2013 -- S 0641

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LC01653

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS - DISTRIBUTED GENERATION

STANDARD CONTRACTS

     Introduced By: Senators Walaska, Miller, Paiva Weed, Ruggerio, and DiPalma

     Date Introduced: March 06, 2013

     Referred To: Senate Environment & Agriculture

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 39-26.2-3, 39-26.2-4, 39-26.2-6 and 39-26.2-7 of the General

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Laws in Chapter 39-26.2 entitled "Distributed Generation Standard Contracts" are hereby

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amended to read as follows:

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     39-26.2-3. Definitions. -- When used in this chapter, the following terms shall have the

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following meanings:

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      (1) "Annual target" means the target for total renewable energy nameplate capacity of

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new distributed generation standard contracts set out in section 39-26.2-3.

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      (2) "Commission" means the Rhode Island public utilities commission.

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      (3) "Board" shall mean the distributed generation standard contract board established

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pursuant to the provisions of chapter 39-26.2-9, or the office of energy resources. Until such time

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as the board is duly constituted, the office of energy resources shall serve as the board with the

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same powers and duties pursuant to this chapter.

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      (4) "Distributed generation contract capacity" means ten percent (10%) of an electric

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distribution company's minimum long-term contract capacity under the long-term contracting

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standard for renewable energy in section 39-26.1-2, inclusive of solar capacity. The distributed

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generation contract capacity shall be reserved for acquisition by the electric distribution company

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through standard contracts pursuant to the provisions of this chapter.

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      (5) "Distributed generation facility" means an electrical generation facility that is a

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newly developed renewable energy resource as defined in section 39-26.1-2, located in the

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electric distribution company's load zone with a nameplate capacity no greater than five

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megawatts (5 MW), using eligible renewable energy resources as defined by section 39-26-5,

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including biogas created as a result of anaerobic digestion, but, specifically excluding all other

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listed eligible biomass fuels, and connected to an electrical power system owned, controlled, or

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operated by the electric distribution company.

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      (6) "Distributed generation project" means a distinct installation of a distributed

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generation facility. An installation will be considered distinct if it is installed in a different

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geographical location and at a different time, or if it involves a different type of renewable energy

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class.

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      (7) "Electric distribution company" means a company defined in subdivision 39-1-2(12),

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supplying standard offer service, last resort service, or any successor service to end-use

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customers, but not including the Block Island Power Company or the Pascoag Utility District.

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      (8) "Large distributed generation project" means a distributed generation project that has

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a nameplate capacity that exceeds the size of a small distributed generation project in a given

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year, but is no greater than five megawatts (5 MW) nameplate capacity.

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      (9) "Program year" means a calendar year beginning January 1 and ending December 31.

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      (10) "Renewable energy classes" means categories for different renewable energy

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technologies using eligible renewable energy resources as defined by section 39-26-5. For each

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program year, the board shall determine the renewable energy classes as are reasonably feasible

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for use in meeting distributed generation objectives from renewable energy resources and are

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consistent with the goal of meeting the annual target for the program year. For the program year

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ending December 31, 2012, there shall be at least four (4) technology classes and at least two (2)

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shall be for solar generation technology, and at least one shall be for wind. The board may add,

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eliminate, or adjust renewable energy classes for each program year with public notice given at

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least sixty (60) days previous to any renewable energy class change becoming effective. For each

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program year, the board shall set renewable energy class targets for each class established. Class

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targets are the total program-year target amounts of nameplate capacity reserved for standard

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contracts for each renewable energy class. The sum of all the class targets shall equal the annual

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target.

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      (11) "Renewable energy credit" means a New England Generation Information System

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renewable energy certificate as defined in subdivision 39-26-2(15);

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      (12) "Small distributed generation project" means a distributed generation renewable

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energy project that has a nameplate capacity no larger than within the following: Solar: fifty

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kilowatts (50 KW) to five hundred kilowatts (500 KW); Wind: fifty kilowatts (50 KW) to one and

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one-half megawatts (1.5 MW). For technologies other than solar and wind, the board shall set the

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nameplate capacity size limits, but such limits may not exceed one megawatt. The board may

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lower the nameplate capacity from year to year for any of these categories, but may not increase

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the capacity beyond what is specified in this definition. In no case may a project developer be

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allowed to segment a distributed generation project into smaller sized projects in order to fall

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under this definition.

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      (13) "Standard contract" means a contract with a term of fifteen (15) years at a fixed rate

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for the purchase of all capacity, energy, and attributes generated by a distributed generation

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facility. A contract may have a different term if it is mutually agreed to by the seller and the

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electric distribution company and it is approved by the commission. The terms of the standard

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contract for each program year and for each renewable energy class shall be set pursuant to the

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provisions of this chapter.

