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Draft Order Would Allow Utility To Use RECs Produced Under Nonbypassable Long-Term Utility Contracts For Default Service Obligations

November 30, 2017

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

A draft Connecticut PURA order would allow the EDCs to use RECs that are generated under various long-term contracts an EDC has with renewable generation to be allocated to the EDC's default service obligation in situations where the EDC self-manages default service load, with any REC transfer occurring at a price that is reflective of the market price for such RECs and that is approved by the state's Procurement Manager (PM)

Specifically, the draft order would, "allow the Electric Distribution Companies to transfer the required number of Class 1 Renewable Energy Credits from the appropriate non-bypassable account to its Last Resort Service or Standard Service account at a transfer price approved by the Procurement Manager."

The various long-term contracts or utility-owned generation under which the RECs are procured are paid for by all distribution customers on a nonbypassable basis

UI had requested the authorization to allow the company to transfer Class I renewable energy certificates (REC) 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 PM. According to UI, this proposed amendment will benefit customers by eliminating the unnecessary sale and re-purchase of the same quantity of Class I RECs from the wholesale market as well as alleviating the administrative burdens associated with such sale and repurchase

UI 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 RECs under these long-term contracts or produces them through its own generation and then resells the RECs into the wholesale market. Conversely, when UI self-manages its LRS obligations, it must purchase Class I RECs from the same wholesale market. UI had said that this process of both buying and selling the same commodity creates unnecessary inefficiency and cost for UI’s customers

"Allowing the utility to avoid the sale and re-purchase of an equal quantity of Class I RECs from the wholesale market has the potential to reduce the administrative burdens and costs associated with the transactions. Ratepayers can benefit from such reduced burdens and costs. UI’s proposed amendment to the Plan is consistent with long-term contracting statutes, inasmuch as those statutes allow for the utilization of contracted RECs to meet an electric distribution company’s RPS requirements for SS and LRS. See Conn. Gen. Stat. §§16-244r(d) and 16-244t(d)," the draft states

The draft would provide that the transfer of RECs would be elective, not mandatory for the EDCs, and subject to approval by the PM

Additionally, the draft would require the EDCs to report the transfers in the monthly self-management plan provided to the PM. That monthly plan would provide documentation on how the transfer prices were set and include the quantity of RECs transferred and the transfer price(s).

The draft says that PM approval of the transfer is essential. "It will still be incumbent on the utility to demonstrate that the circumstances of such transfer (for instance, the method of valuing the contracted RECs in the transfer) satisfy the utility’s dual obligations to maximize the sale price of the RECs, and obtain low-cost SS and LRS offerings," the draft states

"Simply authorizing the utility to transfer contracted RECs for use for self-managed portions of SS or LRS does not relieve the utility of its various obligations under both the long-term contracting statutes and the Procurement Plan. Under the long-term contracting statutes, the utility has an obligation to seek the maximum value of the RECs it has contracted for, in order to realize the greatest savings between the REC purchase price in the long-term contract and the market price of the contracted RECs at the time of resale. Achieving such actual savings during the life of the long-term contract is the premise under which those contracts are approved by PURA. Such savings, moreover, are credited back to all ratepayers through the NBFMCC. Under the Procurement Plan, the utility has a different obligation to procure low-cost, competitive rates for SS and LRS customers, inclusive of the cost of RECs needed to meet supply obligations of Connecticut’s RPS," the draft notes

Docket 12-06-02RE03

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