NOTICES
Tentative Order
[39 Pa.B. 2279]
[Saturday, May 2, 2009]Public Meeting held
April 16, 2009Commissioners Present: James H. Cawley, Chairperson; Tyrone J. Christy, Vice Chairperson; Robert F. Powelson; Kim Pizzingrilli, Statement; Wayne E. Gardner
Implementation of Act 129 of 2008 Phase 4--Relating to the Alternative Energy Portfolio Standards Act; Doc. No. M-2009-2093383
Tentative Order By the Commission:
This Tentative Order initiates a new phase in the Pennsylvania Public Utility Commission's implementation of Act 129 of 2008. In addition to the creation of an energy efficiency and conservation program, Act 129 expanded the definition of alternative energy sources in the Alternative Energy Portfolio Standards Act that qualify as Tier I alternative energy sources.1 The General Assembly also charged the Commission with increasing, at least quarterly, the percentage share of Tier I resources to be sold by electric distribution companies and electric generation suppliers to reflect the new Tier I resources. This Tentative Order proposes guidelines for qualifying the additional Tier I resources, reporting requirements and related procedures for the Commission to make the required adjustments to the Tier I percentage requirements.
Background and History of this Proceeding
Governor Edward Rendell signed the Alternative Energy Portfolio Standards Act of 2004, P. L. 1672, No. 213, (AEPS Act) into law on November 30, 2004. 73 P. S. §§ 1648.1 et seq. The AEPS Act, which took effect on February 28, 2005, established an alternative energy portfolio standard for Pennsylvania. Generally, the Act requires that an annually increasing percentage of electricity sold to retail customers in Pennsylvania by electric distribution companies (EDCs) and electric generation suppliers (EGSs) be derived from alternative energy resources. The Commission has been charged with using its general powers to carry out, execute and enforce the provisions of the AEPS Act. The Pennsylvania Department of Environmental Protection (DEP) has been specifically charged with ensuring compliance with all environmental, health and safety laws and standards relevant to the AEPS Act's implementation. The Commission and the DEP are to jointly monitor compliance with the Act, the development of the alternative energy market, the costs of alternative energy and to conduct an ongoing alternative energy planning assessment. The Commission and the DEP are to report their findings and any recommendations for changes to the Act to the General Assembly on a regular basis.
Governor Edward Rendell signed Act 129 of 2008, P. L. 1592, (Act 129) into law on October 15, 2008, which took effect 30 days thereafter on November 14, 2008. Section 5 of Act 129 adds Section 2814 to the Pennsylvania Public Utility Code. See 66 Pa.C.S. § 2814. Section 2814 expands the types of alternative energy sources that qualify as Tier I alternative energy sources under the AEPS Act to include specific categories of low impact hydropower and biomass energy. 66 Pa.C.S. § 2814(a) and (b). Section 2814 also requires the Commission to increase, at least quarterly, the percentage share of Tier I resources to be sold by EDCs and EGSs to reflect any new Tier I resources added as a result of this amendment. 66 Pa.C.S. § 2814(c).
Discussion
With this Tentative Order the Commission is proposing procedures and guidelines that low-impact hydropower facilities and generators utilizing by-products of pulping and wood manufacturing processes must follow to qualify as a Tier I resource. This Tentative Order also proposes reporting requirements and related procedures that the Commission will use to adjust AEPS Act Tier I requirements to account for the newly qualified Tier I resources. The reporting requirements and related procedures proposed in this Tentative Order are not limited to the newly eligible Tier I sources. In order for the Commission to increase the Tier I percentage requirement to account for the newly eligible sources, the Commission proposes to increase the reporting requirements of EDCs and EGSs, with AEPS compliance obligations.
A. Alternative Energy Resource Qualification
Section 2814 expands the type of alternative energy sources that qualify as Tier I resources under the AEPS Act by also including certain categories of low-impact hydropower and biomass energy. The General Assembly established specific criteria these alternative energy sources must meet to be qualified as a Tier I resource. The Commission is proposing the following specific reporting requirements and related procedures for qualifying the output of these sources as Tier I alternative energy credits (AECs).
1. Low-Impact Hydropower Facilities
Section 2814 expands the low impact hydropower category of ''alternative energy sources'' in Section 2 of the AEPS Act2 to include low-impact hydropower with a maximum capacity of 21 megawatts that were licensed by the Federal Energy Regulatory Commission (FERC) on or prior to January 1, 1984, and held, at least in part, by a Commonwealth municipality or electric cooperative on July 1, 2007. 66 Pa.C.S. § 2814(a)(1). The Commission interprets this language in Act 129 as supplementing the definition of qualifying low-impact hydropower, rather then replacing the existing definition of low-impact hydropower. As such, all previously qualified and any other low-impact hydropower that meets the definition of low-impact hydropower found in Section 2 of the AEPS Act, 73 P. S. § 1648.2, will continue to qualify as a Tier I alternative energy resource.
