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Citing "Unforeseen" Increase in Solar RPS Costs, Retail Supplier Invokes Change-In-Law Provision To Pass-Through Costs to Fixed Price Customers

March 16, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Citing "unforeseen" costs for Massachusetts Solar Carve-Out 1 Renewable Energy Certificates 1 (SREC-1), Liberty Power is passing through the additional costs to non-residential customers, including those on fixed price contracts, invoking contractual change-in-law provisions.

In a Frequently Asked Questions concerning the pass-through, Liberty Power states that, "The SREC 1 Minimum Standard for 2015, calculated by the DOER [Department of Energy Resources], was substantially higher than the Minimum Standard in place for 2014."

In the FAQ, Liberty notes that the SREC 1 percentage requirement is calculated every year using a set formula.

"The final requirement exceeded expectations and resulted in unforeseen costs. To recoup these costs, Liberty Power will pass through the costs as a pass-through or adjustment on your electricity supply bill. The pass-through represents only the incremental costs – there is no markup," Liberty Power said in the FAQ.

The SREC 1 obligation increased from 0.9481 percent in 2014 to 2.1442 percent in 2015 for contracts entered on or after June 28, 2013, and 1.5359% for contracts entered prior to June 28, 2013, Liberty Power said in the FAQ.

"While Liberty Power strives to accurately forecast, based on historical data, the DOER's final SREC I Minimum Standard for 2015 exceeded our original projections," Liberty Power said in the FAQ.

"The DOER uses a formula that includes multiple factors. One factor, among many, is the number of auction rounds it takes to clear (or sell) the solar credits. In 2014 the credits were not cleared by the second round. This prompted the DOER to further increase the SREC 1 obligation for 2015," Liberty Power said in the FAQ.

"Each SREC costs approximately 55 cents per kWh. Even a small increase in the obligation has a significant impact on the amount all suppliers have to pay to purchase the required number of SRECs to match their customers' usage," Liberty Power said in the FAQ.

"Liberty Power's terms and conditions include a Change in Law provision, which is found in most suppliers' contracts. This provision does allow Liberty Power to pass through fees or costs related to a change in law or regulation, and fees and costs imposed by governmental authority, like the DOER," Liberty Power said in the FAQ.

In a statement to EnergyChoiceMatters.com, Liberty Power said:

"In 2014, SREC credits did not clear during the second round of the auction. This triggered an increase in the minimum SREC standard set by the DOER. Liberty Power's contract language which includes 'change in law' provisions also contemplates certain other conditions that may trigger a pass-through of incremental costs, such as this material, unforeseen increase in minimum renewable portfolio standards. After careful consideration, Liberty Power has decided to pass-through the incremental costs of complying with this new, higher standard per our terms and conditions. We made the decision to limit this to non-residential customers only."

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