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State Senate Passes Bill Requiring Long-Term Contract Procurement Equal To 50% of Retail Electric Market Sales; Amendment Changes Impact on Default Service

July 5, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Massachusetts Senate passed an amended version of S.2372, which is generally designed to require the procurement of Canadian hydropower under long-term contracts, but an adopted amendment to the bill changes the treatment of such power with respect to default service

The original Senate bill (as well as a similar bill, H.4385, which has already passed the House) granted the electric distribution companies discretion as to how to dispose of power and other products procured under the long-term contracts contemplated by the bill

Under the original Senate bill, an EDC could elect to use energy purchased under a contract for resale to its customers, and could elect to retain renewable energy certificates to meet the applicable annual renewable portfolio standard requirements (the bill was silent as to cost recovery if the products were used to serve basic service customers). If the EDC did not use the products in such manner, the EDC would sell the purchased energy into the wholesale spot market and sell the purchased renewable energy certificates through a competitive bid process, with costs recovered from all distribution customers.

However, adopted Amendment #72 to S.2372 removes the discretion for EDCs with respect to energy (though discretion with respect to RECs is maintained).

Specifically, adopted Amendment #72 strikes language granting the EDCs discretion with respect to energy and instead provides, "A distribution company shall sell any energy and capacity purchased under a long-term contract in the wholesale market through a competitive bid process in order to minimize the costs to ratepayers under the contract" [emphasis added]. Accordingly, the EDC could no longer use the energy or capacity under the contracts for default service

Costs (or benefits) from the wholesale sales would be recovered through distribution rates

Amendment #72 allows the EDC to continue to elect to retain renewable energy certificates to meet the applicable annual renewable portfolio standard requirements

The amended S.2372 would require competitive solicitations to procure term contracts for "clean energy generation" of not more than 12.45 million MWh. Clean energy generation is defined as: (i) hydroelectric generation; (ii) new Class I renewable portfolio standard eligible resources that are firmed up with hydroelectric generation; or (iii) new Class I renewable portfolio standard eligible resources.

S.2372 would also require procurement of 2,000 MW of offshore wind

Combined, the procurements equate to about 50% of retail electric sales in the state.

Apart from granting the EDCs discretion with regard to disposition of products under the contracts, H.4385 also differs from S.2372 in that the House bill only requires procurement of 9.45 million MWh of clean generation, and 1,200 MW of offshore wind

Adopted Amendment #81 to S.2372 also provides that an increase in the RPS under the bill shall not apply to pre-existing retail supplier contracts. Specifically, for the Class I renewable energy generating source requirement that applies to retail electricity suppliers, the bill requires that Department of Energy Resources shall not impose any incremental obligations resulting from the bill on the kilowatt-hour sales to end-use customers in the commonwealth resulting from contracts executed prior to January 1, 2017, provided the retail electric supplier provides the department of energy resources with satisfactory documentation of the terms of such contracts including, but not limited to, the execution and expiration dates of the contract and the annual volume of kilowatt-hour sales supplied.

The bills now head to conference committee to address the differences

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