2018 -- S 2321

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LC004601

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2018

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A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS - LONG-TERM LEASING

CONTRACTS FOR RENEWABLE ENERGY

     

     Introduced By: Senator V. Susan Sosnowski

     Date Introduced: February 15, 2018

     Referred To: Senate Commerce

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 39-26.1-7 of the General Laws in Chapter 39-26.1 entitled "Long-

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

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     39-26.1-7. Town of New Shoreham Project.

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     (a) The general assembly finds it is in the public interest for the state to facilitate the

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construction of a small-scale offshore wind demonstration project off the coast of Block Island,

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including an undersea transmission cable that interconnects Block Island to the mainland in order

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to: position the state to take advantage of the economic development benefits of the emerging

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offshore wind industry; promote the development of renewable energy sources that increase the

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nation's energy independence from foreign sources of fossil fuels; reduce the adverse

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environmental and health impacts of traditional fossil fuel energy sources; and provide the Town

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of New Shoreham with an electrical connection to the mainland. To effectuate these goals, and

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notwithstanding any other provisions of the general or public laws to the contrary, the Town of

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New Shoreham project, its associated power purchase agreement, transmission arrangements, and

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related costs are authorized pursuant to the process and standards contained in this section. The

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Narragansett Electric Company is hereby authorized to enter into an amended power purchase

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agreement with the developer of offshore wind for the purchase of energy, capacity, and any

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other environmental and market attributes, on terms that are consistent with the power purchase

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agreement that was filed with the commission on December 9, 2009 in docket 4111, and

 

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amendments changing dates and deadlines, provided that the pricing terms of such agreement are

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amended as more fully described in subsection 39-26.1-7(e), in addition to other amendments that

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are made to take into account the provisions of this section as amended since the filing of the

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agreement in docket 4111. Any amendments shall ensure that the pricing can only be lower, and

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never exceed, the original pricing included in the power purchase agreement that was reviewed in

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docket 4111. The demonstration project subject to the amended power purchase agreement shall

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include up to (but not exceeding) eight (8) wind turbines with aggregate nameplate capacity of no

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more than thirty (30) megawatts, even if the actual capacity factor of the project results in the

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project technically exceeding ten (10) megawatts.

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     (b) The amended power purchase agreement shall be filed with the Public Utilities

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Commission. Upon the filing of the amended power purchase agreement, the commission shall

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open a new docket. The commission shall allow the parties to docket 4111 to become parties in

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the new docket who may file testimony within fifteen (15) days of the filing of the amended

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agreement. The commission shall allow other interventions on an expedited basis, provided they

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comply with the commission standards for intervention. The developer shall provide funding for

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the economic development corporation to hire an expert experienced in power markets,

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renewable energy project financing, and power contracts who shall provide testimony regarding

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the terms and conditions of the power purchase agreement to assist the commission in its review,

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provided that the developer shall be precluded from influencing the choice of expert, which shall

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be in the sole discretion of the economic development corporation. This testimony shall be filed

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within twenty (20) days after the filing of the amended power purchase agreement. The parties

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shall have the right to respond to the testimony of this expert through oral examination at the

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evidentiary hearings. The commission shall hold one public comment hearing within five (5) days

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after the filing of the expert testimony. Evidentiary hearings shall commence no later than thirty

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(30) days from the filing of the amended power purchase agreement.

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     (c) The commission shall review the amended power purchase agreement taking into

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account the state's policy intention to facilitate the development of a small offshore wind project

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in Rhode Island waters, while at the same time interconnecting Block Island to the mainland. The

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commission shall review the amended power purchase agreement and shall approve it if:

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     (i) The amended agreement contains terms and conditions that are commercially

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reasonable;

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     (ii) The amended agreement contains provisions that provide for a decrease in pricing if

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savings can be achieved in the actual cost of the project pursuant to subsection 39-26.1-7(e);

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     (iii) The amended agreement is likely to provide economic development benefits,

 

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including: facilitating new and existing business expansion and the creation of new renewable

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energy jobs; the further development of Quonset Business Park; and, increasing the training and

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preparedness of the Rhode Island workforce to support renewable energy projects; and

