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Statutory Interpretation Could Triple Cost of REC Compliance for Retail Suppliers
The interpretation of a June 2013 Connecticut statute could triple the cost for retail suppliers to meet Connecticut's Class III RPS.
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ADVERTISEMENT A 2013 statute revised the definition of Class III REC to provide that, "after January 1, 2014, no such programs supported by ratepayers, including programs overseen by the Energy Conservation Management Board or third-party programs pursuant to section 16-245m, shall be considered a Class III source, except that any demand-side management project awarded a contract pursuant to section 16-243m shall remain eligible as a Class III source for the term of such contract."
The utilities have interpreted this amended statute to read that, "after January 1, 2014, projects funded by the ratepayer-supported C&LM Fund Programs will no longer be eligible to generate Class III renewable energy credits (RECs)."
Further, the utilities have interpreted the revised statute to mean that, "The last compliance period that the C&LM Fund Programs will be able generate Class III RECs is the 2013 period, which will continue until June 16, 2014 based on the NEPOOL calendar of trading periods. RECs created for this period will include RECs generated from C&LM Fund Program electricity savings eligible to create RECs for measures installed through December 31, 2013. This includes eligible savings creating RECs that are being carried forward for their measure life or 10 years, whichever is shorter."
However, GP Renewables & Trading, LLC called this interpretation contrary to the language in the statute.
"As the statute is clearly and explicitly written, '... except that any demand-side management project awarded a contract pursuant to section 16-243m shall remain eligible as a Class III source for the term of such contract'. Clearly, C&LM Fund Programs that were instituted with contracts prior to 12/31/2013 which run into 2014 and beyond ('term') should be eligible to create Class III RECs as has been the case both prior to the legislation and as unequivocally contained with the passage of the new legislation. Only when the term of these contracts expires should these demand-side management projects cease to be eligible for creating Class III RECs because only at this time the exception as written above will become null and void," GP Renewables & Trading said in comments to PURA.
"As such, GP Renewables & Trading firmly believes that the intent as well as the literal interpretation of the regulation will only be upheld if the Companies continue their current practice of creating and auctioning off these exempted Class III RECs in quarterly auctions until the terms of their contracts expire," GP Renewables & Trading said.
"GP Renewables & Trading is tremendously concerned that the Companies' incorrect interpretation and subsequent implementation of this understanding to their regular auctions will unduly penalize the rate payers. Electric Suppliers that have been forecasting costs and passing these costs along to the ratepayers within the state according to their literal and proper interpretation of the regulations will now find themselves incurring additional costs as the supply of 2014 Class III RECs will be greatly reduced. This will be detrimental to both the rate payer and Electric Supplier. The only way to fairly ease this cost into rates while avoiding an immediate price shock would be for the Companies to continue their efficient and time-tested Class III auction process until the terms of these exempted contracts roll off one by one and these C&LM contracts no longer qualify to produce Class III RECs as the current regulation is both written and intended," GP Renewables & Trading said.
GP Renewables & Trading did not provide an estimate of increased Class III REC costs to retail suppliers if the utilities' interpretation is adopted.
However, EnergyChoiceMatters independently understands that the Class III market has traditionally traded around $10. For 2014, the price is already trading at $22, and would likely trade as high as the cap of $31 overnight if PURA approved the utilities' interpretation.
Docket 05-07-19RE03
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April 17, 2014
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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