State Orders Retail Suppliers to Pay $2.5 Million in Alternative Compliance Payments for Improper Assignment of RECs

The Connecticut PURA issued a final order regarding RPS compliance for the year 2010 which denies the request of three retail suppliers to demonstrate compliance with the RPS requirements through RECs that were not settled in the Connecticut Subaccount in GIS, in lieu of paying the higher alternative compliance payment.

While each of the suppliers purchased RECs, the final order said that Clearview Electric, Inc., Discount Power, Inc. and Starion Energy, Inc. failed to assign RECs to the Connecticut Subaccount at the GIS in accordance with GIS Rules, and each sought to use Unsettled RECs to satisfy their respective 2010 RPS requirements.

"The Authority hereby confirms its rulings in prior Decisions and reiterates its long-standing policy that in order to demonstrate compliance with the Connecticut RPS, electric suppliers must provide official GIS reports showing RECs retired in the Connecticut Subaccount for RPS compliance, and that Unsettled RECs or RECs in Residual Mix subaccounts cannot be used to satisfy the Connecticut RPS requirements," the final order said.

"[E]lectric suppliers that submit GIS quarterly reports for the wrong year, or submit GIS reports that show RECs not accounted for in accordance with GIS Rules, as the case with Clearview, Discount Power and Starion in the instant proceeding, also clearly have not satisfied one of the requirements of §16-245a-1, and therefore, cannot be deemed to have 'demonstrated' compliance with the RPS," PURA said.

While the suppliers argued that their REC purchases complied with statute, and that the improper settlement was a technical matter, PURA said that in order for a supplier to be in compliance with Conn. Gen. Stat. §16-245a, suppliers must comply with the implementing regulation, Conn. Agencies Regs. §16-245a-1, including properly assigning their RECs.

Although the suppliers said that they only served load in Connecticut, and not other New England states, and therefore did not believe use of a Connecticut subaccount in GIS was necessary to show compliance, PURA noted that even if these suppliers did not serve load in other states, "it is evidently clear that there are numerous ways the companies could have used their RECs."

"Even if the companies were doing business only in Connecticut, the RECs could have been sold to other entities," PURA said.

PURA said that the suppliers essentially seek to have the Authority rely on "attestations" that the RECs at issue were not used towards another state's RPS requirements. "The Authority has no reasonable means of confirming the veracity of such attestations, and no reasonable means of confirming that expired RECs were not used for some other purpose outside of the GIS system," PURA said.

"Moreover, strict compliance with the GIS Rules is necessary to maintain and safeguard the integrity of the Connecticut RPS program," PURA said.

"The Authority rejects Clearview's and Discount Power's argument that the settlement of REC is form over substance, for the settlement of RECs in the Connecticut subaccount is the only way it can be known with certainty that the RECs have been used for Connecticut RPS compliance and no other purpose," PURA said.

"[A]ny exceptions made in this proceeding for Clearview, Starion or Discount Power would be unfair and may facilitate future 'gaming' of the Connecticut RPS program, placing fully-compliant suppliers at a disadvantage, and thus, ultimately causing significant harm to the Connecticut RPS program," PURA said.

"The Authority hereby reaffirms its precedents and previous rulings and states, once again, that strict compliance with the GIS Rules and Conn. Agencies Regs. §16-245a-1 is required for the demonstration of RPS compliance pursuant to Conn. Gen. Stat. §16-245a. In no circumstances will the Authority make an exception for failure to comply with the RPS legal requirements due to circumstances within the suppliers' control. The Authority will not accept Unsettled RECs as evidence of Connecticut RPS compliance," PURA said.

PURA ordered alternative compliance payments from the three suppliers in the following amounts:

Clearview:                          $620,000
Discount Power:                 $1.6 million
Starion:                            $341,000

The Authority denied Discount Power's request for a stay of the effects of the decision until Discount Power has exhausted its administrative and judicial remedies

PURA also directed additional retail suppliers to make alternative compliance payments in the following amounts:

Cianbro Energy, LLC:                    $150
ConEdison Solutions:                $102,000
Integrys Energy Services:             $8,000
Noble Americas Energy Solutions:    $307,000
North American Power and Gas:        $12,000
Public Power, LLC:                    $9,100
ResCom Energy, LLC:                   $9,500
South Jersey Energy Company:          $1,500
Spark Energy:                         $2,000
Town Square Energy:                     $200
Verde Energy:                         $3,600
Viridian Energy:                      $6,400

In other matters, PURA deemed the banked RECs of several retail suppliers to have been forfeited (see page 49-51 of the decision for specific forfeitures for each supplier).

"Since many electric suppliers may purchase RECs in excess of the mandatory quantities for the use of their voluntary green products, the Authority will not make the presumption that all surplus RECs are 'excess' RECs and should be banked. Therefore, each company is required to affirmatively and expressly indicate the quantity of each type of REC to be banked for each given year. Any RECs that are not specifically banked by a company will be forfeited. The companies are required to indicate the desired banking on the required Exhibit A compliance form. Also, in this proceeding, the Authority issued interrogatories FI-5 and FI-6 that required each company to affirmatively and expressly indicate the quantity of each type of REC to be banked for 2010 and carry-forward from 2009, respectively. Any companies that did not respond shall forfeit their respective 2010 banking and any remaining 2009 banking balances that may have been carried forward," PURA said.

Docket 11-09-03