2014 -- S 2435

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LC004402

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS -- DISTRIBUTED GENERATION

STANDARD CONTRACTS

     Introduced By: Senators Bates, Conley, Sosnowski, and Miller

     Date Introduced: February 27, 2014

     Referred To: Senate Environment & Agriculture

     It is enacted by the General Assembly as follows:

     SECTION 1. Sections 39-26.2-2, 39-26.2-3, 39-26.2-6 and 39-26.2-7 of the General

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

amended to read as follows:

     39-26.2-2. Purpose. -- The purpose of this chapter is to facilitate and promote installation

of grid-connected generation of renewable energy; support and encourage development of

distributed renewable energy generation systems; reduce environmental impacts; reduce carbon

emissions that contribute to climate change by encouraging the local siting of renewable energy

projects; encourage the reuse and redevelopment of contaminated property; diversify the state's

energy generation sources; stimulate economic development; improve distribution system

resilience and reliability; and reduce distribution system costs.

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

following meanings:

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

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

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

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

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

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

same powers and duties pursuant to this chapter.

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

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

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

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

through standard contracts pursuant to the provisions of this chapter.

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

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

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

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

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

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

operated by the electric distribution company.

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

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

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

class.

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

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

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

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

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

year, but is no greater than three megawatts (3 MW) nameplate capacity.

      (9) "Office" means the Rhode Island office of energy resources.

      (10) "Program year" means a calendar year beginning January 1 and ending December

31.

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

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

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

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

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

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

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

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

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

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

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

target.

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

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

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

energy project that has a nameplate capacity within the following: Solar: fifty kilowatts (50 KW)

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

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

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

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

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

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

under this definition.

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

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

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

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

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

provisions of this chapter.

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

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

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

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

available or may become available from the distributed generation facility.

     (16) "Contaminated property" means property that has been or is currently disposed of in

landfill as defined in § 23-19.1-4, or a site as defined in § 23-19.14-3, or land contaminated by the

use, storage, release, or disposal of hazardous material, and all suitable areas in very close

proximity to these sites, where an investigation or remedial action is required pursuant to

applicable hazardous waste or solid waste laws.

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

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

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

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

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

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

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

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

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

is not a segment of a larger project being planned for enlargement over time; provided, however,

that for small or large distributed generation projects proposed for the reuse and redevelopment of

contaminated property the applicant may seek enrollment at the same site for new additions to an

existing distributed generation project. For large distributed generation projects, the short-form

application shall also require the applicant to bid a bundled price for the sale of the energy,

capacity, renewable energy certificates, and all other environmental attributes and market

products that are available or may become available from the distributed generation facility, on a

per kilowatt-hour basis for the output of the project. Subject to the provisions of subsections (b)

and (c) below, the electric distribution company shall not be required to enter into standard

contracts in excess of the annual target for the applicable program year and shall not be required

to enter into standard contracts in excess of any limit set by the board and approved by the

commission for a given enrollment. However, the electric distribution company may voluntarily

exceed an enrollment period limit as long as it does not exceed an annual target for the applicable

program year.

      (b) For small distributed generation projects, the electric distribution company shall

select projects for standard contracts based on the lowest proposal prices received with any

distributed generation project which meets the requirements of all applicable tariffs and

regulations, and meets the criteria of a renewable energy class in effect, until the class target is

met. Enrollment periods will be governed by a solicitation and enrollment process rules that shall

be filed with the commission each October 15 by the electric distribution company, and approved

by the commission within sixty (60) days of such filing.

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

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

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

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

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

distributed generation projects.

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

the electric distribution company shall review the applications submitted and select first those

projects that appear to be the furthest along in development and likely to be deployed in

consultation with the office. Those projects that are likely to be deployed on the earliest timelines

shall be selected. To the extent the electric distribution company is unable to make a clear

distinction on this basis, the electric company shall report the results to the board and not enter

into contracts with those projects that are tied on pricing. In such case, the board may take such

action as it deems appropriate for the selection of projects, including seeking more information

from the projects. Alternatively, the board may consider adjustments to the ceiling price and a

rebid, or simply wait until the next enrollment.

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

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

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

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

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

entered into may cause the total purchased to exceed the target. The office and the electric

distribution company shall enter into a memorandum of understanding regarding the sharing of

the information and data related to the distributed generation program.

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

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

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

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

for purposes of recovering the costs in rates.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

bodies.

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

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

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

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

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

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

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

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

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

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

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

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

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

product. The standard contract also shall:

      (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

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

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

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

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

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

incurred or the year following incurrence;

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

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

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

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

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

at the time of contract execution;

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

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

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

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

(90%) of the output proposed in its enrollment application within eighteen (18) months after

execution of the contract, the contract shall be terminated and the performance guarantee shall be

forfeited. An eligible small-scale hydropower distributed generation facility or a distributed

generation facility project proposed for the reuse and redevelopment of contaminated or formerly

contaminated property that has not generated ninety percent (90%) of the output proposed in its

enrollment application within forty-eight (48) months after execution of the contract shall result

in the contract being terminated and the performance guarantee being forfeited. Any forfeited

performance guarantee deposits shall be credited to all distribution customers in rates and not

retained by the electric distribution company;

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

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

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

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

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

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

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

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

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

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

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

distributed generation facility owner.

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

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

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

termination of the contract.

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

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

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

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

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

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

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

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

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

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

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

the filing.

     SECTION 2. This act shall take effect upon passage.

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LC004402

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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

***

     This act would add to the purpose of distributed generation standard contracts so that it

would encourage the reuse and redevelopment of contaminated property as defined in this act.

     This act would take effect upon passage.

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