2014 -- S 2690 SUBSTITUTE A AS AMENDED

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LC004420/SUB A/3

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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 - THE CLEAN ENERGY JOBS

PROGRAM

     Introduced By: Senators Sosnowski, Walaska, Conley, Cool Rumsey, and Bates

     Date Introduced: March 05, 2014

     Referred To: Senate Environment & Agriculture

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 39 of the General Laws entitled "PUBLIC UTILITIES AND

CARRIERS" is hereby amended by adding thereto the following chapter:

CHAPTER 26.6

THE RENEWABLE ENERGY GROWTH PROGRAM

     39-26.6-1. 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 siting of renewable energy

projects in the load zone of the electric-distribution company; diversify the energy generation

sources within the load zone of the electric-distribution company; stimulate economic

development; improve distribution system resilience and reliability within the load zone of the

electric-distribution company; and reduce distribution system costs.

     39-26.6-2. Renewable energy growth program established. -- To carry out these

purposes, a tariff-based, renewable-energy distributed-generation financing program, hereinafter

referred to as the renewable-energy growth program, is hereby established with the intention of

continuing the development of renewable-energy distributed generation in the load zone of the

electric-distribution company at reasonable cost. The program shall be designed to finance the

development, construction, and operation of renewable-energy distributed-generation projects

over five (5) years through a performance-based incentive system that is designed to achieve

specified megawatt targets at reasonable cost through competitive processes. The renewable-

energy growth program shall be implemented by the electric-distribution company, and guided by

the distributed-generation board, in consultation with the office of energy resources, subject to the

review and supervision of the commission.

     39-26.6-3. Definitions. -- When used in this chapter, the following terms shall have the

following meanings:

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

     (2) "Board" shall mean the distributed-generation board as established pursuant to the

provisions of § 39-26.2-10 under the title distributed generation standard contract board, but shall

also fulfill the responsibilities set forth in this chapter.

     (3) "Commercial-scale solar project" means a solar distributed generation project with the

nameplate capacity specified in § 39-26.6-7.

     (4) "Distributed generation facility" means an electrical generation facility 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 § 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. For purposes of this chapter, a distributed

generation facility must be a new resource that:

     (i) Has not begun operation;

     (ii) Is not under construction, but excluding preparatory site work that is less than twenty-

five percent (25%) of the estimated total project cost; and

     (iii) Except for small-scale solar projects, does not have in place investment or lending

agreements necessary to finance the construction of the facility prior to the submittal of an

application or bid for which the payment of performance-based incentives are sought under this

chapter except to the extent that such financing agreements are conditioned upon the project

owner being awarded performance-based incentives under the provisions of this chapter. For

purposes of this definition, pre-existing hydro generation shall be exempt from the provisions of

subsection (i) of this section, regarding operation, if the hydro-generation facility will need a

material investment to restore or maintain reliable and efficient operation and meet all regulatory,

environmental, or operational requirements. For purposes of this provision, "material investment"

shall mean investment necessary to allow the project to qualify as a new, renewable-energy

resource under § 39-26-2(2). To be eligible for this exemption, the hydro-project developer at the

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time of submitting a bid in the applicable procurement must provide reasonable evidence with its

bid application showing the level of investment needed, along with any other facts that support a

finding that the investment is material, the determination of which shall be a part of the bid

review process set forth in § 39-26.6-16 for the award of bids.

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

generation facility. An installation will be considered distinct if it does not violate the

segmentation prohibition set forth in § 39-26.6-9.

     (6) "Electric distribution company" means a company defined in § 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.

     (7) "ISO-NE" means Independent System Operator-New England, the Regional

Transmission Organization for New England designated by the Federal Energy Regulatory

Commission.

     (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 five megawatts (5 MW) nameplate capacity.

     (9) "Large-scale solar project" means a solar distributed-generation project with the

nameplate capacity specified in § 39-26.6-7.

     (10) "Medium-scale solar project" means a solar distributed-generation project with the

nameplate capacity specified in § 39-26.6-7.

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

     (12) "Program year" means a year beginning April 1 and ending March 31, except for the

first program year that may commence after April 1, 2015, subject to commission approval.

     (13) "Renewable energy classes" means categories for different renewable-energy

technologies using eligible renewable-energy resources as defined by § 39-26-5 , including

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

eligible biomass fuels specified in § 39-26-2(6). For each program year, in addition to the classes

of solar distributed-generation specified in § 39-26.6-7, 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. The board may make recommendations to the commission to add, eliminate, or

adjust renewable-energy classes for each program year, provided that the solar classifications set

forth in § 39-26.6-7 shall remain in effect for at least the first two (2) program years and no

distributed-generation project may exceed five megawatts (5MW) of nameplate capacity.

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     (14) "Renewable-energy certificate" means a New England Generation Information

System renewable energy certificate as defined in § 39-26-2(13).

     (15) "Small-scale solar project" means a solar distributed generation project with the

nameplate capacity specified in § 39-26.6-7.

     (16) "Small distributed-generation project" means a distributed generation renewable

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

to one and one-half megawatts (1.5 MW); small-scale solar projects and medium-scale solar

projects with the capacity limits as specified in § 39-26.6-7. For technologies other than solar and

wind, the board shall set the nameplate capacity size limits, but such limits may not exceed one

(1MW) megawatt.

     (17) "Ceiling price" means the bidding price cap applicable to an enrollment for a given

distributed-generation class that shall be approved annually for each renewable-energy class

pursuant to the procedure established in this chapter. The ceiling price for each technology should

be a price that would allow a private owner to invest in a given project at a reasonable rate of

return, based on recently reported and forecast information on the cost of capital, and the cost of

generation equipment. The calculation of the reasonable rate of return for a project shall include,

where applicable, any state or federal incentives, including, but not limited to, tax incentives.

     39-26.6-4. Continuation of Board. -- (a) The distributed generation standard contract

board shall remain fully constituted and authorized as provided in chapter 26.2 of title 39

provided, however, that the name shall be changed to the "distributed-generation board."

Additional purposes of the board shall be to:

     (1) Evaluate and make recommendations to the commission regarding ceiling prices and

annual targets, the make-up of renewable-energy classifications eligible under the distributed-

generation growth program, the terms of the tariffs, and other duties as set forth in this chapter;

     (2) Provide consistent, comprehensive, informed, and publicly accountable involvement

by representatives of all interested stakeholders affected by, involved with, or knowledgeable

about the development of distributed-generation projects that are eligible for performance-based

incentives under the distributed generation growth program; and

     (3) Monitor and evaluate the effectiveness of the distributed-generation growth program.

     (b) The office, in consultation with the board, shall be authorized to hire, or to request the

electric-distribution company to hire, the services of qualified consultants to perform ceiling price

studies subject to commission approval that shall be granted or denied within sixty (60) days of

receipt of such request from the office. The cost of such studies shall be recoverable through the

rate reconciliation provisions of the electric-distribution company set forth in § 39-26.6-25,

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subject to commission approval. In addition, the office, in consultation with the board, may

request the commission to approve other costs incurred by the board or the electric-distribution

company to perform any other studies and reports, subject to the review and approval of the

commission that shall be granted or denied within one hundred twenty (120) days of receipt of

such request from the office and that shall be recoverable through the same reconciliation

provisions.