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      (14) "Standard contract ceiling price" means the standard contract price for the output of

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a distributed generation facility which price is approved annually for each renewable energy class

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pursuant to the procedure established in this chapter, for the purchase of energy, capacity,

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renewable energy certificates, and all other environmental attributes and market products that are

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available or may become available from the distributed generation facility.

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     39-26.2-4. Standard contracts -- Annual targets. -- (a) To the extent eligible projects

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are available and submit conforming applications, an electric distribution company shall enter

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into standard contracts for an aggregate nameplate capacity of at least forty megawatts (40 MW)

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of distributed generation projects by the end of 2014, unless such schedule is extended by the

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board. The contracting shall be spread over four (4) years, based on the annual targets, aggregated

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to reflect annual targets from prior program years, contained in the following four (4) year phased

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schedule, unless such schedule is adjusted by the board in any given year:

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      (1) By December 30, 2011: a minimum of five megawatts (5 MW) nameplate;

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      (2) By December 30, 2012: a minimum aggregate of twenty megawatts (20 MW)

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nameplate;

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      (3) By December 30, 2013: a minimum aggregate of thirty megawatts (30 MW)

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nameplate;

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      (4) By December 30, 2014: a minimum aggregate of forty megawatts (40 MW)

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nameplate.

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      (b) By October 15, 2011 and each calendar year following until October 15, 2013, the

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board may recommend to the commission that the annual target for the following program year

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be adjusted upward to reflect any shortfalls in meeting the previous program year's annual target

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or to reflect any standard contracts entered into during prior program years that are voided. The

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board may also recommend to the commission that the annual target for the following program

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year be adjusted downward by any amounts that the previous program year's annual targets were

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exceeded by the standard contracts entered into during that program year.

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      (c) The board may, based on market data and other information available to it including

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pricing for standard contracts received during previous program years, recommend a reduction of

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the annual target for the upcoming program year where the board determines that market

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conditions would be likely to produce unfavorably high target pricing for standard contracts

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during that upcoming program year. In considering such issues, the board may take into account

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the reasonableness of current pricing and its impact on all electric distribution customers who will

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be paying for the output for up to twenty (20) years at such prices. The board may also and the

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commission may recommend an extension of time to achieve the forty megawatt (40 MW) target

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targets, to allow for contracting to occur after 2014, if necessary.

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      (d) The electric distribution company must contract for at least forty megawatts (40

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MW) of nameplate capacity distributed generation projects by the end of 2014, unless such

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schedule is extended by the board. The electric distribution company may not be required to

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contract for more than forty megawatts (40 MW) or the distributed generation contract capacity,

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but may do so voluntarily, subject to commission approval.

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      (e) Each year, the board shall file its recommendations relating to the schedule, along

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with its report and recommendations regarding ceiling prices, for the commission's review and

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approval as specified in subsection 39-26.2-5(b).

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      (f) Nothing in this chapter shall derogate from the statutory authority of the commission

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or the division, including, but not limited to, the authority to protect ratepayers from unreasonable

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rates.

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     39-26.2-6. Standard contract enrollment program. -- (a) Each electric distribution

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company shall conduct at least three (3) standard contract enrollments during each program year;

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however, during 2011 the electric distribution company need only conduct one enrollment. Each

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enrollment shall be open for a two (2) week period during which the electric distribution

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company is required to receive standard short-form applications requesting standard contracts for

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distributed generation energy projects. The short-form applications shall require the applicant to

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provide the project owner's identity and the project's proposed location, nameplate capacity, and

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renewable energy class and allow for additional information relative to the permitting, financial

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feasibility, ability to build, and timing for deployment of the proposed projects. For small

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distributed generation projects, the applicant must submit an affidavit confirming that the project

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is not a segment of a larger project being planned for enlargement over time. For large distributed

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generation projects, the short-form application shall also require the applicant to bid a bundled

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price for the sale of the energy, capacity, renewable energy certificates, and all other

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environmental attributes and market products that are available or may become available from the

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distributed generation facility, on a per kilowatt-hour basis for the output of the project. Subject

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to the provisions of subsections (b) and (c) below, the electric distribution company shall not be

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required to enter into standard contracts in excess of the annual target for the applicable program

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year and shall not be required to enter into standard contracts in excess of any limit set by the

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board and approved by the commission for a given enrollment. However, the electric distribution

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company may voluntarily exceed an enrollment period limit as long as it does not exceed an

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annual target for the applicable program year.

