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Proposed Order Would Prohibit Retail Suppliers From Using Term "Renewable Energy" In Marketing REC Products; Term Limited To Using Supply From Owned Generation Or PPA

Draft Would Limit Voluntary Renewable Offerings From Retail Suppliers To RECs From Certain RTOs

September 9, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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The Connecticut PURA issued a proposed decision that, among other things, would limit voluntary renewable electricity supply offers (VRO) from retail suppliers to using only RECs sourced from certain RTOs and which meet certain statutory definitions, and which would prohibit the use of the term "renewable energy" to market a REC product

Specifically, the draft would establish certain universal standards for REC-only and suppliers' VRO offers as follows:

(1) RECs may originate only from ISO-NE, New York ISO, or PJM control areas; and

(2) RECs may originate only from sources defined as Class I in Conn. Gen. Stat. § 16-1.

The draft would prohibit suppliers from using the term "renewable energy" for REC products. Under the draft, a supplier may not market the product as "renewable energy" unless the offer is supported by an ownership interest in or PPA for a renewable resource used to serve the contract.

"Suppliers may not market certificate-based VROs to mislead consumers to believe they are purchasing renewable energy rather than RECs. As noted herein, there is a clear distinction between certificates and the ownership interest in, or a PPA to provide energy from, a renewable source. It is reasonable to display information as representing a renewable source for an offer if the supplier owns, or has a PPA with, these resources and is using them to supply the electricity for the offer. It is unreasonable to display this information if the supplier is merely buying the certificates associated with the renewable attributes," the draft states

"Because certificates do not represent renewable energy offers, but instead are renewable certificate offers, suppliers must clearly provide that language through marketing materials, contracts, and the Certificate Information portion of the Disclosure Label. The supplier may not market the product as 'renewable energy' unless the offer is supported by an ownership interest in or PPA for a renewable resource used to serve the contract. To do so would mislead consumers to believe they are buying renewable energy, not renewable certificates. Certificate and Supply Information [under new disclosure labels discussed below] must be clearly explained and separately displayed on the Disclosure Label as sides one and two," the draft states

The draft would also adopt new verification requirements for VRO claims

The draft provides that, "the Authority will require that suppliers support all VRO claims through audited VRO sales and certificate settlement verification data."

Beginning with 2020 RPS compliance, any supplier marketing a VRO would be required to include the following as separate information to support its VRO load and REC settlement compliance:

1. Third party verification/attestation of its VRO load;

2. Third party verification/attestation that the appropriate RECs were settled;

3. Copies of the VRO Disclosure Label(s).

The draft provides that suppliers may use Green-e for their VRO sales and REC verification or engage a similar third party auditor who can attest to the accuracy of information it files with PURA regarding VROs.

In terms of an implementation date, the draft noted that suppliers offering VROs have REC obligations under existing contracts.

The draft provides that suppliers will be allowed to honor these agreements until their initial contract expires, but suppliers will not be allowed to automatically renew these contracts.

Under the draft, effective January 1, 2021, all new and renewing VRO offers must comply with the rules and standards established herein for all customer enrollments.

Under the draft, suppliers are free to market via a VRO any percentage of renewable certificates above the RPS.

"To be clear, the VRO percentage cannot include any portion of the RPS. The Authority finds that many customers are unaware of the current RPS or that it will continue to increase annually and reach 48% by 2030. The VRO must be separate on the Disclosure Label from the RPS data because, as the RPS continues to increase, customers may not understand that the additional percentage of renewable energy they are supporting through a VRO continues to decrease. As a result, the Authority finds that marketing VROs must be transparent and part of that transparency includes disclosing the current RPS as well as the amount of the VRO that exceeds the current RPS. This strategy will further educate consumers about the RPS," the draft states

The draft would establish a working group to develop new separate VRO disclosure labels that include a section for REC source disclosures as well as separate supply mix information

"The Authority will establish a working group (Disclosure Label Working Group) in the instant proceeding to finalize a revised label by November 1, 2020. The Disclosure Label Working Group must provide recommendations for the separate RPS, RPS/VRO and REC-only Certificate Information labels and the Supply Information label. The Authority has attached hereto revised draft labels intended to provide a concise, at-a-glance, and easily understood two-side format that distinguishes Certificate and Supply Information to avoid customer confusion. It notes that the attached labels are drafts, simply meant to be a starting point from which the Disclosure Label Working Group may continue to develop," the draft states

The draft would require that suppliers provide specific REC source disclosures concerning the RECs that will be used to serve customers (not historic purchases) prior to customer enrollment

