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PSC Directs Utility To Seek Up To 25% Of SOS Through Long-Term Contracts
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The District of Columbia PSC, in a 2-1 decision, directed Pepco to attempt to procure
a target quantity of 25% of SOS load through renewable energy power
purchase agreements.
Although the PSC did not use the term "long-term" or a specific term length in setting the new 25% target, based on the history of the proceeding, as well as prior and current similar procurements for a smaller target of SOS load via green PPAs, it is understood that the PSC is seeking renewable energy power
purchase agreements that have terms longer than the standard three-year SOS term length. As an example, a renewable PPA for 5% of SOS that the PSC approved in the same order (discussed below) has a term of 25 years, with the PSC noting that the 25-year term was selected due to having better pricing than a 15 or 20-year term
The new 25% directive eliminates a previously established target (or cap) of 5% of SOS load, and was issued as the PSC approved an agreement between Pepco and a confidential counter-party for a bundled procurement of renewable energy and Tier One renewable energy credits from a solar facility, to serve approximately 5% of total SOS load
The approved long-term supply agreement, which covers the sale of energy
and RECs, is for a term of 25 years and is for approximately 5% of the SOS load (approximately
172,000 MWh per year, based on an installed capacity of 75 MW).
The Commission anticipates that renewable energy from the approved agreement will begin
to serve approximately 5% of the SOS load in December 2027.
The PSC said, "Based on present market conditions and a December 2027 commercial operation
date, the Commission expects the net impact on SOS customer rates to be minimal once the full
annualized effect of the Agreement is fully incorporated into SOS rates."
"Any additional expenses
associated with the delivery of 172,000 MWhs of intermittent renewable energy from the solar
project will also be reflected in total SOS rates," the PSC said
The Commission expects that any impact on SOS
rates will be proportionately shared across all SOS sales within each SOS customer class.
Concerning the expansion of the use of long-term PPAs for SOS, the PSC said, "Regarding the issue of whether to remove the 5% cap on renewable energy PPAs,
the majority has reviewed the results of this most recent bid process and is concerned that keeping
a 5% cap will impede the integration of potentially financially beneficial renewable energy PPAs
into the SOS program."
The PSC said, "Expanding the use of PPAs in the SOS program has the potential to help the District meet
its climate targets, while simultaneously protecting ratepayers from the wholesale price increases
we are currently seeing."
"By removing this cap and replacing it with a higher target quantity, Pepco
may receive a higher volume of PPA bids with more competitive pricing, which would in turn
benefit customers. Therefore, the majority removes the 5% cap on the PPA and is replacing it with
a target quantity of 25% of the SOS load procured through renewable energy PPAs," the PSC said
The PSC specifically directed Pepco to issue, with a target quantity of 20% of SOS, the same RFP used to procure the 5% contract.
The PSC said that, "Time is of the essence to incorporate renewable PPAs before market conditions become more difficult."
PSC Chair Emile Thompson dissented in part from the PSC's order, due to the increase in the use of long-term PPAs for SOS
Thompson wrote, "To increase the cap [on long-term PPAs],
especially by such a large percentage, there should be careful examination and discussion by all
stakeholders. Neglecting early stakeholder input and engagement when considering a major
procurement change like increasing a PPA cap, even for a Request for Proposals ('RFP'), invites
severe consequences for ratepayers, including unforeseen costs."
Thompson wrote, "To raise the cap, and potentially lock District ratepayers into a multi-decade contract as
energy prices are soaring, stakeholders must be allowed to comment prior to such a significant
increase. Permitting comments after the fact creates an implied assumption that the cap, along
with the resulting price, is reasonable."
Thompson wrote, "The market and economic realities have dramatically shifted since 2023. Those realities
include escalating generation costs, uncertain financial markets as it relates to clean energy
facilities, and evolving federal legislation. The cost of renewable electric energy has increased
significantly over the last several years. To put these concerns into context, Order No. 21413
approved a PPA, with the same developer in 2022. The proposed 2025 PPA price for solar is
seventy-eight percent (78%) higher than the Commission approved 2022 PPA price.
Unfortunately, the contract was terminated due to the reasons stated in the majority opinion [the project was canceled by the developer]. Not
only is this contract price 78% more than the cost of the previous PPA and for ten years longer, it
does not include capacity pricing. It is estimated that this contract will lead to an average increase
of just under a dollar on ALL residential SOS customers. It should be noted that the residential
aid discount program does not provide relief on SOS prices. Future pricing for renewable energy
is uncertain and creates pricing risk for SOS consumers. Expanding the PPA to 25% would create
greater financial risk for SOS customers. With PPA prices steadily rising this year, it can be
presumed that the cost of increasing the cap to 25% will create even greater costs for ratepayers
over an extended period of time."
Thompson wrote, "The largest variable right now in wholesale pricing is the capacity price. Since this agreement, and
presumably the future RFP, contains no requirement to include capacity, this agreement does not 'simultaneously
protect[ing] ratepayers from the wholesale price increases we are currently seeing' as stated in the majority opinion."
FC 1017
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August 15, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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