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:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

project technically exceeding ten (10) megawatts.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

reasonable;

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

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

     (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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

are commercially reasonable.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

shall accept filings of the same and shall approve them.

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

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

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

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

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

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

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.

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

long-term contract capacity.

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

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

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

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

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

distribution company.

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

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

***

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

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

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

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

National Grid for costs associated with interconnection and standby transformers.

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

2010.

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