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PUC Issues RFP For Long-Term Contracts For Capacity, Energy

July 25, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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The Maine PUC issued a request for proposals for long-term contracts for capacity resources and associated energy, initiating the process for the solicitation and review of long-term contract proposals pursuant to Title 35-A, section 3210-C and Chapter 316 of the Commission's rules.

The RFP does not address cost recovery for any procured resources. Per Chapter 316, the PUC may elect to use any procured resources for the supply requirements of Maine customers

Specifically, under Chapter 316, at the direction of the Commission, investor-owned transmission and distribution utilities shall, for any procured products:

• dispose of capacity resources, available energy, and renewable energy credits through periodic competitive auctions supervised by the Commission;

• use capacity resources, available energy, and renewable energy credits to meet the supply requirements of Maine ratepayers; or

• take other action relative to capacity resources and available energy, and renewable energy credits as determined by Commission rule or order.

In its order, the PUC noted, "Throughout the last several months, the Commission has hosted meetings with stakeholders on a variety of issues regarding northern Maine, most notably concerns about electricity prices and market conditions. These issues included the level, variability and lack of predictability of electricity prices in the region and the effect on the region in the event the ReEnergy Holdings LLC (ReEnergy) biomass plants located in Ashland and Fort Fairfield terminate operations."

"The stakeholder discussions included topics such as the lack of a competitive electricity market in northern Maine, transmission charges for power exported out of the region, reciprocity with the ISO-NE, new transmission to connect the Northern Maine Independent System Administrator (NMISA) region with the ISO-NE region, vertical integration, the need for indigenous generation to maintain reliability in the region, and the possible use of a long-term power purchase contract to help ReEnergy continue to operate," the PUC said

On June 5, 2018, ReEnergy, the Aroostook Energy Association and the Aroostook Partnership filed a letter requesting that the Commission issue a RFP pursuant to Title 35-A, section 3210-C, for a five-year contract tailored to address the issues identified by the stakeholder group.

"Although the issuance of a long-term contract RFP at this time may help to address some issues discussed among the stakeholder group, the Commission disagrees that the RFP should be 'tailored' to address northern Maine issues generally or the ReEnergy plants operations specifically," the PUC stated in its order

"Thus, the Commission will not limit proposed contracts to five years or otherwise restrict the RFP to proposals that address northern Maine market issues. The RFP does, however, express a preference for proposals with terms of ten years or less. This preference is included in the RFP because the risk to ratepayers of increased costs from contracts (i.e., the risk of creating stranded costs if contract prices turn out to be higher than the market value of the purchased energy and capacity) inherently increases with the length of the contract term," the PUC said in its order

The RFP states, "The purpose of this RFP is to solicit proposals for contracts that will reduce electricity costs for Maine consumers and/or to serve as a hedge against market price volatility."

Docket No. 2018-00137

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