Pa. PUC Proposes Interpretation Of New RPS Law, Compliance For Retail Suppliers, Including Use Of Grandfathered Contracts For RECs, Renewals Thereof

January 14, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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The Pennsylvania PUC issued a tentative order to interpret Act 114 of 2020, which amends the Fiscal Code, 72 P.S. §§ 1 et seq.

Act 114, inter alia, establishes geographical limits on energy resources that qualify as Tier II resources under the Alternative Energy Portfolio Standards (AEPS) Act, 73 P.S. §§ 1648.1 et seq.

The PUC proposes the following interpretations of various provisions which are relevant to retail suppliers

Section 1799.10-E(a)(1)

This Section creates a limitation to Section 4 of the AEPS Act, 73 P.S. § 1648.4, that established, inter alia, that energy derived from AESs [alternative energy systems] inside the geographical boundaries of Pennsylvania shall be eligible to meet the compliance requirements under the AEPS Act. Section 4 also provides that energy derived from AESs located outside the geographical boundaries of the Commonwealth but within the service territory of a regional transmission organization (RTO) that manages the transmission system in any part of Pennsylvania shall be eligible to meet the AEPS Act compliance requirements of EDCs or electric generation suppliers (EGSs) located within the service territory of the same RTO. Finally, Section 4 provides that AESs located in the PJM Interconnection, L.L.C. RTO (PJM) or its successor service territory shall be eligible to fulfill the AEPS Act compliance obligations of all EDCs and EGSs. See 73 P.S. § 1648.4.

Section 1799.10-E(a) specifically states the following:

(1) Notwithstanding Section 4 of the act of November 30, 2004 (P.L. 1672, No. 213), known as the Alternative Energy Portfolio Standards Act, in order to qualify as an alternative energy source eligible to meet the Tier II share of this Commonwealth’s compliance requirements under Section 3(c) of the Alternative Energy Portfolio Standards Act and to qualify for Tier II Alternative Energy Portfolio credits, each Tier II source must do one of the following:

(i) Directly deliver the electricity it generates to a retail customer of an electric distribution company or to the distribution system operated by an electric distribution company operating within this Commonwealth and currently obligated to meet the compliance requirements contained under the Alternative Energy Portfolio Standards Act.

(ii) Be directly connected to the electric system of an electric cooperative or municipal electric system operating within this Commonwealth.

(iii) Connect directly to the electric transmission system at a location that is within the service territory of an electric distribution company operating within this Commonwealth.

(iv) Generate electricity at generation units whose construction and operation is subject to and complies with permits issued by the Department of Environmental Protection of the Commonwealth under the Act of January 8, 1960 (1959 P.L. 2119, No. 787), known as the Air Pollution Control Act, or the Act of July 7, 1980 (P.L. 380, No. 97), known as the Solid Waste Management Act.

72 P.S. § 1799.10-E(a)(1). Section 1799.10-E(a)(1) modifies Section 4 of the AEPS Act to limit the eligibility of Tier II AESs to those that meet the requirements of subparagraphs i through iv. The PUC's proposed interpretation and implementation of each requirement is below

Section 1799.10-E(a)(1)(i)

This subsection provides two scenarios where AESs qualify to generate Tier II AECs for use by EDCs and EGSs for compliance with the AEPS Act Tier II share requirements. The first scenario that qualifies is when the AES directly delivers the electricity it generates to an EDC’s retail customer within the Commonwealth and is currently obligated to meet the compliance requirements contained under the AEPS Act. The Commission proposes to interpret this section as applying to Tier II AESs physically connected to an EDC’s customer’s internal electric system.

The second scenario that qualifies is when a Tier II AES directly delivers its power to the distribution system operated by an EDC that has an obligation to meet the AEPS Act compliance requirements. The Commission proposes to interpret this provision as applying to Tier II AESs physically interconnected to a Pennsylvania EDC’s distribution system.

Section 1799.10-E(a)(1)(ii)

This subsection addresses the scenario where a Tier II AES is directly connected to the electric system of an electric cooperative or municipal electric system operating within the Commonwealth. The Commission proposes to interpret this subsection as permitting Tier II AESs physically connected to a Pennsylvania electric cooperative’s or municipal electric system’s distribution network to qualify to generate energy and AECs eligible to be used by EDCs and EGSs to meet their Tier II share requirements.

Section 1799.10-E(a)(1)(iii)

This subsection addresses the scenario where a Tier II AES is directly connected to the electric transmission system at a location that is within the service territory of an EDC. The Commission proposes to interpret this subsection as permitting Tier II AESs physically located in Pennsylvania and interconnected to a transmission system that is also located in Pennsylvania to qualify to generate energy and AECs eligible to be used by EDCs and EGSs to meet their AEPS Act Tier II share requirements. This would include utility scale Tier II AESs that are physically interconnected to a transmission system within an EDC’s service territory and operating under PJM rules as a wholesale generator.

