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as a condition to a long-term contract, as the commission determines are just and reasonable. The

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contract shall contain terms that are commercially reasonable. The contract also shall require that

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the electric distribution company purchase all of the output of the entire project, unless otherwise

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authorized by the commission. The parties shall present a proposed contract for review by the

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commission within three (3) months of the order requiring negotiations. If the parties are unable

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to reach agreement on a contract within three (3) months of the order requiring negotiations the

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commission shall have the discretion to order the parties to arbitrate the dispute on an expedited

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basis. Once the contract terms are finalized by negotiation or arbitration, the contract shall be

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filed with the commission for review and approval. The commission shall approve the contract

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upon a finding that the contract is consistent with the purposes of this chapter and the standards

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set forth in section 39-26.1-1.8(b). The commission shall issue its final decision on the proposed

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contract within sixty (60) days of receiving the proposed contract. Upon execution of the contract,

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the provisions of sections 39-26.1-4 and 39-26.1-5 shall apply, and all costs incurred in the

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negotiation, administration, enforcement, and implementation of the agreement shall be recovered

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annually by the electric distribution company in electric distribution rates. To the extent the

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application cites significant economic benefits to Rhode Island that require commitments from

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the applicant outside of the long term contract to achieve such benefits, and those economic

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benefits are ultimately relied upon by the commission in authorizing a long term contract to be

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negotiated, the commission may require that appropriate legally binding commitments be made

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by the applicant as a condition to a long term contract, unless the commission finds that such

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commitments are not necessary. 

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     (h) Notwithstanding any other provision of this section, the application process does not

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convey a legal entitlement to the applicant to a long term contract. Rather, the purpose of the

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proceeding is to leave the final decision as to whether a long term contract should be required to

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the discretion of the commission, subject to the standards outlined in this section and the purposes

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of this chapter.

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     (i) An applicant under this section shall not be permitted to submit a proposal under the

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solicitations required in section 39-26.1-3, except that such applicant shall be permitted to submit

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a proposal under section 39-26.1-7.

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     (j) Should a proceeding pursuant to this section result in the commission not ordering the

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distribution company to enter into a long-term contract for a utility-scale offshore wind project, or

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should the certified developer fail to file an application with the commission within one hundred

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eighty (180) days of certification, the certification shall be deemed void. In such case, if the

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commission determines it is in the interest of electric distribution customers to have another

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utility-scale project considered for a long term contract, the commission has the discretion to

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request the department of administration to certify a different developer to make another proposal

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for a utility-scale offshore wind project per this section, provided that the commission makes such

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request within ninety (90) days of the certification becoming void. If the commission makes such

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request, the department of administration may, but is not required to, certify another project and

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shall have ninety days to submit another certification. If such certification is not made within the

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time allowed, no further action shall be taken by the commission pursuant to this section. Under

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no circumstances is a distribution company required to enter into more than one contract under

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this section 39-26.1-8.

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     (k) Approval of a contract under this section shall not be interpreted to prevent, hinder or

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diminish the ability of any offshore wind project or developer to pursue, finance, seek the

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development of, or secure permits or electrical interconnection for offshore wind projects in or

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adjacent to the state, or whose output may be utilized in the state.

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     SECTION 2. This act shall take effect upon passage.

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LC00102/SUB A/2

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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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LC00102/SUB A/2

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