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      (b) For small distributed generation projects, the electric distribution company on a first-

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come, first-served basis, shall enter into standard contracts at based on the lowest proposed price

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received for the approved technology classes, but not to exceed the applicable standard contract

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ceiling price with any distributed generation project which meets the requirements of all

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applicable tariffs and regulations, and meets the criteria of a renewable energy class in effect,

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until the class target is met. Enrollment periods will be governed by a solicitation and enrollment

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process rules that shall be filed with the commission each October 15 by the electric distribution

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company, and approved by the commission within sixty (60) days of such filing.

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      (c) For large distributed generation projects, the electric distribution company shall

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select projects for standard contracts based on the lowest proposed prices received, but not to

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exceed the applicable standard contract ceiling price, provided, that the selected projects meet the

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requirements of all applicable tariffs and regulations and meet the criteria of a renewable energy

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class in effect until the class target is met. Except for 2011, no enrollment period shall seek to

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enroll more than one-third (1/3) of the annual goal for the distribution company for large

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distributed generation projects.

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      (d) If there are more projects than what is specified for a class target at the same price,

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the electric distribution company shall review in consultation with the office of energy resources

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the applications submitted and select first those projects that appear to be the furthest along in

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development and likely to be deployed. Those projects that are likely to be deployed on the

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earliest timelines shall be selected. To the extent the electric distribution company is unable to

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make a clear distinction on this basis, the electric company shall report the results to the board

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and not enter into contracts with those projects that are tied on pricing. In such case, the board

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may take such action as it deems appropriate for the selection of projects, including seeking more

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information from the projects. Alternatively, the board may consider adjustments to the ceiling

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price and a rebid, or simply wait until the next enrollment. The office of energy resources is

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authorized to request copies of submitted applications from the distribution company in order to

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verify accuracy of the reported data and information.

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      (e) Should an electric distribution company determine that it has entered into sufficient

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standard contracts to achieve a program-year class target, it shall immediately report this to the

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board, the office of energy resources, and the commission, and cease entering into standard

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contracts for that renewable energy class for the remainder of the program year. An electric

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distribution company may exceed the renewable energy class target if the last standard contract

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entered into may cause the total purchased to exceed the target.

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      (f) The electric distribution company is authorized to enter into standard contracts up to

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the applicable ceiling price. As long as the terms of the standard contract are materially the same

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as the standard contract terms approved by the commission and the pricing is no higher than the

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applicable ceiling price, such contracts shall be deemed prudent and approved by the commission

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for purposes of recovering the costs in rates.

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      (g) A distributed generation project that also is being employed by a customer for net

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metering purposes may submit an application to sell the excess output from its distributed

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generation project. In such case, however, at the election of the self-generator all of the renewable

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energy certificates and environmental attributes pertaining to the energy consumed on site may be

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sold to the electric distribution company on a month-to-month basis outside of the terms of the

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standard contract. In such case, the portion of the renewable energy certificates that pertain to the

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energy consumed on site during the net metering billing period shall be priced at the average

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market price of renewable energy certificates, which may be determined by using the price of

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renewable energy certificates purchased or sold by the electric distribution company.

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     39-26.2-7. Standard contract -- Form and provisions. -- The following process shall be

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implemented to establish the non-price terms and conditions of the standard contract:

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      (1) A working group ("contract working group") shall be established and supervised by

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the board, consisting of the following members: (i) The director of the office of energy resources;

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(ii) A designee from the division of public utilities and carriers; (iii) Two (2) designees of the

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electric distribution company; (iv) Two (2) individuals designated by the office of energy

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resources who are experienced developers of renewable generation projects; (v) One individual

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designated by the office of energy resources who represents a customer of the electric distribution

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company; and (vi) A lawyer designated by the office of energy resources who has at least three

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(3) years of experience in negotiating and/or developing power purchase agreements. With

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respect to the lawyer designated in (vi) above, the electric distribution company shall enter into a

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cost reimbursement agreement with such lawyer, to compensate the lawyer for the time spent

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serving in the contract working group at the reasonable hourly rate negotiated by the office of

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energy resources. The costs incurred by the electric distribution company under the

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reimbursement agreement shall be recovered in rates by the electric distribution company in the

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year incurred or the year following incurrence through an appropriate filing with the commission.

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The contract working group shall be an advisory group that is not to be considered to be an

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agency for purposes of the administrative procedures act or any other laws pertaining to public

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bodies.