     39-26.6-5. Tariffs Proposed and Approved. -- (a) Each year, for a period of at least five

(5) program years, the electric-distribution company shall file tariffs with the commission that are

designed to provide a multi-year stream of performance-based incentives to eligible renewable-

distributed-generation projects for a term of years, under terms and conditions set forth in the

tariffs and approved by the commission. The tariffs shall set forth the rights and obligations of the

owner of the distributed-generation project and the conditions upon which payment of

performance-based incentives by the electric-distribution company will be paid. The tariffs shall

include the non-price conditions set forth in §§ 39-26.2-7(2)(i) – (vii) for small distributed

generation projects (other than small and medium scale solar) and large distributed-generation

projects; provided, however, that the time periods for such projects to reach ninety percent (90%)

of output shall be extended to twenty-four (24) months (other than eligible anaerobic-digestion

projects, which shall be thirty-six (36) months, and eligible small-scale hydro, which shall be

forty-eight (48) months). The non-price conditions in the tariffs for small-and medium-scale solar

shall take into account the different circumstances for distributed-generation projects of the

smaller sizes.

     (b) In addition to the tariff(s), the filing shall include the rules governing the solicitation

and enrollment process. The solicitation rules will be designed to ensure the orderly functioning

of the distributed-generation growth program and shall be consistent with the legislative purposes

of this chapter.

     (c) In proposing the tariff(s) and solicitation rules applicable to each year, the tariff(s) and

rules shall be developed by the electric-distribution company and will be reviewed by the office

and the board before being sent to the commission for its approval. The proposed tariffs shall

include the ceiling prices and term lengths for each tariff that are recommended by the board. The

term lengths shall be from fifteen (15) to twenty (20) years, provided, however, that the board

may recommend shorter terms for small-scale solar projects. Whatever term lengths between

fifteen (15) and twenty (20) years are chosen for any given tariff, the evaluation of the bids for

that tariff shall be done on a consistent basis such that the same term lengths for competing bids

are used to determine the winning bids.

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     (d) The board shall use the same standards for setting ceiling prices as set forth in § 39-

26.2-5. In setting the ceiling prices, the board may specifically consider:

     (1) Transactions for newly developed renewable energy resources, by technology and

size, in the ISO-NE control area and the northeast corridor;

     (2) Pricing from bids received during the previous program year;

     (3) Environmental benefits, including, but not limited to, reducing carbon emissions;

     (4) System benefits; and

     (5) Cost effectiveness.

     (e) At least forty-five (45) days before filing the tariff(s) and solicitation rules, the

electric-distribution company shall provide the tariff(s) and rules in draft form to the board for

review. The commission shall have the authority to determine the final terms and conditions in

the tariff and rules. Once approved, the commission shall retain exclusive jurisdiction over the

performance-based incentive payments, terms, conditions, rights, enforcement, and

implementation of the tariffs and rules, subject to appeals pursuant to chapter 5 of title 39.

     39-26.6-6. Permanence of Tariff Terms Once Set. -- It is the intention of the general

assembly in enacting this chapter that the developers, owners, investors, customers, and lenders

of the distributed-generation projects receiving performance-based incentives under the tariffs be

able to rely on the tariffs for the entire term of the applicable tariff for purposes of obtaining

financing. Consistent with that intention and expectation, the terms under the tariffs for a given

program year, once approved by the commission, shall not be altered in any way that would

undermine such reliance on those tariffs during the applicable terms of the tariffs; and in no

circumstance will the performance-based incentive rate paid to a renewable energy project

developer or owner be reduced during the term of the tariff once a renewable energy project has

qualified to receive a tariff under the terms of this chapter.

     39-26.6-7. Solar Project Size Categories. – (a) Tariff(s) shall be proposed for each of

the following solar distributed generation classes:

     (1) Small-scale solar projects;

     (2) Medium-scale solar projects;

     (3) Commercial-scale solar projects; and

     (4) Large-scale solar projects.

     (b) Such classes of solar distributed-generation projects shall be established based on

nameplate megawatt size as follows:

     (1) Large scale: solar projects from one megawatt (1 MW), up to and including, five

megawatts (5MW) nameplate capacity;

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     (2) Commercial scale: solar projects greater than two hundred fifty kilowatts (250 kW),

but less than one megawatt (1 MW) nameplate capacity;

     (3) Medium scale: solar projects greater than twenty-five kilowatts (25 kW), up to and

including, two hundred fifty kilowatts (250 kW) nameplate capacity; and

     (4) Small scale: solar projects, up to and including, twenty-five kilowatts (25 kW)

nameplate capacity.

     (c) Other classifications of solar projects may also be proposed by the board, subject to

the approval of the commission. After the second program year, the board may make

recommendations to the commission to adjust the size categories of the solar classes, provided

that the medium-scale solar projects may not exceed two hundred fifty kilowatts (250 kW).

     39-26.6-8. Renewable Technologies Other Than Solar. -- Tariffs also shall be proposed

for on-shore wind and any other distributed-generation technologies permissible under this

chapter that the board, in its discretion, recommends; provided, however, that no project shall

exceed five megawatts (5 MW) nameplate capacity. The electric-distribution company shall file

tariffs for each technology and size categories recommended by the board pursuant to the

procedures set forth in this chapter.

     39-26.6-9. Project Segmentation Prohibition. -- In no case may a project developer be

allowed to segment a distributed-generation project on the same parcel or contiguous parcels into

smaller-sized projects in order to fall under a smaller-size project classification. Notwithstanding

this prohibition, a project developer may designate a generation unit on the same parcel or

contiguous parcel for net metering or other means of participating in electricity markets, provided

that such unit, or portion of such unit, designated for net metering or other market participation is

not receiving performance-based incentives under this chapter; is capable of being segregated

electrically; is configured with such electrical segregation; and is separately metered. Further, a

project shall not be considered to have been segmented if:

     (1) There is a lapse of at least twenty-four (24) months between: (i) The commencement

of construction of new distributed-generation units on a parcel that is the same as, or is

contiguous with, a parcel upon which a distributed-generation project has already been

constructed; and (ii) The operation date of the pre-existing project; or

     (2) The new project is a different renewable technology.

     39-26.6-10. Timing and Schedule of Tariff Filings. -- (a) The electric-distribution

company shall file with the commission the first set of tariffs and solicitation rules pursuant to

this chapter no later than November 15, 2014. Thereafter, the electric-distribution company shall

make annual tariff and solicitation rules filings with the commission no later than November 15

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prior to the beginning of the applicable program year, which tariffs and rules shall be applicable

for the next program year.

