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Utility Seeks To Use RECs From Nonbypassable Long-Term Contracts, Owned Generation To Serve Default Service Load

March 7, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

United Illuminating has sought authority from the Connecticut PURA to utilize RECs that it owns through required purchases under long-term contracts, or utility-owned generation built via nonbypassable charges, to serve any default service load self-managed by UI, with such transfer of RECs taking place at a price that is reflective of the market price for Class I RECs at the time of the transfer

UI made its proposal in a proceeding considering changes to the procurement plans for Standard Service (SS) and Last Resort Service (LRS) supplies

UI noted that, "[f]rom time to time, the Company is required to self-manage its LRS obligation due to lack of competitive LRS bids in its quarterly requests for proposals," and further noted that the state's procurement plan contemplates that UI may self-manage a portion of its SS requirements (though, unlike CL&P, UI has not done so for SS to date).

"UI also has a growing portfolio of long-term contracts through various state renewable energy programs, and owns 10 MW of its own Class I generation. UI purchases Connecticut Class I renewable energy credits ('RECs') under these long-term contracts, or produces such RECs with its own generation, and re-sells those RECs into the wholesale market. Conversely, when the Company self-manages its LRS obligation, it must purchase Class I RECs from the same wholesale market. This process of both buying and selling the same commodity creates unnecessary inefficiency and cost for UI’s customers," UI said

"This proposed amendment to the Plan will allow the Company to transfer Class I RECs that it produces or purchases under long-term contracts to its load-serving obligation when it self-manages LRS or SS load, with such transfer taking place at a price that is reflective of the market price for Class I RECs at the time of the transfer, subject to approval of the Procurement Manager. As an example, if the Company has an inventory of 20,000 Class I RECs from long-term contracts and its own generation, and an obligation to provide 1,000 Class I RECs to meet its RPS obligation for LRS, it would be allowed to transfer 1,000 Class I RECs from the appropriate non-bypassable account to its LRS account at a transfer price approved by the Procurement Manager. The remaining 19,000 Class I RECs would be sold into the wholesale market," UI said

"The Company’s proposed amendment to the Plan will benefit customers by sensibly eliminating the unnecessary sale and re-purchase of the same quantity of Class I RECs from the wholesale market. Such an amendment would also alleviate the administrative burdens associated with sale and re-purchase of Class I RECs. The Company’s proposed amendment to the Plan is also consistent with the legislative intent to allow for the sale of RECs to meet an electric distribution company’s RPS requirements. See General Statutes § 16-244r(d) (stating 'an electric distribution company may retire the renewable energy credits it procures through long-term contracting to satisfy its obligation pursuant to section 16-245a.'); General Statutes § 16-244t(d) (same); General Statutes § 16-244v(c) (stating 'Nothing in this section shall preclude the resale or other disposition of energy or associated renewable energy credits purchased by the electric distribution company'); General Statutes §16a-3f (stating 'Class I renewable energy sources procured under this section shall be sold in the New England Power Pool Generation Information System renewable energy credit market to be used by any electric supplier or electric distribution company to meet the requirements of section 16-245a.'); General Statutes § 16a-3g (same); General Statutes § 16-a3h (same)," UI said

The state's power procurement manager supported UI's proposal to utilize its owned RECs to meet default service obligations related to self-managed load, with such transfer taking place at a price that is reflective of the market price for Class I RECs at the time of the transfer, subject to approval of the procurement manager and with the following provisions:

• The transfer of RECs is elective if it avoids transaction costs, but not mandatory.

• Eversource may also elect to use RECs procured through long-term PPAs for compliance in their self-managed tranches.

• If an EDC intends to utilize RECs procured through long term PPAs for compliance, this should be noted in the self-management plan provided to the PM, along with documentation about how the transfer price will be set (e.g., average of x brokers, actual price of a coincident market sale, etc.). The EDC’s monthly self-management reports should include the quantity of RECs transferred and the price(s).

Docket No. 12-06-02RE03

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