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About The Author:

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions.

He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive
Suite 301
Concord, NH 03301
 rolson@bowlaw.com
(603) 225-9716

 

 

 

 

 

 

 

 

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STATELINE by Robert Olson


September 2002

Maine PUC To Determine Rights To GIS Certificates
by Robert Olson  --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 2002/11/26)

On September 6, 2002, the Maine PUC ("PUC") launched an investigation to determine who owns the rights to Generation Information System ("GIS") certificates associated with pre-existing power purchase agreements ("PPA") with qualifying facilities ("QF") ("Notice of Investigation," Docket No. 2002-506). Subject to a public comment period, now closed, the Notice of Investigation sets forth the PUC’s tentative conclusion: "[U]tilities that purchase power from QFs pursuant to PPA’s that pre-date the GIS are entitled to the GIS certificates associated with the QF generation."

Maine has a so-called "portfolio requirement" for competitive electricity providers. In general terms, the electricity providers must obtain 30% of their electricity from generation facilities that use renewable resources or meet minimum standards of efficiency. Other New England states also have laws and regulations that take into account the attributes of electricity. The New England Power Pool ("NEPOOL") recently implemented the GIS to assist New England electricity suppliers in meeting such requirements more efficiently. The GIS issues certificates to electricity generating units that reflect various attributes of the electricity generated. The certificates are transferable. This raises the question of whether QFs that sell power to utilities under pre-existing PPA’s must transfer the certificates to the utilities, and whether utilities that have sold QF output at entitlement auctions must further transfer the certificates to buyers of the entitlements.

In reaching its tentative conclusion that there certificates belong to the purchasing utilities and, by extension, subsequent buyers of QF entitlements, the PUC discounts the fact that GIS operating rules assign the certificates to the generating units. According to the PUC, "this is explicitly done ‘without prejudice’ to the entity that has the ownership rights to the certificates." The PUC points instead to the fact that utilities are required to buy power from QFs, and that an entity only qualifies as a QF under state and federal law if, among other things, it meets certain fuel use and efficiency criteria. Thus, the PUC concludes, electricity attributes are a fundamental part of the PPAs, and "[t]he QF transactions were, in effect, a bundled sale of energy and attributes that at the time represented a single product."

The PUC also points to the expectations of the buyers of QF output from utilities at entitlement auctions. According to the Notice of Investigation, the utilities informed potential buyers that the power was "renewable or efficient cogeneration that would satisfy Maine’s portfolio requirement." According to the PUC, deny the buyers the associated GIS certificates would frustrate the buyers’ legitimate expectations, and the PUC might be forced to recognize the entitlements as satisfying portfolio requirements even if the GIS certificates were not transferred to the buyers.

Finally, the PUC stated that the failure to transfer GIS certificates to the purchasing utilities could "unfairly enrich the QFs at the expense of ratepayers and frustrate the reasonable expectations of the Legislature in enacting the portfolio requirement." The PUC explains that stranded costs are offset by entitlement sales. If the QFs sell certificates to third parties, the QF will gain extra profit and the value of the entitlements will decline, resulting in higher stranded costs for the ratepayers.

The PUC states that it may change its mind upon review of comments from interested parties, and specifically solicits comment as to how other states have addressed the issue. However, the PUC’s current "inclination is to issue a declaratory ruling . . . stating that purchases of QF power . . . include purchases of the associated certificates."


Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716


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