     (b) Upon receiving the filing from the electric-distribution company, the commission

shall open a docket to consider the filing. The commission shall issue an order approving the

proposed tariffs and solicitation rules; provided, however, that the commission may make any

modifications that it deems appropriate consistent with the legislative purposes of this chapter as

set forth herein.

     (c) For the first program year, the commission shall issue its order approving tariff(s) and

solicitation rules by no later than March 31, 2015. Thereafter, the commission shall approve them

by February 15 of each succeeding year.

     (d) During the course of any program year, the electric-distribution company may, at any

time, in consultation with the office and the board, propose tariff or solicitation rules

modifications. The commission shall consider such proposed modifications through an already

open or new docket, and shall issue its order within one hundred five (105) days of the filing of

the proposed modification. If approved, the proposed modification shall take effect for the next

enrollment event following the issuance of the commission's order.

     39-26.6-11. Power Purchase Agreements Not Required. -- The distributed generation

growth program shall be implemented and administered exclusively through the tariff structure

and procedures set forth in this chapter, and the electric-distribution company shall not be

required to execute power purchase agreements for the procurement of the renewable energy

distributed-generation capacity requirements set forth in this chapter.

     39-26.6-12. Annual Bidding and Enrollments. -- (a) With the exception of the first

program year (2015), the electric-distribution company, in consultation with the board and office,

shall conduct at least three (3) tariff enrollments for each distributed-generation class each

program year. For the first program year, the board may recommend that either two (2) or three

(3) enrollments be conducted.

     (b) During each program year, the tariff enrollments shall have both an annual targeted

amount of nameplate megawatts ("annual MW target") and a nameplate megawatt target for each

separate enrollment event ("enrollment MW target"). The enrollment MW target shall comprise

the specific portion of the annual MW target sought to be obtained in that enrollment. The

enrollment MW targets shall be recommended by the board each year, subject to commission

approval. The board shall also recommend a megawatt target for each class ("class MW target")

that comprises a specified portion of the enrollment MW target, subject to commission approval.

If the electric-distribution company, the office, and the board mutually agree, they may reallocate

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megawatts during an enrollment from one class to another without commission approval if there

is an over subscription in one class and an under subscription in another, provided that the annual

MW Target is not being exceeded, except as provided in § 39-26.6-7.

     (c) The annual MW targets shall be established as follows; provided, however, that at

least three megawatts (3 MW) of nameplate capacity shall be carved out exclusively for small-

scale solar projects in each of the first four (4) program years:

     (1) For the first program year (2015), the annual MW target shall be twenty-five (25)

nameplate megawatts;

     (2) For the second program year, the annual targets shall be forty (40) nameplate

megawatts;

     (3) For the third and fourth program years, the annual target shall be forty (40) nameplate

megawatts, subject to the conditions set forth in § 39-26.6-12(f) having been met for the

applicable prior program year as determined in the manner specified in § 39-26.6-12(g); and

     (4) For the fifth program year, the annual target shall be set to obtain the balance of

capacity needed to achieve one hundred sixty (160) nameplate megawatts within the five-year (5)

distributed-generation growth program, subject to § 39-26.6-12(e) and the conditions set forth in

§ 39-26.6-12(f) having been met for the fourth program year as determined in the manner

specified in § 39-26.6-12(g).

     (d) During the fifth year of the distributed-generation growth program, the board may

recommend to the commission an extension of time in the event that additional time is required to

achieve the full one hundred sixty (160) nameplate megawatt target of the program. The

commission shall approve the recommendation of the board; provided, however, that the

commission may make any modifications to the board's recommendation that the commission

deems appropriate, consistent with the legislative purposes of this chapter as set forth herein.

     (e) To the extent there was a shortfall of capacity procured under chapter 26.2 of title 39

from distributed generation procurements in 2014, such shortfall amount may be added to the one

hundred sixty megawatt (160MW) target for acquisition in the fifth program year under this

chapter. In no event shall the electric-distribution company be required to exceed the aggregate

amount of one hundred sixty (160) nameplate capacity plus any such shortfall amount over the

five (5) years, but may do so voluntarily, in consultation with the board and subject to

commission approval.

     (f) The conditions specified in subsections (c)(3) and (c)(4) of this section are as follows:

(1) That it is reasonable to conclude that the bid prices submitted in the procurements for the

large-scale solar and commercial-scale solar classes were reasonably competitive in the

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immediately preceding program year; (2) That it is reasonable to conclude that the annual MW

target specified for the next program year is reasonably achievable; and (3) That the electric-

distribution company was able to, or with reasonably prudent efforts should have been able to,

perform the studies and system upgrades on a timely basis necessary to accommodate the number

of applications associated with the targets without materially adversely affecting other electric-

distribution construction projects needed to provide reliable and safe electric-distribution service.

To the extent the board or the commission concludes that any of these conditions have not been

met for the applicable program year, the board may recommend, and/or the commission may

adopt, a new annual MW target, based on the factors set forth in § 39-26.6-12(h).

     (g) Before the third, fourth, and fifth program years, each year the board shall review the

conditions specified in § 39-26.6-12(f) and make a recommendation to the commission for

findings as to whether they have been met for the applicable year. The recommendation shall be

filed with the commission, with copies to the office and the electric-distribution company, and

any person who has made a written request to the commission to be included in such notification,

such list which may be obtained from the commission clerk, and a notice of such filing shall be

posted by the commission on its website. If no party files an objection to the recommended

findings within ten (10) business days of the posting, the commission may accept them without

hearings. If an objection is filed with a reasonable explanation for its basis, the commission shall

hold hearings and make the factual determination of whether the conditions have been met.

     (h) In the event that the conditions in § 39-26.6-12(f) have not been met for any program

year, then the board and the commission shall take into account the factors set forth below in

setting the annual MW target for the following year. In addition, for every program year the board

and the commission shall take into account these factors in setting the class MW targets, and the

enrollment MW targets for the following year: (1) That the new annual, class, and enrollment

levels reasonably assure that competition among projects for the applicable bidding

classifications remains robust and likely to yield reasonable and competitive program costs; (2)

That, assuming prudent management of the program, the electric-distribution company should be

able to perform the studies and system upgrades on a timely basis necessary to accommodate the

number of applications associated with the targets without materially adversely affecting other

electric-distribution construction projects needed to provide reliable and safe electric-distribution

service; and (3) Any other reasonable factors that are consistent with the legislative purpose of

this chapter as set forth herein, including the program purpose to facilitate the development of

renewable distributed generation in the load zone of the electric-distribution company at

reasonable cost.

