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Maine PUC Seeks Comments on Long-Term Contract Rules
August 18, 2011
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The Maine PUC issued a Notice of Inquiry regarding a legislative directive that the Commission adopt rules to help ensure that long-term contracts for capacity, energy and renewable energy credits (RECs) provide benefits to ratepayers (2011-270).
During its 2011 session, the Legislature enacted P.L. 2011, ch. 413 which amended the long-term contracting section of the statute, 35-A M.R.S.A. § 3210-C(11), to state the following:
Customer benefits. The commission may direct investor-owned transmission and distribution utilities to enter into contracts under this section only as agents for their customers and only when such contracts are in the best interest of customers and in accordance with this subsection. The commission shall adopt rules to ensure that:
A. To the extent the benefits to ratepayers of a long-term contract are projected to occur in the later years of the contract term, the commission shall ensure that adequate financial security is in place so that it is reasonably likely ratepayers will obtain the projected benefits of the long-term contract; and
B. To the extent practicable, ratepayers obtain the benefit of lower cost capacity resources of [sic] energy associated with those resources or of any renewable energy credits that may exist after the term of primary financing or subsequent replacement financing necessary for the development and construction of a generation project is completed.
In addition, section 1 of the Act modified the provision of current law that governs contracting for RECs. The long-term contracting statute now specifies that "[t]he price paid by the investor-owned transmission and distribution utility for the renewable energy credits must be lower than the price received for those renewable energy credits at the time they are sold by the investor-owned transmission and distribution utility."
The PUC sought comments from stakeholders in advance of opening a formal rulemaking on the Act's provisions, which the PUC intends to do by October 2011.
The PUC issued specific questions for comment, including, among others:
- How should the Commission ensure that there is adequate financial security in place? What specific provisions should be added to the long-term contracting rules to ensure that there is adequate financial security if the benefits are projected to occur in the later years of the contract?
- What provisions should be included in the long-term contracting rules to allow customers to benefit from lower cost capacity, energy or RECs after the expiration of the financing that was necessary for the generation project development?
- Is the premise of the statutory provision correct that there will be, in at least some cases, low cost capacity, energy and RECs available after the term of primary or subsequent replacement financing? Would the premise of the statutory provision be correct if the term of the primary or subsequent replacement financing is the same or similar to the project’s useful life? Would subsequent replacement financing apply to entities obtaining financing to extend the facility’s useful life?
- To get the benefit of lower cost capacity, energy or RECs, should long-term contracts specify that these products be sold to the utility at some type of cost-of-service rate? If so, how should the cost of service be determined?
- Should the Commission interpret the Act to mean that the price paid for RECs must below the market prices for RECs at the time that they are produced and sold? If the Act does require that RECs be sold at below market prices, would there be any benefit or purpose for a seller of RECs to enter into a long-term contract with a utility?
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