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     (iv) The amended power purchase agreement is likely to provide environmental benefits,

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including the reduction of carbon emissions. An advisory opinion on the findings of economic

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benefit set forth in (iii) above shall be provided by the Rhode Island economic development

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corporation and an advisory opinion on the environmental benefits set forth in (iv) above shall be

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filed by the Rhode Island department of environmental management. The advisory opinions shall

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be filed with the commission within twenty (20) days of filing of the amended power purchase

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agreement. The commission shall give substantial deference to the factual and policy conclusions

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set forth in the advisory opinions in making the required findings. Notwithstanding any other

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provisions of the general laws to the contrary, for the purposes of this section, "commercially

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reasonable" shall mean terms and pricing that are reasonably consistent with what an experienced

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power market analyst would expect to see for a project of a similar size, technology and location,

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and meeting the policy goals in subsection (a) of this section.

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     (d) The commission shall issue a written decision to accept or reject the amended power

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purchase agreement, without conditions, no later than forty-five (45) days from the filing of the

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amended power purchase agreement, without delay or extension of the timeframes contained in

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this section. Any review of the commission's decision shall be according to chapter 5 of title 39,

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and the supreme court shall advance any proceeding under this section so that the matter is

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afforded precedence on the calendar and shall be heard and determined with as little delay as

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possible. The provisions of § 39-26.1-4 and the provisions of subsections (b), (c), (d), and (f) of §

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39-26.1-5 shall apply, and all costs incurred in the negotiation, administration, enforcement,

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transmission engineering associated with the design of the cable, and implementation of the

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project and agreement shall be recovered annually by the electric distribution company in electric

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distribution rates. The pricing under the agreement shall not have any precedential effect for

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purposes of determining whether other long-term contracts entered into pursuant to this chapter

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are commercially reasonable.

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     (e) Cap and lower price. (i) The amended power purchase agreement subject to

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subsection 39-26.1-7(a) shall provide for terms that shall decrease the pricing if savings can be

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achieved in the actual cost of the project, with all realized savings allocated to the benefit of

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ratepayers. (ii) The amended power purchase agreement shall also provide that the initial fixed

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price contained in the signed power purchase agreement submitted in docket 4111 shall be the

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maximum initial price, and any realized savings shall reduce such price. After making any such

 

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reduction to the initial price based on realized savings, the price for each year of the amended

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power purchase agreement shall be fixed by the terms of said agreement. (iii) The amended

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power purchase agreement shall require that the costs of the project shall be certified by the

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developer. An independent third-party acceptable to the division of public utilities and carriers

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shall within thirty (30) days of this certification by the developer, verify the accuracy of such

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costs at the completion of the construction of the project. The reasonable costs of this verification,

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shall be paid for by the developer. Upon receipt of such third-party verification, the division shall

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notify the Narragansett Electric Company of the final costs. The public utilities commission shall

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reduce the expense to ratepayers consistent with a verified reduction in the project costs.

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     (f) The project shall include a transmission cable between the Town of New Shoreham

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and the mainland of the state. The electric distribution company, at its option, may elect to own,

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operate, or otherwise participate in such transmission cable project. The electric distribution

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company, however, has the option to decline to own, operate, or otherwise participate in the

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transmission cable project. The electric distribution company may elect to purchase the

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transmission cable and related facilities from the developer or an affiliate of the developer,

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pursuant to the terms of a transmission facilities purchase agreement negotiated between the

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electric distribution company and the developer or its affiliate, an unexecuted copy of which shall

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be provided to the division of public utilities and carriers for the division's consent to execution.

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The division shall have twenty (20) days to review the agreement. If the division independently

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determines that the terms and pricing of the agreement are reasonable, taking into account the

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intention of the legislature to advance the project as a policy-making matter, the division shall

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provide its written consent to the execution of the transmission facilities purchase agreement.