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     (i) The renewable energy growth program is intended to achieve at least an aggregate

amount of one hundred sixty (160) nameplate megawatts over five (5) years, plus any shortfall

amount added in pursuant to § 39-26.6-12(e). However, after the second program year the board

may, based on market data and other information available to it, including pricing received during

previous program years, recommend changes to the annual target for any program year above or

below the specified targets in § 39-26.6-12(c) if the board concludes that market conditions are

likely to produce favorably low or unfavorably high target pricing during the upcoming program

year, provided that the recommendation may not result in the five (5)-year one hundred sixty

megawatt (160MW) nameplate target, plus any shortfall added pursuant to § 39-26.6-12(e), being

exceeded. Any megawatt reduction in an annual target shall be added to the target in the fifth year

of the program (and any subsequent years if necessary) such that the overall program target of

one hundred sixty megawatt (160MW) nameplate capacity, plus any shortfall added pursuant to §

39-26.6-12(e), is achieved. In considering such issues, the board and the commission may take

into account the reasonableness of current pricing and its impact on all electric-distribution

customers and the legislative purpose of this chapter as set forth herein, including the program

purpose to facilitate the development of renewable distributed generation in the load zone of the

electric-distribution company at reasonable cost.

     (j) The provisions of § 39-26.1-4 shall apply to the annual value of performance based

incentives (actual payments plus the value of net metering credits, as applicable) provided by the

electric-distribution company to all the distributed generation projects under this chapter, subject

to the following conditions:

     (1) The targets set for the applicable program year for the applicable project

classifications were met or, if not met, such failure was due to factors beyond the reasonable

control of the electric-distribution company;

     (2) The electric-distribution company has processed applications for service and

completed interconnections in a timely and prudent manner for the projects under this chapter,

taking into account factors within the electric-distribution company's reasonable control. The

commission is authorized to establish more specific performance standards to implement the

provisions of this chapter; and

     (3) The incentive shall be one and three-quarters percent (1.75%) of the annual value of

performance-based incentives. The commission is authorized to establish more specific

performance standards to implement the provisions of this paragraph.

     39-26.6-13. Cost reconciliation. -- To the extent the electric-distribution company incurs

incremental costs to meet the program objectives or make billing system improvements that are

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required to facilitate payments of performance-based incentives and administering net metering,

the electric-distribution company may elect to recover those incremental costs through the annual

charge set forth in § 39-26.6-25, subject to commission review and approval that assures such

costs were properly and prudently incurred.

     39-26.6-14. Existing powers of agencies and advocacy rights of parties unchanged. --

Nothing in this chapter shall be construed to derogate from the statutory authority of the

commission or the division of public utilities and carriers, including, but not limited to, the

authority to protect ratepayers from unreasonable rates. Nothing in this chapter shall be construed

to preclude any party from advocating a position in commission proceedings that differs from the

recommendations made by the board to the commission or in any filing with the commission

relating to this chapter, including without limitation (1) Individual or organizational members of

the board; (2) Participants in board deliberations; (3) The office; and (4) The electric-distribution

company, unless such party has consented by vote to the execution or executed a settlement

agreement agreeing to the terms, policy proposals, or any other matter proposed to the

commission.

     39-26.6-15. Bidding and Incentive Award Processes for Solar DG Projects. -- (a)

Large scale and commercial scale solar projects and distributed generation projects for other

eligible technologies shall bid a price per kilowatt-hour for the entire output of the facility (net of

any station service), which price shall not exceed the applicable ceiling price. Small-scale and

medium-scale solar projects will submit an enrollment application to receive a standard

performance-based incentive for the period of years in the applicable tariff, which shall be a price

per kilowatt-hour for the entire output of the facility. Except for megawatts that may be allocated

to the energy efficiency program pursuant to § 39-26.6-19, small and medium scale projects shall

be selected on a first come, first served basis, or by means of a commission-approved lottery

system, or such other method as may be recommended by the board and approved by the

commission.

     (b) Except for the first program year, the board shall determine, subject to commission

approval, the standard performance based incentive for small and medium sized solar projects

from the average bid price from the last two (2) procurement enrollments conducted in the

commercial scale and/or large scale solar projects class. For the first program year, the board may

derive the standard performance incentive for small and medium sized solar projects from the

bidding data obtained from the distributed generation program in effect in 2014 under the

provisions of chapter 26.2 of title 39, until there is bidding data from the first procurement under

the new program which shall then be used to set a new standard performance incentive. The

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standard performance incentive may be set at a higher rate than payments for commercial scale

and large scale solar projects in order to take into account the potentially higher per-unit cost of

smaller projects. The standard performance incentive also shall be adjusted upward or downward,

as needed, in order to take into account the term length over which the incentive shall be paid for

the small and medium scale solar projects if such terms are different than the terms applicable to

the classes from which the standard performance incentive was derived.

     (c) For each program year, the board shall recommend to the commission a standard

performance incentive for each of the small scale and medium scale solar project classifications.

Upon receiving the recommendations from the board, the commission shall open a docket to

consider the recommendations or address the recommendations in its approval process for the

program year in a consolidated docket, as provided in § 39-26.6-10. The commission shall issue

its order approving the recommendations no later than concurrently with approval of the entire

program and tariffs applicable to the program year; provided, however, that the commission may

make modifications or changes to the board's recommendations consistent with the legislative

purposes of this chapter.

     (d) If after the first program year the applications for the medium scale solar projects are

significantly over-subscribed, then the board and the electric-distribution company, in

consultation with the office, may propose to the commission a bidding process for medium scale

projects or a subset of the medium scale projects under which project selections would be made

based on the lowest bids rather than first come first served or such other method previously

approved by the commission. The commission shall approve the proposal from the board and

electric company within ninety (90) days; provided, however, that the commission may make

changes to the proposal consistent with the legislative purposes of this chapter.

     (e) The commission shall approve the bidding process for medium scale solar projects

recommended by the board only if the commission finds that such bidding process is in a

sufficiently simple form that is not administratively burdensome to bidders, and will not have the

effect of discouraging participation in the distributed generation growth program by developers of

medium scale solar projects who may be unrepresented by counsel.

     39-26.6-16. Enrollment Program. -- (a) 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. The standard short-form application shall require the applicant to provide the

following information: the project owner's identity; the location of the proposed project; the

nameplate capacity of the proposed project; and renewable energy class of the proposed project.

The standard short-form application shall allow project owners to provide additional information

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relative to the permitting, financial feasibility, ability to build, and timing for deployment of the

proposed projects. The applicant must submit an affidavit with the standard short-form

application confirming that the project is not in violation of the rules that prohibit project

segmentation, as set forth in § 39-26.6-9.

     (b) For large distributed generation projects only, the standard short-form application

shall also require the applicant to bid a bundled price that applies to the energy, 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 measured

from the output of the project. At the election of the electric-distribution company, and subject to

the approval of the commission, the bid may be required to include the sale of capacity.

     (c) For (i) Small distributed generation projects other than small scale and medium scale

solar projects; and (ii) Large distributed generation projects, the electric-distribution company

shall select projects based on the lowest proposed prices received that do not exceed the ceiling

price from the distributed generation projects which meet the requirements of all applicable tariffs

and regulations, and meet the criteria of the renewable energy class in effect, until the class target

is met. Performance based incentives shall be awarded to the winning bidders based on their bids

submitted.