"The statute requires that suppliers provide information about RECs above the RPS prior to enrolling a customer in a contract. As noted, the supplier must disclose such information in the customer’s contract and marketing materials; therefore, the statute does not contemplate an after-the-fact disclosure. Furthermore, the statute requires suppliers to disclose 'the types of renewable energy sources that will be purchased' (emphasis added [by draft]), not the types of RECs that were purchased. The Authority reads the statute as requiring a forward-looking Disclosure Label," the draft states

"The Authority finds that stating a VRO is nationally sourced or including all possible energy sources ignores the plain language of Conn. Gen. Stat. § 16-245o(h) and does not offer the specificity required by the statute. Stating that a VRO is nationally sourced does not indicate 'where such additional credits are being sourced from;' likewise, listing all possible energy sources does not indicate 'the types of renewable energy sources that will be purchased.' Conn. Gen. Stat. § 16-245o(h) (emphasis added). Conn. Gen. Stat. § 16-245o is a consumer protection statute, and therefore it must be interpreted in a manner that offers proper protections to the consumers purchasing VROs. Consumers must understand at the time of their purchase what they are buying; this includes both the resource and location supporting the VRO. Therefore, all Disclosure Labels must include the resource supporting the VRO and the location of that resource and must be provided to the customer at the time of enrollment in the contract," the draft states

"The Authority will allow suppliers to identify the type of resource and regional control area to satisfy this requirement. For example, the Disclosure Label may state that VRO RECs will be sourced from New England solar certificates, New York wind certificates, or PJM hydroelectric certificates if the supplier knows only that degree of specificity at the time the customer signs the contract. However, to improve market education, the Authority encourages a supplier to provide more specific detail with regard to the location of the facility if known. For example, there should be adequate space on the Disclosure Label for the supplier to include the name of the facility and its exact location in the region or state in which it intends to procure the RECs if known. The Authority notes that the Disclosure Label Working Group may consider use of a map on the label to reinforce certificate location," the draft states

"As it relates to power sources, the Supply Information portion of the label can only provide the generation mix of the resources used to support the offer. For example, if a supplier relies on the regional system mix to supply an offer, the power source data should so reflect. If a supplier owns generation resources or has a PPA with one or more generation resources and uses that energy to supply an offer, the power source should display that information. However, suppliers cannot include certificate information to support power source data. Doing so implies that the customer is buying renewable energy when in fact the customer is supporting the certificates for power sources that are not providing the customer’s generation supply. Certificate information therefore cannot be included in the power source data and power source information cannot exceed 100%," the draft states

The draft would require the Disclosure Label be printed in color.

Apart from placement in other standard avenues (such as communications to customers and on the PURA Rate Board), the draft provides that a supplier’s website must also provide the Disclosure Label for any offer that is not listed on the Rate Board, such as offers that are sold through telemarketing, direct mail, or that otherwise may not be generally available.

Draft new disclosure labels, meant as a starting point for work group discussions, can be found in the draft order here

The draft order states, "The Authority acknowledges concerns about narrowing the eligible regions for VRO and REC-only products; however, ensuring environmental benefits support Connecticut’s energy policies continues to be a guiding principal for the Authority’s actions. Many more customers are participating in CEOP and VROs now than were fifteen years ago. These customers not only need to fully understand the products for which they are now paying a premium, but the Authority must also ensure that these products are furthering Connecticut’s clean energy goals. The Authority notes that current VROs contribute minimally, at best, to Connecticut’s environmental betterment. See DEEP Written Comments dated December 20, 2019 ('Moreover, the majority of VRO RECs offered in Connecticut are sourced from outside New England, and their purchase by Connecticut customers does not effectively further Connecticut’s public policy goals and may not align with customers’ intent when choosing electric supply options beyond the RPS.') ... [I]n 2016 few VRO products included New England regional RECs. Instead, the majority of these offers relied on nationally sourced certificates with no demonstrable benefit to Connecticut or New England; further, claims related to certain nationally-sourced RECs may conflict with the goals that consumers likely intend to achieve through their premium. The 2013, 2014 and 2015 RPS Compliance Decisions demonstrate a similar trend."

The draft states, "As DEEP noted in its written comments, 'Conn. Gen. Stat. § 22a-200a requires Connecticut to reduce statewide greenhouse gas emissions to 80 percent below 2001 levels by 2050. Additionally, in Executive Order No. 3, Governor Lamont has directed DEEP, in consultation with PURA to analyze and recommend strategies for achieving a 100% zero carbon target for the electric sector by 2040.' DEEP Written Comments dated December 20, 2019, p. 1. These are ambitious goals and meeting them requires the Authority to revisit its policies surrounding CEOP and VROs to ensure these offerings contribute to the goals."