In order to be qualified as a Tier I low-impact hydropower alternative energy source, any facility that meets the criteria contained in 66 Pa.C.S. § 2814(a) must submit an application with supporting documentation to the Commission's AEPS program administrator. This application requirement applies regardless of whether the facility is already qualified as a Tier II resource. In addition, each facility qualified under 66 Pa.C.S. § 2814(a) must comply with the reporting requirements outlined below in Section B of this order.
2. Biomass Facilities
Section 2814 supplements the definition of ''biomass energy'' in Section 2 of the AEPS Act3 to include electricity generated ''utilizing by-products of the pulping process and wood manufacturing process, including bark, wood chips, sawdust and lignins in spent pulping liquors.'' 66 Pa.C.S. § 2814(b). Section 2814 further states that ''[e]lectricity from biomass energy under this subsection generated inside this Commonwealth shall be eligible as a Tier I alternative energy source.'' Id. Finally, Section 2814 states that ''[e]lectricity from biomass energy under this subsection generated outside this Commonwealth shall be eligible as a Tier II alternative energy source.'' Id.
The Commission notes that Section 2 of the AEPS Act, 73 P. S. § 1648.2, defines Tier II alternative energy sources as including the ''[g]eneration of electricity utilizing by-products of the pulping process and wood manufacturing process, including bark, wood chips, sawdust and lignin in spent pulping liquors.'' 73 P. S. § 1648.2. Therefore, any facility located in this Commonwealth that generates electricity by utilizing by-products of the pulping process and wood manufacturing desiring to be qualified as a Tier I resource must submit an application with supporting documentation to the Commission's AEPS program administrator. This application requirement applies regardless of whether the facility is already qualified as a Tier II resource. In addition, each facility qualified under 66 Pa.C.S. § 2814(b) must comply with the reporting requirements outlined below in Section B of this order.
B. Adjustment to Tier I Alternative Energy Source Requirements
Section 2814(c) specifically requires this Commission to increase, at least quarterly, the percentage share of EDC and EGS Tier I requirements in Section 3 of the AEPS Act4 to reflect any new low-impact hydropower and biomass resources that qualify as a Tier I resource. 66 Pa.C.S. § 2814(c). Furthermore, Section 2814 states that no new qualifying low-impact hydropower or biomass facilities ''shall be eligible to generate Tier I alternative energy credits until the Commission has increased the percentage share of Tier I to reflect these additional resources.'' Id. In this section the Commission proposes its procedures for determining the amount and frequency of the increase in Tier I percentage requirements.
At the outset, we note that there are several steps that must be taken before we can adjust periodically the percentage shares stated in Section 3 of the AEPS Act and Section 75.61(b) of the Commission's regulations. These steps are necessary because the AEPS Act's tier percentage shares apply to EDC and EGS sales of generation and not to the generation from qualified alternative energy sources.
The Commission believes that as the General Assembly required adjustments to the Tier I requirements on at least a quarterly basis, such adjustments must be based on the actual output of the newly qualified low-impact hydropower and biomass in relation to the actual EDC and EGS sales. As such, the Commission will initially be calculating each EDC's and EGS' Tier I nonsolar photovoltaic (PV) requirements on at least a quarterly basis. This quarterly adjustment will coincide with the AEPS Act compliance year quarters.5 Each EDC's and EGS' quarterly Tier I nonsolar PV requirements will be added together at the end of the year to determine their total annual Tier I nonsolar PV requirements. Tier I solar PV and Tier II requirements will be computed only annually under existing procedures. See 52 Pa. Code § 75.61.
The Commission believes that it was not the intent of the General Assembly for Act 129 to increase the Tier I solar PV requirements, as the expanded Tier I eligible resources are nonsolar resources. As such, the Commission will calculate each EDC's and EGS' Tier I solar PV requirements based on the annual Tier I requirements contained in 52 Pa. Code § 75.61(b). For example, for compliance year 2009-2010 the Tier I requirement is 2.5% of all retail sales, of which at least 0.0120% must come from solar PV. Assume that EDC X had total annual retail sales of 4,800,000 MWh. Under this scenario, EDC X would have a total annual Tier I solar PV requirement of 14.6
The Commission will determine each EDC's and EGS' new quarterly Tier I requirements as follows:
1. Tier I quarterly percentage increase equals the ratio of the available new Tier I megawatt-hour (MWh) sales to total quarterly EDC and EGS MWh sales (New Tier I MWh/EDC and EGS MWh = Tier I % increase).
2. New quarterly Tier I requirement equals the sum of the new Tier I percentage increase and the annual nonsolar Tier I percentage requirement in 52 Pa. Code § 75.61(b) (Tier I % increase + annual Tier I = quarterly Tier I requirement).