     (d) For small scale and medium scale solar projects, awards shall be made in the manner

set forth in §§ 39-26.6-15 and 39-26.6-19.

     (e) If there are more projects bidding at the same price than the capacity that is specified

for a class target, the electric-distribution company shall, in consultation with the board and the

office, select first those projects that appear to be the furthest along in development and that are

most likely to be deployed. Those projects that are likely to be deployed at the earliest time shall

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

distinction on this basis, the electric-distribution company shall report its findings to the board

and not award bids for 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.

     (f) Should the electric-distribution company determine that it has made sufficient awards

to achieve a program-year class target, it shall immediately report this fact to the board, the

office, and the commission, and may cease making awards for that renewable energy class for the

remainder of the program year. In any event, the electric-distribution company may exceed the

renewable energy class target if the last award may cause the total purchased to exceed the target.

     (g) The board, the office, and the electric-distribution company shall enter into a

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memorandum of understanding regarding the sharing of the information and data related to the

renewable energy growth program, including, without limitation, information on bids received,

details regarding project ownership, and pricing. At the request of the board, the office, or the

electric-distribution company, the commission shall have the authority to protect from public

disclosure individual bid information for any projects that have not been awarded performance

based incentives.

     (h) The electric-distribution company is authorized to award bids up to the applicable

ceiling price. As long as the terms of the tariff are met and the pricing is no higher than the

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

for purposes of recovering the costs in rates.

     (i) With respect to any procurement that includes bids from pre-existing hydro-electric

generation, the electric-distribution company, in consultation with the office, shall have the

authority to accept the applicant's representation that its investment is material, within the

meaning of § 39-26.6-3(4). However, if the electric-distribution company or the office questions

whether the material investment standard has been met or the application is otherwise rejected,

the application shall be submitted to the board for review and the board shall draw its own

conclusion and make a recommendation to the commission at the time the commission is

approving awards from the procurement to which the application pertains. The commission shall

have the final authority to make the determination as to whether the material investment standard

has been met. Nothing in this paragraph shall preclude a project developer from seeking a

preliminary confirmation of eligibility for the material investment exemption from the electric-

distribution company, the office, and the board prior to the submittal of a bid. In such case, if

there is any disagreement, the final determination shall be submitted to the commission.

     39-26.6-17. Excess enrollment not required. -- The electric-distribution company shall

not be required to award bids in excess of the annual target for the applicable program year and

shall not be required to procure projects in excess of any limit set by the board and approved by

the commission for a given enrollment. However, the electric-distribution company, in

consultation with the board and the office, may voluntarily exceed an enrollment period limit as

long as it does not exceed an annual target for the applicable program year. At its election, the

electric-distribution company may exceed an annual target for the applicable program year after

review by the board and approval by the commission.

     39-26.6-18. Utility Right to Separately Meter. -- Owners of medium scale, commercial

scale, and large scale solar projects and other distributed generation technologies shall be required

to provide at their cost a revenue quality meter to standards approved by the division of public

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utilities and carriers and provide access to the information from the meter to the electric-

distribution company to measure the output of the generation. The electric-distribution company

shall have the discretion to install the second meter in a parallel configuration to the retail meter

or behind the meter, provided that a parallel installation shall have no effect on the right of the

customer to net meter using the net of the two meters. The electric-distribution company also

shall have the right to install its own revenue quality meter for small scale solar projects if not

being supplied by the owner. The electric-distribution company shall recover the installation and

capital cost of the separate meters it installs for small scale solar projects in the annual

reconciliation of solar costs under § 39-26.6-25.

     39-26.6-19. Coordination with Energy Efficiency Programs. -- (a) In consultation with

the office, the electric-distribution company may make a request to the commission that up to half

of the megawatts for the small and medium scale solar project enrollments be allocated by the

commission for selection through a process coordinated with the energy efficiency program in

order that specified solar incentives may be tied with energy efficiency program incentives in

order to allow the electric-distribution company to implement a coordinated energy efficiency and

solar program offering. In such case, the electric-distribution company will propose criteria for

eligibility for performance based incentives for solar that requires certain energy efficiency

standards be met at the customer location in order to be eligible for performance based incentives

for a small scale and/or medium scale solar installation.

     (b) The electric-distribution company must also include program parameters that do not

disrupt competition among small-scale and/or medium-scale solar developers, including, without

limitation, safeguards against any one or subset of developers in this market being given

exclusive rights or other market advantages over competitors. In approving the proposal, the

commission must find that there is no such small and medium solar-market disruption.

     (c) The commission shall approve the request of the distribution company within ninety

(90) days, making such modifications as it deems reasonable, provided such modifications are

consistent with the legislative purposes of this chapter and the state's energy efficiency goals.

     (d) The allocation of megawatts is for implementation purposes only and shall not

authorize funds to be shifted from the distributed generation growth program to energy efficiency

programs, nor will implementation of the electric distribution company's request cause a

reduction of the annual or cumulative capacity goals established for the distributed generation

growth program. To the extent that the megawatts allocated to the energy efficiency program

pursuant to this section are not committed during a program year, such uncommitted megawatts

shall be allocated back to the distributed generation growth program in the following year or such

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year the board recommends to the commission. Funding for the energy efficiency measures that

are tied to the solar installations must be obtained separately from the energy efficiency program

budget funded through applicable energy efficiency charges.

     (e) Should the small-scale and medium-scale project classes in the renewable energy

growth program be oversubscribed in two (2) consecutive enrollments and there are megawatts

that have not been committed through the process coordinated with the energy efficiency program

after the second enrollment, the board, after consultation with the office and the electric

distribution company, shall have the authority to move all or a portion of the uncommitted

megawatts out of the coordinated program back to the renewable energy growth program to meet

the demand of the oversubscription, subject to commission approval. If, in such case, the board

does not exercise the authority, any party may file a petition to the commission requesting action

to be taken

     39-26.6-20. Issuance of certificates and right to incentive payments. -- (a) For small

scale and medium scale solar projects, the electric distribution company shall provide certificates

of eligibility to the selected projects without commission confirmation of approval ("distribution

company awarded certificates"), subject to the review and consent of the office. The electric

distribution company shall file with the commission a list of all such distribution company

awarded certificates.

     (b) For commercial-scale and large-scale solar and all other distributed generation

projects, the electric distribution company shall file with the commission a list of the distributed

generation projects selected together with the corresponding pricing information. Within sixty

(60) days of receipt of the list, the commission shall issue an order awarding certificates of

eligibility to the distributed generation projects ("PUC awarded certificates").

     (c) Upon receipt of a PUC awarded certificate or a distribution company certificate, a

distributed generation project shall be entitled to receive, and the electric distribution company

shall pay and/or credit (as applicable), the performance-based incentives for the specified term

and under the terms and conditions of the applicable tariff in the manner set forth below.