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Once written consent is provided, the electric distribution company and its transmission affiliate

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are authorized to make a filing with the federal energy regulatory commission to put into effect

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transmission rates to recover all of the costs associated with the purchase of the transmission

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cable and related facilities and the annual operation and maintenance. The revenue requirement

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for the annual cable costs shall be calculated in the same manner that the revenue requirement is

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calculated for other transmission facilities in Rhode Island for local network service under the

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jurisdiction of the federal energy regulatory commission. The division shall be authorized to

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represent the State of Rhode Island in those proceedings before the federal energy regulatory

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commission, including the authority to enter into any settlement agreements on behalf of the state

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to implement the intention of this section. The division shall support transmission rates and

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conditions that allow for the costs related to the transmission cable and related facilities to be

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charged in transmission rates in a manner that socializes the costs throughout Rhode Island. All

 

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interconnection and standby transformer costs which have been and may be incurred by National

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Grid and/or by the electric distribution company and/or by the Block Island Power Company or

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its successor shall also be charged in transmission rates in a manner that socializes the costs

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throughout Rhode Island. National Grid and/or the electric distribution company shall reimburse

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the Block Island Power Company or its successor in connection with all funds expended by the

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Block Island Power Company or its successor in connection with all interconnection and standby

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transformer costs and National Grid shall socialize all costs of this reimbursement throughout

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Rhode Island as set forth herein. The amendment to this section clarifies the legislative intent of

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this section as enacted on June 15, 2010; therefore, this amendment shall be retroactively applied

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and shall be effective as of June 15, 2010. Should the electric distribution company own, operate,

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and maintain the cable, the annual costs incurred by the electric distribution company directly or

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through transmission charges shall be recovered annually through a fully reconciling rate

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adjustment from customers of the electric distribution company and/or from the Block Island

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Power Company or its successor, subject to any federal approvals that may be required by law.

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The allocation of the costs related to the transmission cable through transmission rates or

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otherwise shall be structured so that the estimated impact on the typical residential customer bill

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for such transmission costs for customers in the Town of New Shoreham shall be higher than the

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estimated impact on the typical residential customer bill for customers on the mainland of the

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electric distribution company. This higher charge for the customers in the Town of New

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Shoreham shall be developed by allocating the actual cable costs based on the annual peak

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demands of the Block Island Power Company and the electric distribution company, and these

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resultant costs recovered in the per kWh charges of each company. In any event, the difference in

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the individual charge per kWh or per customer/month shall not exceed the ratio of average

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demand to peak demand for Block Island Power Company relative to the electric distribution

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company, currently at 1.8 to 1.0 respectively. To the extent that any state tariffs or rates must be

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put into effect in order to implement the intention of this section, the public utilities commission

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shall accept filings of the same and shall approve them.

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     (g) Any charges incurred by the Block Island Power Company or its successor pursuant

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to this section or other costs incurred by the Block Island Power Company in implementing this

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section, including the cost of participation in regulatory proceedings in the state or at the federal

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energy regulatory commission shall be recovered annually in rates through a fully reconciling rate

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adjustment, subject to approval by the commission. If the electric distribution company owns,

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operates, or otherwise participates in the transmission cable project, pursuant to subsection 39-

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26.1-7(b) the provisions of § 39-26.1-4 shall not apply to the cable cost portion of the Town of

 

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New Shoreham Project.

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     (h) Any contract entered into pursuant to this section shall count as part of the minimum

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long-term contract capacity.

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     (i) If the electric distribution company elects not to own the transmission cable, the

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developer may elect to do so directly, through an affiliate, or a third-party and the power purchase

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agreement pricing shall be adjusted to allow the developer, an affiliate or a third-party, to recover

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the costs (including financing costs) of the transmission facilities, subject to complying with the

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terms as set forth in the power purchase agreement between the developer and the electric

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distribution company.

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     SECTION 2. This act shall take effect upon passage and shall retroactively apply as of

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June 15, 2010.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO PUBLIC UTILITIES AND CARRIERS - LONG-TERM LEASING

CONTRACTS FOR RENEWABLE ENERGY

***

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     This act would clarify that interconnection and standby transformer costs incurred by any

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New Shoreham electric distribution company (i.e., National Grid and/or Block Island Power

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Company or their successors) shall be charged in transmission rates and be socialized throughout

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Rhode Island, and would provide for the reimbursement of Block Island Power Company by

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National Grid for costs associated with interconnection and standby transformers.

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     This act would take effect upon passage and would retroactively apply as of June 15,

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2010.

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