3. EDC and EGS quarterly MWh sales multiplied by quarterly Tier I requirement (EDC and EGS quarterly MWh × quarterly Tier I % = EDC and EGS quarterly Tier I requirement).
To demonstrate this quarterly adjustment calculation for the first quarter in the 2009-2010 compliance year, assume that the total EDC and EGS MWh sales for the quarter is 4,130,000 MWh and the total new Tier I MWh sales for the quarter is 132,000 MWh. Also assume that the total quarterly MWh sales of EDC X is 1,200,000 MWh.
The quarterly adjustment calculation for EDC X would be as follows:
1. 132,000/4,130,000 = 0.032 or 3.2%.
2. 0.032 + 0.024887 = 0.05688 or 5.688% of total retail sales.
3. 1,200,000 × 0.05688 = 68,256 total nonsolar Tier I credits required for the quarter. (Prior to adjustment total Tier I credits required would have been 29,856 (1,200,000 × 0.02488) for a difference of 38,400 nonsolar Tier I credits.)
To accomplish the quarterly adjustments as described above, the Commission directs all EDCs and EGSs with AEPS compliance requirements to report total retail sales data to the Commission's AEPS program administrator on a monthly basis. The monthly sales figures are to be submitted by the fifteenth day of the following month.
In addition, all facilities qualifying as a Tier I resource under 66 Pa.C.S. §§ 2814(a) and (b) must provide the Commission, on a monthly basis, sufficient information for the Commission to determine the amount of generation that qualifies for Tier I credits. This information will include at least the following:
1. The facility's total generation from qualifying alternative energy sources for the month in MWh, broken down by source;
2. The amount of AECs sold in the month to each EDC and EGS with a compliance obligation under the AEPS Act;
3. The amount of AECs sold in the month to any other entity, including utilities, suppliers and users for compliance with another state's alternative/renewable energy portfolio standard or sold on the voluntary market;
4. The amount of AECs created and eligible for sale during the month but not yet sold;
5. The sale or other disposition of AECs created in prior months and transferred in the month--broken down by compliance status (Pennsylvania AEPS, other state compliance, voluntary market).
The Commission intends to limit the Tier I percentage share modifications to exclude credits which are committed for compliance with another state's portfolio standard or are not otherwise available to be used for Pennsylvania compliance. See 73 P. S. § 1648.4 and 52 Pa. Code § 75.63(c). Credits unavailable to EDCs and EGSs for Pennsylvania AEPS compliance are no different than unused generation capacity and must therefore be excluded from consideration when increasing the Tier I percentage requirement. The Commission believes that it was the intent of the General Assembly that the addition of any new Tier I resources have a neutral impact on the value of Tier I credits. As such, including only those credits that are available for AEPS compliance in the calculation of the Tier I percentage requirement will accomplish this intent. The monthly reporting data listed above will be used to identify the amount of credits available for Pennsylvania AEPS compliance.
The new Tier I facilities must provide this information to the Commission's Bureau of Conservation, Economics and Energy Planning (CEEP) and to the Commission's AEPS program administrator by the fifteenth day of the following month. CEEP may prepare a form (or a facility specific form) consistent with the order and direct each facility to report this information using such form(s). All such information is subject to audit by the Commission or its AEPS program administrator.
These facilities must also provide the AEPS program administrator access to the facility's GATS account so that the program administrator can track and confirm the number of additional Tier I credits available for Pennsylvania AEPS compliance. Any alternative energy facility that fails to report its qualifying generation for any given month will be disqualified from generating Tier I credits for the quarter in which that month falls.
An open and transparent Tier I credit market is essential to maintaining market integrity. In addition, all EDCs, EGSs and Tier I facilities will need to know what the quarterly requirements in a timely manner to meet the AEPS requirements at a reasonable price. To facilitate the need for an open and transparent Tier I market, the Commission intends to post each new quarterly Tier I percentage requirement on the Commission's AEPS Web Site at http://paaeps.com/credit/ and in the Pennsylvania Bulletin within 45 days of the end of each quarter.
