Maine PUC Proposes Rule Which May Prevent Long-Term REC Contracting by Utilities

The Maine PUC opened a formal rulemaking to address recent legislative directives and to modify its long-term utility contracting rules to include provisions meant to ensure customers receive benefits under the long-term contracts (2011-348).

The PUC previously issued a Notice of Inquiry on the issues ahead of the rulemaking (see 8/18 for background).

Consistent with legislation, the PUC would codify language providing that, "[t]he price paid by the investor-owned transmission and distribution utility for the renewable energy credits must be lower than the price received for those renewable energy credits at the time they are sold by the investor-owned transmission and distribution utility."

In issuing the rulemaking, the PUC noted that this provision will, "likely prevent any long-term contracting for RECs," since this provision would effectively preclude fixed price contracts, and thus the provision would result in no predictable revenue stream to the seller and provide no benefit in obtaining financing for a project.

"Nevertheless, the intent of the Act in this regard is clear. The REC provision in the Act is designed to assure that the utility and their customers are not exposed to losing any money on RECs that are purchased under long-term contracts," the PUC said.

The PUC would also add the following language to its long-term contracting rules:

"To the extent practicable, the Commission shall ensure that ratepayers obtain the benefit of lower cost capacity resources[,] of energy associated with those resources or of any renewable energy credits that may exist after the term of primary financing or subsequent replacement financing necessary for the development and construction of a generation project is completed. For purposes of this provision, primary financing or subsequent replacement financing means the permanent financing arrangements that fund the development and construction of a generation project. The Commission may obtain this benefit for ratepayers through a contract term of sufficient length, contract renewal or extension options or any other reasonable commercial means."

The rulemaking would also add financial security requirements to the existing long-term contracting rule.