     (d) The performance based incentive shall be the price per kilowatt-hour that was bid and

awarded or established as a standard incentive, as applicable. The performance-based incentive

shall be applied as a price per kilowatt-hour for all kilowatt-hours actually produced from the

distributed generation (net of station service, if any) for the term of years specified in the

applicable tariff, less the value of any kilowatt-hour charges that were offset by any net metering

(if applicable) for the host customer associated with the distributed generation for the billing

month; provided, however, if the value of kilowatt-hour charges that otherwise would be offset by

LC004420/SUB A/3 - Page 17 of 30

net metering in a given month exceeds the total value of the performance-based incentive for the

month, the customer shall not be subject to any additional charge nor receive any additional net

metering credit for the difference between the performance-based incentive value and net

metering value for the month.

     (e) Except as provided herein for residential small-scale solar projects, in every case

where a distributed generation project can be configured for net metering, it shall be the election

of the owner of such generation to choose one of two (2) separate methods through which the

owner will be compensated for the performance based incentive:

     (1) The owner is compensated solely through direct payments under the performance-

based incentive provisions of this chapter for the life of the tariff term with no net metering

implemented; or

     (2) The owner is compensated through a combination of direct payments and the bill

credit value of net metering for the life of the term of the tariff under the provisions of this

chapter.

     In the case of residential small-scale solar projects, only option (2) shall be available.

     In either option, the total value of the performance incentive per kilowatt-hour is the

same. An owner shall have a one-time right to switch the compensation methods after the

generation commences operation, provided that at least sixty (60) days notice is given to the

electric distribution company. Thereafter, any further compensation method switches shall be at

the sole discretion of the electric distribution company if requested again by the owner.

     (f) Every owner who elects the compensation method shall:

     (1) Receive compensation solely in the form of a check from the electric distribution

company or such other payment method that is mutually agreed between the electric distribution

company and the owner; and

     (2) Shall receive compensation in the form of offsets against its electricity bill from the

electric distribution company from net metering and the balance in the form of a check from the

electric distribution company or such other payment method that is mutually agreed upon

between the electric distribution company and the owner; provided, however, that no owner of a

distributed generation project may be compensated twice for the same kilowatt hour of electricity,

and that every self-generator shall receive the full pecuniary benefit of its election to participate

in the performance-based incentive program.

     (g) Every owner of a distributed generation project that can be configured for net

metering that elects the first option for compensation under the provisions of § 39-26.6-20(e)

shall become eligible to net meter its output in conformity with the provisions of existing law

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upon the completion of the full term of the applicable tariff. Nothing in this section shall preclude

a customer from electing not to participate in the performance based program and electing simply

to net meter under the provisions of existing law; provided, however, once an election is made to

participate, the customer will remain subject to the performance based tariff conditions and may

not terminate the arrangement without the consent of the electric distribution company.

     (h) As provided in § 39-26.6-9, any project developer may designate a generation unit on

the same parcel or contiguous parcel for net metering, provided that such unit or portion of such

unit designated for net metering is not receiving performance-based incentives under this chapter,

is capable of being segregated electrically, is configured with such electrical segregation, and is

separately metered.

     (i) All distributed generation projects accepting certificates shall be obligated to abide by

all the terms and conditions of the approved applicable tariff.

     39-26.6-21. Ownership of output, other attributes, and renewable energy

certificates. -- (a) Except as provided herein for residential small-scale solar projects, distributed

generation projects participating in the renewable energy growth program shall transfer to the

electric distribution company the rights and title to:

     (1) Those renewable energy certificates generated by the project during the term of the

applicable performance-based incentive tariff;

     (2) All energy produced by the generation that is not otherwise consumed on site under a

net metering arrangement; and

     (3) Rights to any other environmental attributes or market products that are created or

produced by the project; provided, however, that it shall be the election of the electric distribution

company whether it chooses to acquire the capacity of the distributed generation projects under

the tariffs set forth in this chapter and no ceiling prices recommended by the board and approved

by the commission will be adjusted downward in light of the electric distribution company's

election. The electric distribution company shall sell any products acquired and credit them to the

reconciliation account specified in § 39-26.6-25. When a generator reverts to net metering after

the end of the tariff term under the renewable energy growth program, the net metering generator

shall retain title to the renewable energy certificates generated by the project. In the case of

residential small-scale projects, title to all energy and capacity produced from the solar generation

shall remain with the residential customer, shall not be transferred to the electric distribution

company, and shall be deemed consumed by the residential customer on-site during the

applicable distribution service billing period with no sale or purchase between the residential

customer and the electric distribution company.

LC004420/SUB A/3 - Page 19 of 30

     (b) For the accounting purposes of the electric distribution company in treating the

performance-based incentives, the cost of the energy that is procured shall be the real time market

price of energy and the balance of the performance-based incentive shall be attributable to the

purchase of environmental and any other attributes acquired. This accounting shall have no effect

on the total bundled performance-based incentive to which the distributed generation project is

entitled under the provisions of this chapter.

     39-26.6-22. Zonal and other incentive payments. -- In order to provide the electric

distribution company with the flexibility to encourage distributed generation projects to be

located in designated geographical areas within its load zone where there is an identifiable system

benefit, reliability benefit, or cost savings to the distribution system in that geographical area, the

electric distribution company, in consultation with board and office, may propose to include an

incentive payment adder to the bid price of any winning bidder that proposes a distributed

generation project in the desired geographical area. The electric distribution company also may

propose other incentive payments to achieve other technical or public policy objectives that

provide identifiable benefits to customers. Any incentive payment adders must be approved by

the commission, and shall not be counted as part of the bid price when the bids are selected at an

enrollment event.

     39-26.6-23. Intersection of distributed generation and net metering. -- (a) Net

metering credits for excess generation shall not be credited during the term of the tariff when the

distributed generation project is receiving performance-based incentive payments under the tariff.

After the end of the term of the performance-based incentive tariff applicable to a distributed

generation project, net metering credits for excess generation in any given month shall be credited

to the net metered account at the applicable rate allowed under the law.

     (b) All distributed generation projects that had begun development prior to the date the

commission approves the first set of ceiling price recommendations from the board and that are in

operation by no later than July 1, 2016, shall be eligible to continue operation under the net

metering rules that would have been applicable to that self-generation project absent the change

in law set forth in this section, provided that such project does not otherwise participate in the

performance based incentive program set forth in this chapter.

     39-26.6-24. Rate design review by the commission. -- (a) On or after July 1, 2015, the

commission shall open a docket to consider rate design and distribution cost allocation among

rate classes in light of net metering and the changing distribution system that is expected to

include more distributed energy resources, including, but not limited to, distributed generation.

