Maine PUC Approves Long-Term Contract for Capacity, RECs

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January 6, 2011

The Maine PUC has directed Central Maine Power to enter into a long-term contract for the capacity value and renewable energy credits associated with Verso Bucksport LLC's 40 MW Renewable Capacity Project (2010-66).  

The PUC ordered CMP to enter into a five-year, long-term contract with Verso Bucksport for 35 MWhs per hour equivalent of RECs and the financial equivalent of 21 MW of capacity associated with the Verso project, which consists of the modification of one of the boilers at a Verso paper mill and the installation of a new steam turbine generator and associated equipment.  

The agreement may be extended by CMP for an additional five-year term at the direction of the Commission.

Under the agreement, CMP will purchase RECs at a base price that is preset for each contract year.  The REC base price starts at $22 per REC for contract years one and two and decreases over time to $15 per REC in contract year five.  If CMP exercises its option to extend the agreement for the second term at the direction of the Commission, the base price of $15 per REC in contract year six decreases to $10 per REC in contract year ten.  

If, after the second year of the agreement, the average cost per Maine Class I REC (ACPR) is greater than the REC base price, then Verso Bucksport will receive 75% of the ACPR for each REC transferred under the agreement.

From June 1, 2014 to November 30, 2016, Verso Bucksport will pay CMP the monthly financial equivalent of 21 MW multiplied by 10% of the forward capacity auction capacity clearing price.   This provides CMP with the financial equivalent of purchasing capacity at a 10% discount and reselling that capacity at full market value without burdening CMP or ratepayers with any market transaction risk, the PUC said.  

If CMP exercises its option to extend the agreement at the direction of the Commission, Verso Bucksport will pay CMP capacity value in the amount of 24 MW multiplied by 5% of the forward capacity auction capacity clearing price for every month of the second term of the agreement.  

"[T]he pricing structure contained in the proposed Term Sheet showed a modest positive benefit to ratepayers," the PUC said.  "The capacity proposal provided a discount to ratepayers for the cost of capacity requirements and the REC proposal contained in the Term Sheet provided value to the overall transaction by allowing the [Verso Bucksport] Project to move forward."  The Commission concluded that the project would not move forward absent the long-term contract.

The Commission reserved for a future order the disposition of the resources obtained under the contract, consistent with statute and rule.

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