Amendment #14 to H.4198

Long Term Contracts

Representatives Jones of North Reading, Peterson of Grafton, Hill of Ipswich, Poirier of North Attleborough and deMacedo of Plymouth move that the bill be amended striking section 32, in its entirety, and inserting in the place thereof the following section:–

“SECTION 32. Said chapter 169 is hereby further amended by inserting after section 83 the following section:-

Section 83A. Beginning on January 1, 2013, and continuing until December 31, 2016, each distribution company in the commonwealth, as defined in section 1 of chapter 164 of the General Laws, shall be required in that time period to solicit additional proposals from renewable energy developers and, provided reasonable proposals have been received, enter into additional cost-effective long-term contracts; provided, however, that distribution companies may jointly solicit additional proposals and apportion resulting cost-effective long-term contracts among the distribution companies in accordance with this section. The timetable and method for solicitation and execution of such contracts shall be proposed by the distribution companies in consultation with the department of energy resources and shall be subject to review and approval by the department of public utilities.

For purposes of this section, a long term contract shall be a contract with a term of 10 to 20 years. In developing proposed long term contracts, the distribution companies shall consider multiple contracting methods, including long-term contracts for renewable energy certificates, hereinafter referred to as RECs, for energy, and for a combination of both RECs and energy; provided, however, that such items shall be priced separately. Beginning January 1, 2013, the electric companies shall select a reasonable method of soliciting proposals from renewable energy developers using a competitive bidding process only. Nothing in this section shall prohibit distribution companies from joint solicitation or contracting. A distribution company may decline to consider contract proposals having terms and conditions that it determines would require the contract obligation to place an unreasonable burden on the distribution company’s balance sheet, and may structure its contracts, pricing, and/or administration of the products purchased to mitigate impacts on the balance sheet or income statement of the distribution company or its parent company, subject to the approval of the department of public utilities; provided that such mitigation shall not increase costs to ratepayers. The distribution companies shall consult with the department of energy resources and the attorney general’s office regarding the choice of contracting methods and solicitation methods. All proposed contracts shall be subject to the review and approval of the department of public utilities.

The department of public utilities and the department of energy resources each shall adopt regulations consistent with this section. The regulations shall: (a) allow renewable energy developers to submit proposals for long-term contracts conforming to the contracting methods specified in the second paragraph; (b) require that contracts executed by the distribution companies under such proposals are filed with, and approved by, the department of public utilities before they become effective; (c) provide for an annual remuneration for each contracting distribution company of up to 4 per cent but no less than 2.75 per cent of the annual payments under the contract made by each distribution company to compensate the companies for accepting the financial obligation of the long-term contract, as determined by the department of public utilities at the time of contract approval; and (d) require that the renewable energy generating source to be used by a developer under the proposal meet the following criteria: (1) have a commercial operation date, as verified by the department of energy resources, on or after January 1, 2013; (2) be qualified by the department of energy resources as eligible to participate in the RPS program, under said section 11F of said chapter 25A, and to sell RECs under the program; and (3) be determined by the department of public utilities to: (i) provide enhanced electricity reliability within the commonwealth; (ii) contribute to moderating system peak load requirements; (iii) be cost effective to Massachusetts electric ratepayers over the term of the contract; and (iv) where feasible, create additional employment and economic development in the commonwealth. As part of its approval process, the department of public utilities shall consider the attorney general’s recommendations, which shall be submitted to the department of public utilities within 45 days following the filing of such contracts with the department of public utilities. The department of public utilities shall take into consideration both the potential costs and benefits of such contracts and shall approve a contract only upon a finding that it is a cost effective mechanism for procuring low cost renewable energy on a long-term basis taking into account the factors outlined in this section. For the purposes of this section, cost effective shall mean proposals that are likely to result in net ratepayer savings as compared to current and projects future market prices of energy and RECs over the course of the contract period. If, after competitive solicitation, no proposal received by a distribution company or distribution companies is determined to provide such savings, cost effective shall mean proposals that are the least costly in terms of electric service rate impacts.

If distribution companies choose to engage in joint solicitations, authorized under this section, said solicitations shall be coordinated among the electric distribution companies by the department of energy resources. The electric distribution companies shall each enter into a contract with the winning bidder(s) for their apportioned share of the market products being purchased from the project. The apportioned share shall be calculated and based upon the total energy demand from all distribution customers in each service territory of the distribution companies.

Distribution companies shall not enter into long-term contracts under this section that would, in the aggregate, exceed 4 per cent of the total energy demand from all distribution customers in the service territory of the distribution company. Ten per cent of the aggregate level of long-term contracts under this section shall be reserved for newly developed, small, emerging or diverse renewable energy distributed generation facilities, as determined by the department of energy resources. Notwithstanding any provision in this section to the contrary, each distribution company shall be required to solicit proposals for such distributed generation facilities separately through a competitive bidding process only. Distributed generation projects qualifying under this paragraph shall have a nameplate capacity no larger than 6 megawatts, shall not qualify as a Class I, II or III net metering facility, as defined in section 138 of said chapter 164, and shall not be eligible for solar renewable energy credits at the time of solicitation. Distribution companies shall not be required by regulation or order or by other agreement to enter into additional long-term contracts, other than as is prescribed in this section.

An electric distribution company may elect to use any energy purchased under such contracts for resale to its basic service customers, and may elect to retain RECs for the purpose of meeting the applicable annual RPS requirements under said section 11F of said chapter 25A. If the energy and/or RECs are resold to basic service customers, basics service customers shall pay the contracted price of said energy and RECs. If the energy and RECs are not sold to basic service customers, such companies shall sell such purchased energy into the wholesale spot market and shall sell such purchased RECs through a competitive bid process. Notwithstanding the previous sentence, the department of energy resources shall conduct periodic reviews to determine the impact on the energy and REC markets of the disposition of energy and RECs under this section and may issue reports recommending legislative changes if it determines that actions are being taken that will adversely affect the energy and REC markets.

If a distribution company sells the purchased energy into the wholesale spot market and auctions the RECs as described in the fifth paragraph, the distribution company shall net the cost of payments made to projects under the long-term contracts against the proceeds obtained from the sale of energy and RECs, and the difference shall be credited or charged to all distribution customers through a uniform fully reconciling annual factor in distribution rates, subject to review and approval of the department of public utilities. The reconciliation process shall be designed so that a distribution company recovers all costs incurred under such contracts. If the RPS requirements of said section 11F of said chapter 25A should ever terminate, the obligation to continue periodic solicitations to enter into long-term contracts shall cease, but contracts already executed and approved by the department of public utilities shall remain in full force and effect.

If this section is subject to a judicial challenge, the department of public utilities may suspend the applicability of the challenged provision during the pendency of the judicial action until final resolution of the challenge and any appeals, and shall issue such orders and take such other actions as are necessary to ensure that the provisions that are not challenged are implemented expeditiously to achieve the public purposes of this section.”.