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      (2) The contract working group shall work in good faith to develop standard contracts

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that would be applicable for various technologies for both small and large distributed generation

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projects. The standard contracts should balance the need for the project to obtain financing

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against the need for the distribution company to protect itself and its distribution customers

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against unreasonable risks. The standard contract should be developed from contracting terms

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typically utilized in the wholesale power industry, taking into account the size of each project and

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the technology. The standard contracts shall provide for the purchase of energy, capacity,

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renewable energy certificates, and all other environmental attributes and market products that are

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available or may become available from the distributed generation facility. However, the electric

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distribution company shall retain the right to separate out pricing for each market product under

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the contracts for administrative and accounting purposes to avoid any detrimental accounting

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effects or for administrative convenience, provided that such accounting as specified in the

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contract does not affect the price and financial benefits to the seller as a seller of a bundled

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product. The standard contract also shall:

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      (i) Hold the distributed generation facility owner liable for the cost of interconnection

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from the distributed generation facility to the interconnect point with the distribution system, and

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for any upgrades to the existing distributed generation system that may be required by the electric

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distribution company. However, a distributed generation facility owner may appeal to the

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commission to reduce any required system upgrade costs to the extent such upgrades can be

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shown to benefit other customers of the electric distribution company and the balance of such

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costs shall be included in rates by the electric distribution company for recovery in the year

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incurred or the year following incurrence;

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      (ii) Require the distributed generation facility owner to make a performance guarantee

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deposit to the electric distribution company of fifteen dollars ($15.00) for small distributed

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generation projects or twenty-five dollars ($25.00) for large distributed generation projects for

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every renewable energy certificate estimated to be generated per year under the contract, but at

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least five hundred dollars ($500) and not more than seventy-five thousand dollars ($75,000), paid

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at the time of contract execution;

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      (iii) Require the electric distribution company to refund the performance guarantee

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deposit on a pro-rated basis of renewable energy credits actually delivered by the distributed

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generation facility over the course of the first year of the project's operation, paid quarterly;

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      (iv) Provide that if the distributed generation facility has not generated the output

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proposed in its enrollment application, with the exception of hydroelectric facilities, is not fully

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operational within eighteen (18) months after execution of the contract, the contract is

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automatically voided and the performance guarantee is forfeited. Eligible hydroelectric

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distribution generation facilities that are not fully operational within thirty (30) months after the

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execution of the contract, the contract is automatically voided and the performance guarantee is

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forfeited. Any forfeited performance guarantee deposits shall be credited to all distribution

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customers in rates and not retained by the electric distribution company; all projects that have

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executed contracts with the distribution company shall be required to have their distributed

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generation system produce ninety percent (90%) of the kilowatt or megawatt output in the

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submitted application, and shall be verified by the distribution company within eighteen (18)

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months after the execution of the contract. Any distributed generation facility that fails this output

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requirement shall result in the contract automatically being voided and the performance guarantee

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forfeited.

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      (v) Provide for flexible payment schedules that may be negotiated between the buyer and

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seller, but shall be no longer than quarterly if an agreement cannot be reached;

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      (vi) Require that an electric meter which conforms with standard industry norms be

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installed to measure the electrical energy output of the distributed generation facility, and require

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a system or procedure by which the distributed generation facility owner shall demonstrate

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creation of renewable energy credits, in a manner recognized and accounted for by the GIS; such

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demonstration of renewable energy credit creation to be at the distributed generation facility

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owner's expense. The electric distribution company may, at its discretion, offer to provide such a

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renewable energy credit measurement and accounting system or procedure to the distributed

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generation facility owner, and the distributed generation facility owner may, at its discretion, use

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the electric distribution company's program, or use that of an independent third party, approved

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by the commission, and the costs of such measurement and accounting are paid for by the

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distributed generation facility owner.

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     (vii) All distributed generation projects that have executed contracts will be required to

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submit quarterly reports on the progress of the project to the distribution company and the office

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of energy resources. Failure to submit these quarterly progress reports may result in the

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termination of the contract.

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      (3) If the contract working group reaches agreement on the terms of standard contracts,

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the board shall file the contracts with the commission for approval. If there are any

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disagreements, they shall be identified to the commission. The commission shall review the

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standard contracts for conformance with the standards set forth in subsection (2). Should there be

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any disputes, the commission shall issue an order resolving them. To the extent the commission

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needs expert assistance to resolve any disagreements noted in the filing, the commission is

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authorized to hire a consultant to assist it in the proceedings, the costs of which shall be recovered

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from electric distribution customers pursuant to a uniform factor established by the commission

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in rates for recovery by the electric distribution company in the year incurred or the year

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following incurrence, as requested through a filing by the electric distribution company. The

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commission shall issue an order approving standard forms of contract within sixty (60) days of

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the filing.

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     SECTION 2. This act shall take effect upon passage.

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LC01653

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS - DISTRIBUTED GENERATION

STANDARD CONTRACTS

***

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     This act would amend the definition of small distributed generation project, and would

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allow hydroelectric projects to participate in the standard contract enforcement program.

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     This act would take effect upon passage.

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LC01653

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