Retail Suppliers Favor Higher Financial Security Requirements For Suppliers As Alternative To Accelerated RPS Compliance Schedule
RESA Proposal Would Exempt Suppliers With Years Of History Of Compliance From New Quarterly RPS Reporting
UI Says, If Quarterly Reporting Sought, Initial Load Data Reported To ISO-NE Should Be Used
February 5, 2020 Email This Story Copyright 2010-20 EnergyChoiceMatters.com
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Retail electric suppliers in Connecticut said that higher financial security requirement for retail suppliers are a better mechanism to address concerns of unmet RPS obligations (and unpaid alternative compliance payments) in cases of supplier default, versus proposals to accelerate the RPS compliance deadlines to minimize such risk
In comments to PURA, Vistra Energy Corp. and Calpine Energy Solutions, LLC said that, "the Authority’s goals can be more effectively and efficiently addressed through increased financial assurance requirements which will help ensure that electric suppliers don’t exit the market without meeting their RPS obligations."
"These financial assurance obligations are already being addressed in a separate proceeding in which the Authority proposes increasing the current $250,000 maximum security to a range between $250,000 to $2,000,000 depending on load size to ensure the supplier will continue to meet its RPS responsibilities. Therefore, the Authority clearly contemplates increasing the amount of security a supplier must maintain. Vistra & Calpine support the linkage between financial security and non-compliance with RPS rules and believe this is a more direct tool to protect customers against supplier non-compliance without placing unnecessary administrative burdens on suppliers to demonstrate ongoing compliance with RPS obligations," Vistra & Calpine said
In separately filed comments, the Retail Energy Supply Association agreed that, "increasing the amount of financial security that electric suppliers must maintain and making it available to ensure RPS compliance (as the Authority is contemplating in a separate docket)1 will establish a meaningful guaranty of compliance."
RESA said that, even under a new PURA proposed alternative (details here), concerns remain about the potential for a distortion in REC pricing, and the burden it would place on retail suppliers
As such, RESA proposed a potential RPS compliance alternative, as follows:
• Quarterly reporting should not be generally required for all suppliers. If a supplier has met its obligations for five (5) consecutive years (including by paying ACPs), it should not be subject to a quarterly reporting requirement.
• Any supplier that has not met its obligations for five (5) consecutive years (i.e., a supplier that has not operated in Connecticut for five (5) consecutive years or that has failed to meet its obligation in one of the preceding five (5) years) should be required to submit, on a quarterly basis (in each of the first three quarters), a quarterly report, including an affidavit identifying the supplier’s projected sales and describing how the supplier intends to comply with its obligations. Such quarterly reporting obligation would continue until the supplier demonstrated compliance with its RPS obligations for five (5) consecutive years.
• If any quarterly report shows the potential for non-compliance, the supplier should be required to demonstrate that it has purchased RECs sufficient to meet ten percent (10%) of its projected annual obligation or to provide financial security in an amount equal to ten percent (10%) of the amount of the ACP needed to satisfy its projected annual obligation.
• In lieu of providing a quarterly report, any supplier subject to the quarterly reporting requirement, should be permitted to demonstrate that it has purchased RECs sufficient to meet ten percent (10%) of its projected annual obligation or to provide financial security in an amount equal to ten percent (10%) of the amount of the ACP needed to satisfy its projected annual obligation.
• If any year-end or annual compliance report shows that a supplier did not comply with its annual obligations, the supplier should be required to demonstrate, in the first quarter of the next year, that it has settled RECs sufficient to satisfy ten percent (10%) of its projected annual obligation for the following year or to provide financial security in an amount equal to ten percent (10%) of the amount of the ACP needed to satisfy its projected annual obligation for that following year. If the supplier is able to do so, it should then be subject to the quarterly reporting requirement for the remainder of the year and such quarterly reporting obligation would continue until the supplier demonstrated compliance with its RPS obligations for five (5) consecutive years.
"This alternative will ensure that suppliers that have a substantiated record of complying with the RPS are not subject to undue burdens and their customers are not subject to unnecessary costs," RESA said
In separately filed comments, United Illuminating opposed a potential use of retail sales (aka billing determinants) as a proxy for ongoing, real-time quarterly RPS compliance, as contemplated under one of PURA's alternates
UI said that, to the extent that the Authority is inclined to adopt the use of a proxy to estimate RPS compliance obligations, "initial load" would be a suitable metric for the first three quarters of each RPS Compliance Year. Initial load data is reported to ISO New England (ISO NE) and the Suppliers as an estimate for Q1, Q2 and Q3 RPS compliance, and final resettled load data reported to ISO NE and Suppliers 90 days from the filing of the initial load data, UI said
"Therefore, the initial load data reported to ISO NE could be used for Q1-Q3 compliance filings, and final resettled data could be used for Q1 through Q4 on a final compliance filing date. This approach would remove the need for retail sales to be used, which is not appropriate or relevant for RPS compliance filings," UI said
"The use of initial settlement data to estimate the RPS compliance obligation for the first three quarters of each RPS Compliance Year could be done without creating a timing issue. Initial load data for each day is reported to the ISO NE and the Suppliers by the end close of business on the following business day, and initial load data for each quarter is known by each Supplier shortly after the end of the quarter. Resettled load is available within 90 days after the last day of the month. Therefore, resettled load for the month of January would be available by the end of April, February by the end of May, and March by the end of June," UI said
"Finally, the Authority should be aware that the relationship between initial load and resettled load is de minimis. Historically, the difference between initial settlement and 90-day resettlement is less than 2%. Based on the foregoing, the use of initial load could be viewed as an appropriate to estimate of RPS obligations," UI said
"UI suggests that the initial load data reported to ISO NE should be used for Q1-Q3 compliance filings, and final resettled data should be used for Q1 through Q4 on a final compliance filing date. This approach removes the need for Retail sales to be used, which is not appropriate or relevant for RPS compliance filings," UI said