The commission will determine the appropriate cost responsibility and contributions to the

LC004420/SUB A/3 - Page 20 of 30

operation, maintenance, and investment in the distribution system that is relied upon by all

customers, including, without limitation, non-net metered and net metered customers. In that

docket, the commission shall require the electric distribution company to file a revenue-neutral

allocated cost of service study for all rate classes and a proposal for new rates for all customers in

each rate class. The electric distribution company shall use the distribution revenue requirement

upon which the then-current distribution rates were set. The electric distribution company may

use the allocated cost of service that was filed with the compliance filing from the rate case when

the then current distribution rates were set. The commission may also address the rate design for

the equitable recovery of costs associated with energy efficiency and any renewable energy

programs that are recovered in rates.

     (b) In establishing any new rates the commission may deem appropriate, the commission

shall take into account and balance the following factors:

     (1) The benefits of distributed energy resources;

     (2) The distribution services being provided to net metered customers when the

distributed generation is not producing electricity;

     (3) Simplicity, understandability and transparency of rates to all customers, including

non-net metered and net-metered customers;

     (4) Equitable ratemaking principles regarding the allocation of the costs of the

distribution system;

     (5) Cost causation principles;

     (6) The general assembly's legislative purposes in creating the distributed generation

growth program; and

     (7) Any other factors the commission deems relevant and appropriate in establishing a

fair rate structure. The rates shall be designed for each proposed rate class in accordance with

industry-standard cost allocation principles. The commission may consider any reasonable rate

design options, including without limitation, fixed charges, minimum monthly charges, demand

charges, volumetric charges, or any combination thereof, with the purpose of assuring recovery of

costs fairly across all rate classes.

     (c) The commission shall issue an order in the docket by no later than December 1, 2015.

Any new rates shall take effect for usage on and after January 1, 2016; provided, however, that

the electric distribution company may seek an extension if necessary to make the billing system

changes necessary to implement a new rate structure. After new revenue-neutral rates are set in

the docket specified above, the commission may approve changes to the rate design in any future

distribution base rate cases when a fully allocated embedded cost of service study is being

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reviewed in the rate case, subject to the principles set forth in subsection (b) of this section.

     39-26.6-25. Forecasted rate and reconciliation. -- (a) Three (3) months prior to the

beginning of the first program year, the electric distribution company shall file a forecast of the

total amount of payments that is likely to be paid out to distributed generation projects in the

coming program year within the electric distribution company's load zone, along with any costs

permitted for recovery pursuant to §§ 39-26.6-4, 39-26.6-13 and 39-26.6-18. The total of all

forecasted payments and costs shall be aggregated, net of forecasted revenues from the sale of the

energy, renewable energy certificates, and any other market products from the distributed

generation projects participating in the performance based incentive program. The forecasted net

aggregate amount shall be used to design a fixed monthly charge per customer to recover the net

forecast in rates charged to all distribution customers during the prospective calendar year, which

fixed charge may be different by rate class in order to reasonably and equitably spread the

program costs across all customer classes. The fixed rate shall stay in effect until changed after

the first reconciliation filing set forth below and the rate reconciliation process shall be repeated

annually, as set forth below. The commission, in its discretion, may move the reconciliation of

costs and credits under § 39-26.1-5(f) into this reconciliation in order to have one reconciliation

of all program costs and credits from the long-term contracting standard, distributed generation

standard contracting, and renewable energy growth program.

     (b) Within three (3) months after the end of each program year, the electric distribution

company shall reconcile the total amount recovered from distribution customers against the total

of net payments and costs for the program year. The electric distribution company shall file the

reconciliation with a report along with a new forecast of payments to be made for the next twelve

(12) month period, net of forecasted revenues for the resale of energy, renewable energy

certificates, or any other market attributes sold by the electric distribution company. The forecast

shall be used to set a new rate in the same manner as set forth above and the new rate shall remain

in effect until rates are reset in the next annual reconciliation and the reconciliation balance shall

be reflected in the new rate.

     SECTION 2. Section 39-26.1-3 of the General Laws in Chapter 39-26.1 entitled "Long-

Term Contracting Standard for Renewable Energy" is hereby amended to read as follows:

     39-26.1-3. Long-term contract standard. -- (a) Beginning on or before July 1, 2010,

each electric distribution company shall be required to annually solicit proposals from renewable

energy developers and, provided commercially reasonable proposals have been received, enter

into long-term contracts with terms of up to fifteen (15) years for the purchase of capacity, energy

and attributes from newly developed renewable energy resources. Subject to commission

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approval, the electric distribution company may enter into contracts for term lengths longer than

fifteen (15) years. Notwithstanding any other provisions of this chapter, on or before August 15,

2009, the electric distribution company shall solicit proposals for one newly developed renewable

energy resources project as required in section § 39-26.1-7. Proposals for the sale of output from

an offshore wind project received under the provisions of this section shall be diligently and fully

considered without prejudice, regardless of the status of any proceedings under sections §§ 39-

26.1-7 or 39-26.1-8.

      (b) The timetable and method for solicitation and execution of such contracts shall be

proposed by the electric distribution company, and shall be subject to review and approval by the

commission prior to issuance by the company; provided that the timetable is reasonably designed

to result in the electric distribution company having the minimum long-term contract capacity

under contract within four (4) years of the date of the first solicitation; it is not necessary that the

projects associated with these contracts be operational within these four (4) years, as the

operational dates shall be specified in the contract. The electric distribution company shall,

subject to review and approval of the commission, select a reasonable method of soliciting

proposals from renewable energy developers, which shall include, at a minimum, an annual

public solicitation, but may also include individual negotiations. The solicitation process shall

permit a reasonable amount of negotiating discretion for the parties to engage in commercially

reasonable arms-length negotiations over final contract terms. Each long-term contract entered

into pursuant to this section shall contain a condition that it shall not be effective without

commission review and approval. The electric distribution company shall file such contract, along

with a justification for its decision, within a reasonable time after it has executed the contract

following a solicitation or negotiation. The commission shall hold public hearings to review the

contract within forty-five (45) days of the filing and issue a written order approving or rejecting

the contract within sixty (60) days of the filing; in rejecting a contract the commission may advise

the parties of the reason for the contract being rejected and direct the parties to attempt to address

the reasons for rejection in a revised contract within a specified period not to exceed ninety (90)

days. The commission shall approve the contract if it determines that: (1) the contract is

commercially reasonable; (2) the requirements for the annual solicitation have been met; and (3)

the contract is consistent with the purposes of this chapter. A report on each solicitation shall be

filed with the commission each year within a reasonable time after decisions are made by the

electric distribution company regarding the solicitation results, even if no contracts are executed

following the solicitation.

      (c) (1) No electric distribution company shall be obligated to enter into long-term

LC004420/SUB A/3 - Page 23 of 30

contracts for newly developed renewable energy resources on terms which the electric

distribution company reasonably believes to be commercially unreasonable; provided, however, if

there is a dispute about whether these terms are commercially unreasonable, the commission shall

make the final determination after an evidentiary hearing. The electric distribution company shall

not be obligated to enter into long-term contracts pursuant to this section that would, in the

aggregate, exceed the minimum long-term contract capacity, but may do so voluntarily subject to

commission approval. As long as the electric distribution company has entered into long-term

contracts in compliance with this section, the electric distribution company shall not be required

by regulation or order to enter into power purchase contracts with renewable generation projects

for power, renewable energy certificates, or any other attributes with terms of more than three (3)

years in meeting its applicable annual renewable portfolio standard requirements set forth in

section 39-26-4 or pursuant to any other provision of the law.

