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Mass. EDCs Propose Disposition, Cost Recovery Of Products Procured Under Large Long-Term Contracts

July 30, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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The Massachusetts investor-owned electric distribution companies have collectively sought approval at the DPU for a PPA with H.Q. Energy Services (U.S.) Inc., which is part of the previously reported, statutorily required solicitation of long-term contracts, with the winning selection being the proposal filed jointly by Hydro Renewable Energy Inc., an affiliate of Hydro Quebec, and Central Maine Power Company, which is referred to as the New England Clean Energy Connect: 100% Hydro proposal (the NECEC Transmission Line).

The PPA provides for the delivery of an aggregate of 9,554,940 MWh annually of incremental hydroelectric generation and related Environmental Attributes from HQ delivered through the NECEC Transmission Line

The PPA has a service term of 20 years from the date of commercial operation.

The EDCs said in testimony that, "Each of the Distribution Companies intends to sell the clean energy procured through the proposed PPA through the ISO-NE spot market. The difference between the spot market revenues and the contract costs will be credited to or charged to each Distribution Company’s distribution customers. Each Distribution Company’s renewable contract cost recovery tariff provisions will allocate to all its distribution customers the costs and revenues associated with entering into these contracts."

The PPA's generation will be offered into ISO-NE’s spot market without a price reserve. "This allows the generation to be a hedge during times of natural gas supply constraints by reducing the amount of natural gas-fired generation required to meet electricity demand, thereby reducing winter electricity price spikes," the EDCs said

Pursuant to statute, the Distribution Companies must retain all renewable energy certificates purchased under Section 83D that are not attributed to Class I renewable portfolio standard eligible resources. Accordingly, the Distribution Companies intend to use the Environmental Attributes procured by the PPA for compliance with the CES [Clean Energy Standard]. The CES requires that each Distribution Companies’ total annual sales of electricity to Massachusetts end-use customers to include a minimum percentage of electrical energy sales with "Clean Generation Attributes," beginning with 16 percent in 2018, increasing to 80 percent by 2050. Clean Generation Attributes include any generation attribute that is retained pursuant to Section 83D(h). "The Environmental Attributes being purchased under the PPA will assist the Distribution Companies in meeting the CES obligations on a long-term basis. Further if the CES obligation has been filled the EDCs will retire any additional Environmental Attributes on behalf of all Massachusetts customers," the EDCs said

"The Distribution Companies intend to use the Environmental Attributes acquired through the PPA for compliance towards the Clean Energy Standard requirements established pursuant to the Massachusetts Department of Environmental Protection regulations at 310 C.M.R. § 7.75 ('CES'), which require all retail electricity suppliers in Massachusetts to provide a minimum percentage of electricity from 'Clean Generation Attributes.' The CES provides that all generation attributes retained pursuant to Section 83D are 'Clean Generation Attributes,'" the EDCs said

"The Distribution Companies are not purchasing RECs under this PPA and will retain the Environmental Attributes purchased for CES compliance," the EDCs said

"The Distribution Companies propose to recover the following costs associated with each Distribution Company’s various long-term renewable contracts procured 5 pursuant to Section 83, Section 83A and Section 83D: (1) the net costs of the energy 6 sold into the ISO-NE market; (2) the net costs of the RECs obtained under the long-term contracts; (3) the costs of transmission associated with procuring energy under Section 83D; and (4) the remuneration allowed in recognition of the Distribution Companies’ acceptance of the financial obligation of the long-term contracts under Sections 83, 83A and 83D. The net costs included in the determination of the long-term renewable energy contract cost adjustment factor for the recovery year are estimated based upon the contract prices, projected market prices and the estimated kWh generated and purchased under the contracts," the EDCs said

The EDCs will recover all costs under the PPAs under a nonbypassable rider applicable to distribution customers

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