"The Authority finds that all CEOP offers and all VROs must use RECs sourced from NEPOOL GIS or the adjacent control areas of New York and PJM. As indicated, the New York and PJM control areas are located in a favorable weather direction to reap the most benefits for Connecticut; whereas resources in Canada or further west or south of New York and PJM are unlikely to provide any measurable benefits toward Connecticut’s clean energy goals. Under the current lack of regulation, customers are paying premiums for products that do not benefit Connecticut or New England. Moreover, due to the current configuration of Disclosure Labels, discussed later, customers may not realize they are paying a premium for a product that does not benefit Connecticut or New England. By limiting the geographic region from which CEOP and VROs can be sourced, and requiring clear disclosure as to location upon enrollment, the Authority ensures customers receive offers that further Connecticut’s clean energy goals. This limitation could incentivize construction of clean energy facilities in New England and adjacent regions to meet the growing demand for cleaner energy for Connecticut customers," the draft states

"Both the RPS designed by the General Assembly as well as the CES signal the need to encourage construction of additional, clean, and sustainable renewable sources of energy, and demonstrate a preference for those sources of energy identified as Class I. As a result, the Authority will limit VRO and REC-only eligible certificates to those that meet the Connecticut Class I standards as defined by Conn. Gen. Stat. § 16-1. Limiting the eligible certificates to Class I resources located in the NEPOOL GIS and the allowed control areas reinforces the state’s support for construction of additional solar, wind and other similar clean, sustainable renewable generation that will benefit Connecticut and New England. The limitation also ensures that customers will support VRO and REC-only products that facilitate the state’s goals and align with the customers’ intent when paying a premium for these products," the draft states

Under the draft, to simplify program rules, the Authority will require that certificates used to fulfill REC-only and VRO obligations, but settled through other tracking systems, must follow the NEPOOL GIS settlement requirements. Certificates retired within NEPOOL GIS must comply with then-current GIS rules for the calendar year in which the load was served. This aligns the certificate settlement rules for REC-only and VRO offers with NEPOOL GIS.

Residual mix certificates may not be used to meet REC-only or VRO certificate obligations, the draft states

Clean Energy Options Program

The draft would also continue, with modifications, the Clean Energy Options Program (CEOP), a REC add-on for default service customers and other customers which is billed on the EDC bill

"The electric distribution companies (EDC) are not required to offer a Standard Service VRO or REC-only option and as a result do not do so. Absent a CEOP-like REC-only program, Standard Service customers cannot participate in the REC market unless they switch to a supplier-provided VRO certificate plan. Although the number of supplier-provided VROs has increased over time, the number of residential and small business customers taking service from licensed suppliers has steadily declined, dropping from 38% (about 500,000 customers) at year-end 2010 to 26.4% (about 345,000 customers)1 in April 2020," the draft says

"The Authority finds that it is appropriate to continue to offer a REC-only option to provide increased market choice and more fully support Connecticut’s energy policies. Retaining a CEOP offer will allow customers who opt to remain with the EDC’s Standard Service supply or otherwise elect not to take service from a supplier to support the REC market, thereby providing all customers with additional choice. For example, continuation of this program allows consumers to add a REC-only offer to their Standard Service or non-VRO supplier offer," the draft says

Under the draft, any new REC-only contract entered into with a customer as of January 1, 2021, must meet the standards listed above.

Per the draft, the Authority will limit REC-only suppliers who participate in utility consolidated billing to one offer that must include a 50% and 100% option.

To facilitate that determination, and limit the cost of providing a REC-only option, the draft would cap the number of participating REC-only suppliers at three (the current limit) until 2025.

"In 2025, the Authority will reopen the instant proceeding to evaluate program participation to determine if the number of participating suppliers should be increased to five or if it should make any other changes to the program," the draft states

"The Authority seeks to offer a REC-only program while limiting EDC cost and administrative work; therefore, the Authority will not require the EDCs to assist with marketing this effort. However, the Authority intends to provide REC-only information through the website, which will provide cost-effective program support. The Authority will take steps to display REC-only information through to explain REC-only offers and avoid the potential for customers to confuse REC-only offers with generation supply plans," the draft states

The draft would require that REC-only rates remain fixed on a calendar year basis.

Docket 16-12-29

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