      (2) Except as provided in section 39-26.1-7 and 39-26.1-8, an electric distribution

company shall not be required to enter into long-term contracts for newly developed renewable

energy resources that exceed the following five (5) year phased schedule:

      By December 30, 2010: Twenty-five percent (25%) of the minimum long-term contract

capacity;

      By December 30, 2011: Fifty percent (50%) of the minimum long-term contract

capacity;

      By December 30, 2012: Seventy-five percent (75%) of the minimum long-term contract

capacity;

      By After December 30, 2014 2013: One hundred percent (100%) of the minimum long-

term contract capacity; but may do so earlier voluntarily, subject to commission approval subject

to subsection (f) of this section.

      (d) Compliance with the long-term contract standard shall be demonstrated through

procurement pursuant to the provisions of a long-term contract of energy, capacity and attributes

reflected in NE-GIS certificates relating to generating units certified by the commission as using

newly developed renewable energy resources, as evidenced by reports issued by the NE-GIS

administrator and the terms of the contract; provided, however, that the NE-GIS certificates were

procured pursuant to the provisions of a long-term contract. The electric distribution company

also may purchase other attributes from the generator as part of the long-term contract.

      (e) After the adoption of the rules and regulations promulgated by the commission

pursuant to this chapter, an electric distribution company may, at its sole election, immediately

and from time to time, procure additional commercially reasonable long-term contracts for newly

LC004420/SUB A/3 - Page 24 of 30

developed renewable-energy resources on an earlier timetable or above the minimum long-term

contract capacity, subject to commission approval.

     (f) At least once per year beginning in 2014, the electric distribution company shall

conduct solicitations until one hundred percent (100%) of the minimum long-term contract

capacity is met; provided, however, that no contracts shall be awarded unless the pricing under

such contract(s) is below the forecasted market price of energy and renewable energy certificates

over the term of the proposed contract, using industry standard forecasting methodologies as have

been used to evaluate pricing in the past solicitation processes reviewed by the commission under

this section. In such solicitations, the electric distribution company may elect not to acquire

capacity, but shall acquire all environmental attributes and energy.

     SECTION 3. Section 39-26.4-3 of the General Laws in Chapter 39-26.4 entitled "Net

Metering" is hereby amended to read as follows:

     39-26.4-3. Net metering. -- (a) The following policies regarding net metering of

electricity from eligible net metering systems and regarding any person that is a renewable self-

generator shall apply:

      (1) The maximum allowable capacity for eligible net metering systems, based on

nameplate capacity, shall be five megawatts (5 mw).

      (2) The aggregate amount of net metering in Rhode Island shall not exceed three percent

(3%) of peak load, provided that at least two megawatts (2 mw) are reserved for projects of less

than fifty kilowatts (50 kw). The aggregate amount of net metering in the Block Island Power

Company and the Pascoag Utility District shall not exceed three percent (3%) of peak load for

each utility district.

      (3)(2) For ease of administering net metered accounts and stabilizing net metered

account bills, the electric distribution company may elect (but is not required) to estimate for any

twelve (12) month period:

      (i) The production from the eligible net metering system; and

      (ii) Aggregate consumption of the net metered accounts at the eligible net metering

system site and establish a monthly billing plan that reflects the expected credits that would be

applied to the net metered accounts over twelve (12) months. The billing plan would be designed

to even out monthly billings over twelve (12) months, regardless of actual production and usage.

If such election is made by the electric distribution company, the electric distribution company

would reconcile payments and credits under the billing plan to actual production and

consumption at the end of the twelve (12) month period and apply any credits or charges to the

net metered accounts for any positive or negative difference, as applicable. Should there be a

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material change in circumstances at the eligible net metering system site or associated accounts

during the twelve (12) month period, the estimates and credits may be adjusted by the electric

distribution company during the reconciliation period. The electric distribution company also may

elect (but is not required) to issue checks to any net metering customer in lieu of billing credits or

carry forward credits or charges to the next billing period. For residential eligible net metering

systems twenty-five kilowatts (25 kw) or smaller, the electric distribution company, at its option,

may administer renewable net metering credits month to month allowing unused credits to carry

forward into following billing period.

      (4)(3) If the electricity generated by an eligible net metering system during a billing

period is equal to or less than the net metering customer's usage during the billing period for

electric distribution company customer accounts at the eligible net metering system site, the

customer shall receive renewable net metering credits, which shall be applied to offset the net

metering customer's usage on accounts at the eligible net metering system site.

      (5)(4) If the electricity generated by an eligible net metering system during a billing

period is greater than the net metering customer's usage on accounts at the eligible net metering

system site during the billing period, the customer shall be paid by excess renewable net metering

credits for the excess electricity generated beyond the net metering customer's usage at the

eligible net metering system site up to an additional twenty-five percent (25%) of the renewable

self-generator's consumption during the billing period; unless the electric distribution company

and net metering customer have agreed to a billing plan pursuant to subdivision (3).

      (6)(5) The rates applicable to any net metered account shall be the same as those that

apply to the rate classification that would be applicable to such account in the absence of net

metering including customer and demand charges and no other charges may be imposed to offset

net metering credits.

      (b) The commission shall exempt electric distribution company customer accounts

associated with an eligible net metering system from back-up or standby rates commensurate with

the size of the eligible net metering system, provided that any revenue shortfall caused by any

such exemption shall be fully recovered by the electric distribution company through rates.

      (c) Any prudent and reasonable costs incurred by the electric distribution company

pursuant to achieving compliance with subsection (a) and the annual amount of the distribution

component of any renewable net metering credits or excess renewable net metering credits

provided to accounts associated with eligible net metering systems, shall be aggregated by the

distribution company and billed to all distribution customers on an annual basis through a

uniform per kilowatt-hour (kwh) surcharge embedded in the distribution component of the rates

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reflected on customer bills.

      (7)(d) The billing process set out in this section shall be applicable to electric distribution

companies thirty (30) days after the enactment of this chapter.

     SECTION 4. Section 39-26.2-7 of the General Laws in Chapter 39-26.2 entitled

"Distributed Generation Standard Contracts" is hereby amended to read as follows:

     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

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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

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 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. An eligible anaerobic digestion distributed generation

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

application within thirty-six (36) 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

LC004420/SUB A/3 - Page 28 of 30

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

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 5. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS - THE CLEAN ENERGY JOBS

PROGRAM

***

     This act would create a tariff-based renewable energy distributed generation financing

program, or "Renewable Energy Growth Program", to provide for the continuation of the

development of the renewable energy growth program in the load zone of the electric distribution

company at a reasonable cost.

     This act would take effect upon passage.

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