Conclusion
The Commission believes that these proposed procedures capture the General Assembly's intent for the limited expansion of qualifying Tier I alternative energy sources. In addition, the proposed procedures for calculating the increase in the percentage share of Tier I credits in proportion to the increase in the number of new Tier I resources available accurately captures the General Assembly's intent to allow for an expansion of qualifying Tier I resources without adversely affecting the previously established Tier I resources credit prices. Given the complex nature of the issues involved in implementing this section of Act 129, we find it appropriate to seek public comment before adopting final implementation standards. After reviewing the comments, the Commission will issue a final order identifying the standards adopted for implementation of this provision of Act 129 for the AEPS compliance year beginning on June 1, 2009. Therefore,
It Is Ordered That:
1. Interested parties file an original and 15 copies of any written comments on this Tentative Order be submitted within 20 days of the entry date of this Tentative Order to the Pennsylvania Public Utility Commission, Attn.: Secretary James J. McNulty, P. O. Box 3265, Harrisburg, PA 17105-3265. This Tentative Order and all comments will be posted on the Commission's Alter- native Energy web page at http://www.puc. state.pa.us/electric/electric_alt_energy.aspx; accordingly service on other parties is not required. To facilitate posting, all filed comments should be forwarded by means of electronic mail to Kriss Brown at kribrown@state.pa.us and Charles Covage at ccovage@state.pa.us.
2. This Tentative Order be published in the Pennsylvania Bulletin and a copy served on all jurisdictional electric distribution companies, all licensed electric generation suppliers, the Office of Consumer Advocate, the Office of Small Business Advocate, the Office of Trial Staff, and the Pennsylvania Department of Environmental Protection. In addition, the Commission directs the Bureau of Conservation, Economics and Energy Planning to identify potential new Tier I alternative energy resources eligible under section 5 of Act 129, 66 Pa.C.S. § 2814(a) and (b), to be served as well.
JAMES J. MCNULTY,
Secretary
Statement of Commissioner Kim Pizzingrilli The General Assembly, through Act 129 of 2008, addressed a number of important and interrelated issues involving the regulation of retail electric service. These include energy efficiency and peak demand reduction, the procurement of energy supply for retail customers, and the utilization of alternative energy sources. The Commission has been tasked with developing the standards necessary to implement these provisions of Act 129. Throughout the first few months of 2009, the Commission has focused on complying with the timetable identified in Act 129 for the implementation of the energy conservation and demand reduction provisions of the Act. The Commission must establish a process and identify guidelines to enable electric distribution companies to develop and file their energy conservation and demand reduction compliance plans by July 1, 2009, and, separately, their smart meter procurement and installation plans by August 14, 2009.
Today the Commission is addressing Act 129's amendments to the Alternative Energy Portfolio Standards Act of 2004. This Tentative Order identifies proposed standards governing the inclusion of low impact hydro and biomass in the Tier I alternative energy source category. We encourage all AEPS Act stakeholders to review and comment on this Tentative Order, as implementation of this provision will require a coordination of certain reporting activities by generators, electric distribution companies, and electric generation suppliers.
This is also an appropriate opportunity to provide a snapshot of the status of Act 129 implementation. The Commission has taken final action on the following issues in the past few months:
* Adoption of the program identifying the standards which the Commission will review proposed implementation plans, monitor execution, and enforce compliance with the efficiency provisions of the Act at the January 15, 2009 Public Meeting.
* Adoption of the rules for the Conservation Services Provider Registry, and the development of a standard application package, at the February 5, 2009 Public Meeting.
* Quantification of the energy consumption and peak demand reduction targets for Act 129 at the March 26, 2009 Public Meeting.
Implementation continues to proceed on four separate tracks on the following issues:
* The development of a standard filing template for the July 1, 2009 compliance plan. A draft template has been circulated to the stakeholder working group for comment.
* Revision of the technical reference manual that establishes levels of deemed savings for certain energy efficiency and conservation measures. Revisions have been released for public comment, and the Commission has hosted a technical conference on the matter.
* The development of standards by which the Commission will review and evaluate smart meter installation and procurement plans. A draft proposal has been circulated to the stakeholder working group for comment.
* The development of a Request for Proposal for the statewide energy efficiency and conservation program evaluator. The Commission expects to issue this Request for Proposal in the near future.
In conclusion, I would like to commend our staff for their work on these issues, and the stakeholders for their many constructive comments and participation in the technical conferences we have hosted.
KIM PIZZINGRILLI,
Commissioner____
1 See Act 129 of 2008, section 5, codified in the Pennsylvania Consolidated Statutes at 66 Pa.C.S. § 2814.
2 73 P. S. § 1648.2.
3 73 P. S. § 1648.2.
4 73 P. S. § 1648.3(b)(1).
5 The quarters will be as follows: 1st quarter--June, July and August; 2nd quarter--September, October and November; 3rd quarter--December, January and February; and 4th quarter--March, April and May.
6 4,800,000 × 0.025 = 120,000 × 0.000120 = 14.4.
7 Under 52 Pa. Code § 75.61(b)(4) the following are the Tier I requirements for the 2009-2010 compliance year. The Tier I requirement is 2.5% of all retail sales. This includes 0.0120% solar photovoltaic. Therefore, the nonsolar PV Tier I requirement is 2.488%.
[Pa.B. Doc. No. 09-828. Filed for public inspection May 1, 2009, 9:00 a.m.]
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