PUC ruling could spur renewable energy sector

After years of legal wrangling, the R.I. Public Utilities Commission last week rejected National Grid’s electricity supply plan for next year because it did not include long-term contracts for buying renewable energy – a decision that could speed development of Rhode Island’s nascent alternative energy sector.
In 2004, the General Assembly passed a law mandating that Rhode Island get 16 percent of its electricity from renewable sources by 2020. To carry that out, the PUC enacted rules the following year requiring National Grid to sign long-term contracts with renewable developers.
But to the consternation of Gov. Donald L. Carcieri, environmentalists and some lawmakers, in the intervening years the PUC has not made National Grid enter into such contracts, even after the company dropped its formal opposition to the idea last year. Last August, Carcieri called on the PUC to force the issue, saying that “besides being an environmentally responsible action, large-scale renewable energy can provide stable, cost-effective electric prices far into the future.”
On March 16, the PUC threw out National Grid’s proposed 2010 electricity-procurement plan for its Standard Offer Service – which is what nearly all Rhode Island residential customers, as well as many small and medium-sized businesses, use to buy their electricity – because of its failure to include long-term renewables contracts.
The PUC also defined a “long-term” contract as one that lasts for at least 10 to 15 years, if not longer. However, the commission declined to specify what percentage of National Grid’s electricity purchases must be from renewable sources, such as wind and solar.
A spokesman for National Grid declined to comment on the decision, saying the utility had not yet received the PUC’s written order.
PUC Chairman Elia Germani said it had always been the commission’s intention to act on long-term contracts once the current Standard Offer Service supply plan expired at the end of this year – and, he told Providence Business News, “Sometimes one way to get [the utility’s] attention is to kick ’em.” The commission ordered National Grid to submit a revised supply plan by April 17.
“Our view is the only effective way you’ll be able to do this is if we make [provision of renewables] a condition of the Standard Offer Service,” Germani said.
Dennis Duffy, vice president of regulatory affairs at Energy Management Inc. and an attorney who has practiced before the PUC for years, said he could not remember a previous instance when the commission rejected a utility’s procurement plan.
“It’s not common, though it’s probably not unheard of,” said Duffy, whose company is the developer behind the Nantucket Bay wind farm project Cape Wind. “I think the commission is saying, ‘Hey guys, you’ve got to do [long-term contracting], and you’ve got to do it now.’”
Duffy and other renewable developers say long-term contracts are key for attracting investors, because they guarantee that projects will generate enough revenue to cover their up-front costs.
Other states are moving ahead with similar policies. The Mass. Department of Public Utilities earlier this month proposed regulations for evaluating long-term contracts, as called for in a law signed by Gov. Deval L. Patrick last summer.
Chris Wissemann, chief operating officer and acting CEO of Deepwater Wind, which the Carcieri administration has chosen to develop two wind farms off Block Island, did not immediately return a call seeking comment. But earlier this month he said long-term contracts were “essential” for Deepwater’s project to succeed.
Jerry Elmer, staff attorney for the Conservation Law Foundation’s Rhode Island office and a leading advocate for long-term contract provisions, declined to comment on the PUC’s ruling.
But Karina Lutz, director of development and advocacy for the green-energy group People’s Power & Light, said: “We are absolutely thrilled that the commission is enforcing the law to require long-term contracts. We hope at this point there’s a speedy resolution where we see within this month some real movement by National Grid to do the contracts.”
Lutz said there are a number of renewable energy projects in Rhode Island that National Grid could contract with to buy power, pointing as one example to the Royal Mills apartment redevelopment in West Warwick, which includes a hydroelectric plant.
However, Germani acknowledged that it is unlikely National Grid will be able to fulfill its obligations by buying actual power. Instead, the utility will probably need to buy Renewable Energy Certificates (RECs), a type of permit that provides a second stream of income from the output of alternative energy projects.
State Sen. Joshua Miller, D-Cranston, who is sponsoring a bill vetoed by Carcieri last year that would clarify state policy on long-term contracts, said the PUC’s ruling added new urgency to his argument for passing the measure, though he added that the ruling would not change the bill’s contents.
“It has put a little fire under it,” he said. “Everybody’s aware of that ruling.” &#8226