HOUSE DOCKET, NO. 3135        FILED ON: 1/16/2015

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 2851

The Commonwealth of Massachusetts

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PRESENTED BY:

Antonio F. D. Cabral

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To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:

The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:

An Act to promote offshore wind energy.

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PETITION OF:

HOUSE DOCKET, NO. 3135        FILED ON: 1/16/2015

HOUSE  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  No. 2851

The Commonwealth of Massachusetts

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In the One Hundred and Eighty-Ninth General Court
(2015-2016)

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An Act to promote offshore wind energy.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:
 

SECTION 7:  Chapter 169 of the acts of 2008 is hereby amended by inserting after section 83A the following section: -

Section 83B: Beginning on or before October 1, 2016 and continuing until September 30, 2018, all distribution companies in the commonwealth, as defined in section 1 of chapter 164 of the General Laws, shall be required to conduct four (4) joint solicitations for proposals from offshore wind energy developers to deliver an annual amount of electricity of no less than 876,000 MWh and, provided reasonable proposals have been received, enter into commercially reasonable long-term contracts to facilitate the financing of offshore wind energy generation.  Distribution companies shall not enter into long-term contracts under this section that would, in the aggregate, exceed 4,380,000 MWh per annum.

For purposes of this section, the term "commercially reasonable" shall mean terms and pricing that are reasonably consistent with what an experienced power market analyst would expect to see in transactions involving newly developed offshore wind energy resources. Commercially reasonable shall include having a credible project operation date, as determined by the department of public utilities, but a project need not have completed the requisite permitting process to be considered commercially reasonable. If there is a dispute about whether any terms or pricing are commercially reasonable, the department of public utilities shall make the final determination after evidentiary hearings. 

The timetable and method for solicitation and execution of contracts under this section shall be proposed by the distribution company, in consultation with the department of energy resources, and shall be subject to review and approval by the department of public utilities. This long-term contracting obligation for offshore wind shall be separate and distinct from the electric distribution companies’ obligation to meet applicable annual renewable portfolio standard, hereinafter referred to as RPS, requirements, under section 11F of chapter 25A of the General Laws.

A distribution company may fulfill its responsibilities under this section through individual competitive solicitations that are independent from the 4 joint solicitations for proposals from offshore wind energy developers and, provided reasonable proposals have been received, enter into commercially reasonable long-term contracts to facilitate the financing of offshore wind energy generation under this section if, upon petition to the department of public utilities prior to the first joint solicitation, the department rules that a solicitation by an individual distribution company would be more commercially reasonable than said distribution company engaging in a joint solicitation.

For purposes of this section, a long-term contract shall be a contract with a term of 20 to 30 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. Beginning on or before October 1, 2016, the electric companies shall jointly select a reasonable method of soliciting proposals from offshore wind energy developers using a competitive bidding process only. Distribution companies may use timetables and methods for the solicitation of competitively bid long-term contracts approved by the department of public utilities prior to October 1, 2016. A distribution company may structure its contracts, pricing 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. 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 offshore wind 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) the department of public utilities shall authorize the contracting parties to seek recovery of such transmission costs of the project through federal transmission rates, consistent with policies and tariffs of the federal energy regulatory commission; and (d) require that the proposed offshore wind energy project meet the following criteria: (1) have a commercial operation date, as verified by the department of energy resources, on or after October 1, 2018; (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; (3) have control or a right to acquire control over a suitable offshore site at the time of the submission of the proposal; (4) be developed by a team with a sufficient amount of relevant experience to successfully develop, finance, construct and operate its proposed project; and (5) 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 in the commonwealth; (iii) contribute to greenhouse gas reductions in the commonwealth pursuant to chapter 238 of the acts of 2008, as well as other air emissions reductions in the commonwealth; (iv) demonstrate that the offshore wind energy will be delivered to the ISO New England  Control Area including, where feasible, at or near the location of retiring carbon emitting generation sources; (v) be commercially reasonable; and (vi) 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 consider both the potential costs and benefits of such contracts and shall approve a contract only upon a finding that it is a commercially reasonable mechanism for procuring offshore wind energy on a long-term basis taking into account the factors outlined in this section.

The joint solicitations required under this section shall be coordinated among the electric distribution companies by the department of energy resources. If distribution companies are unable to agree on a winning bid under a solicitation under this section, the matter shall be submitted to the attorney general, in consultation with the department of energy resources and the department of public utilities, for a final, binding determination of the winning bid.

The electric distribution companies shall each enter into a contract with the winning bidders 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. As long as an electric distribution company has entered into long-term contracts in compliance with this section, it shall not be required by regulation or order or by other agreement to enter into additional long-term contracts; provided, however, that an electric distribution company may execute such contracts voluntarily, subject to the approval of the department of public utilities.

An electric distribution company may elect to use any energy purchased under such contracts for resale to its customers, and may elect to retain RECs to meet the applicable annual RPS requirements under said section 11F of said chapter 25A. If the energy and RECs are not so used, 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 above 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 terminate, the obligation to continue periodic solicitations to enter into long-term contracts shall cease; provided however, that contracts already executed and approved by the department of public utilities shall remain in full force and effect.

This section shall not limit consideration of other contracts for RECs or power submitted by a distribution company for review and approval by the department of public utilities.

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.