Massachusetts Gov. Signs Bill Authorizing Long-Term Capacity Contracts, Requires Study of Restructuring Impacts

Massachusetts Gov. Deval Patrick has signed S.2395 which, among other things, requires the DPU to investigate procuring capacity via long-term contracts, and directs the Department of Energy Resources to study the impacts of restructuring the New England electricity marketplace.

Regarding capacity, S.2395 requires the DPU to investigate the need for additional capacity in the NEMA region within the next 10 years. This investigation shall be completed by March 15, 2013. If there is a demonstration that the ISO New England forward capacity auction immediately preceding March 15, 2013 concluded with total capacity, including excess generating capacity, in such load zone in an amount less than the capacity expected to be needed to reliably serve the load to such load zone during the next subsequent auction after taking into account any delist or retirement bids that were rejected for reliability reasons, the department shall determine whether there is a need for additional electric generating capacity in the NEMA region.

If the department determines there is need for additional electric generating capacity in the NEMA load zone within the next 10 years, the department may order distribution companies serving such load zone to solicit competitive proposals from developers of electricity generation and to enter into "cost-effective" long-term contracts to deliver such resources to the NEMA load zone.

Cost recovery of such long-term contracts, defined as 10-20 years in length, is not addressed by the law.

Among other things, the DPU must determine that the capacity contracts, "provide net benefits in terms of the cost of electricity to Massachusetts electric ratepayers over the term of the contract."

Among the law's other provisions is a requirement for DOER, and the attorney general, to conduct a study, "on the continuing challenges associated with the restructuring of the electric industry."

The study shall:

(1) analyze the effects of market manipulation within the New England electricity marketplace on electricity costs, including distribution, transmission and supply costs, since the restructuring of the electric industry;

(2) analyze the effects electric power industry consolidation within the New England electricity marketplace and effects on electricity costs, including distribution, transmission and supply costs, since the restructuring of the electric industry;

(3) provide a status of competition in the New England marketplace as it affects the commonwealth and detail the market share trends for generation and competitive supply of electricity since the restructuring of the electricity industry and since the termination of standard offer generation service under section 1B of chapter 164 of the General Laws and 220 CMR 11.00, including an analysis of generation market share trends for: (i) the entire New England marketplace; (ii) the commonwealth; and (iii) each of the 3 load zones within the commonwealth;

(4) analyze and provide conclusions regarding the limited residential customer migration rate from basic service to competitive electricity supply including a projection of residential customer migration rates in the future; and

(5) analyze the benefits of the integrated resource planning process that electric companies developed under section 69I of the General Laws prior to the restructuring of the electric industry that are not effectively or comprehensively considered within the commonwealth's restructured electric industry, including the accurate analysis and procurement of non-transmission generation alternatives when resources are necessary for electricity reliability.

Furthermore, DOER and the AG shall jointly study the feasibility, anticipated results, statutory and regulatory barriers and potential benefits of authorizing the commonwealth to procure long-term contracts with Class I renewable energy facilities, together with long-term contracts for transmission scheduling rights to deliver power generated by such facilities to load zones in the commonwealth. The study shall, "include a review of central procurement practices in other jurisdictions, including other states or regions, and shall concentrate on such practices in states with restructured electricity markets."

The law further replaces the current obligations for utilities to contract for long-term renewable energy with a new set of renewable long-term contracting obligations. Contracts may include energy, RECs, or both. Again, cost recovery is not specified in the law.

Additionally, the law increases the amount of solar generating capacity the utilities are allowed to own to 25 MW.