Section 1799.10-E(a)(2)(i)

This subsection provides that a Tier II AES’s certification originating within the geographical boundaries of the Commonwealth granted prior to the effective date of Act 114 will not be affected by Section 1799.10-E or Section 4 of the AEPS Act. This section sets forth a condition to which Section 1799.10-E(a) does not apply. Specifically, Section 1799.10-E(a)(2)(i) states the following:

(2) Nothing under this Section or Section 4 of the Alternative Energy Portfolio Standards Act shall affect any of the following:

(i) A certification originating within the geographical boundaries of this Commonwealth granted prior to the effective date of this section of a Tier II energy generator as a qualifying alternative energy source eligible to meet the Tier II share of this Commonwealth’s alternative energy portfolio compliance requirements under the Alternative Energy Portfolio Standards Act.

72 P.S. § 1799.10-E(a)(2)(i).

The Commission proposes to interpret “[a] certification originating within the geographical boundaries of this Commonwealth. . .” in the same manner it interpreted this language in the Implementation of Act 40 of 2017, Docket No. M-2017-2631527 (Order entered May 3, 2018). In the Implementation of Act 40 of 2017, the Commission interpreted Section 2804(2)(i) of the Administrative Code of 1929, 71 P.S. § 714(2)(i), as closing Pennsylvania’s borders to solar photovoltaic share AECs. Specifically, the PUC previously held that the interpretation of Section 2804(2)(i) of the Adm. Code, 71 P.S. § 714(2)(i) is as follows: "We interpret the phrase '[a] certification originating within the geographical boundaries of this Commonwealth...' as a facility located within Pennsylvania having received an AEPS Act Tier I solar photovoltaic share certification."

"In keeping with this interpretation of the phrase '[a] certification originating within the geographical boundaries of this Commonwealth. . .' the Commission proposes to interpret this phrase in Section 1799.10-E(a)(2)(i) as meaning a facility located within Pennsylvania having received an AEPS Act Tier II certification," the PUC proposed

Section 1799.10-E(a)(2)(ii)

"This subsection addresses the scenario where a Tier II AES had received a Pennsylvania certification as an AES eligible to meet Tier II share requirements prior to November 23, 2020, the effective date of Section 1799.10-E. Specifically, this subsection grandfathers certification of a Tier II AES with a binding written contract for the sale and purchase of Tier II AECs derived from Tier II energy sources for the remaining term of the contract as of the effective date of this section, but only until the current term of the contract ends. Again, we propose to interpret the language used in Section 1799.10-E(a)(2)(ii) consistent with the Commission’s interpretation of the same language used in Section 2804(2)(ii) of the Administrative Code of 1929 in relation to the Commission’s treatment of solar photovoltaic resources with one change," the PUC proposed.

"Specifically, we interpret this section to only permit out-of-state facilities that are (a) already certified as a Tier II AES and that (b) have entered into a contract with a Pennsylvania EDC or EGS serving Pennsylvania customers, for the sale of Tier II AECs, to maintain certification until the expiration of the contract. If the Commission deems the existing contract for Tier II AECs eligible, eligibility will be valid for the term of the contract and in accordance with the banking provisions. For open-ended contracts or contracts that automatically renew, eligibility will terminate at the end of the current term of the last renewal that occurred prior to November 23, 2020," the PUC proposed.

Section 1799.10-E(b)

"This section provides that contracts entered into or renewed on or after the effective date of Section 1799.10-E, are subject to the provisions of Section 1799.10-E. The Commission proposes to interpret this subsection as limiting the eligibility of systems certified under the contract exception in Subsection 1799.10-E(a)(2)(ii) to the duration of the contract for the sale and purchase of AECs where the contract was entered into prior to November 23, 2020. We also propose to limit a Tier II AES owner from extending its facility’s eligibility through a renewal of the original contract or subsequent contracts. The Commission, however, proposes that the AECs generated and transferred to an EDC or EGS prior to expiration of the contract would continue to be eligible to be used by that EDC or EGS to meet their Tier II share requirements in accordance with 52 Pa. Code § 75.69 (relating to the banking of AECs)," the PUC proposed

Implementation of Section 1799-E(b)

To implement this provision, the Commission proposes that any EDC or EGS seeking to use Tier II AECs generated after November 2020 from AESs located outside the Commonwealth that were acquired through contracts entered into prior to November 23, 2020, to meet their Tier II share requirements file a petition with the Commission after the entry date of a Final Implementation Order in this Docket. The Commission proposes that EDCs and EGSs should clearly identify in their petitions the information they believe is pertinent to determine whether their AECs are eligible to be used by the EDC or EGS to meet its AEPS Act Tier II share requirements.

The minimum information and supporting documentation that EDCs and EGSs should provide in their petitions is set forth as follows:

(1) Complete and unredacted copies of all contracts, and amendment(s) thereto supporting the claim for approval of AECs to be used by the EDC or EGS to meet its Tier II share requirements of the AEPS Act;

(2) Documentation that the out-of-state Tier II facilities were certified as an AEPS Act Tier II resource before November 23, 2020;

(3) Documentation that the EDC or EGS entered into a contract prior to November 23, 2020, for the purchase of AECs;

(4) Documentation of the expiration date of the contracts;

(5) Documentation of the number of AECs being purchased by the EDC or EGS; and

(6) Verification pursuant to 52 Pa. Code § 1.36.

Docket M-2020-3023323

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