CALIFORNIA AND FLORIDA ADOPT NEW MEASURES TO PROMOTE RENEWABLE ENERGY GENERATION
By Robert A.
Olson, Esq. and E. Maria Reinemann, Esq. -- Brown, Olson and Wilson, P.C.
The California Public Utilities Commission ruled on January 11, 2007, that renewable distributed generation facility owners own the Renewable Energy Credits (RECs) associated with their facilities. This reverses the Commission’s November 2006 proposed decision that would have granted the RECs to utilities. The utilities alleged that they needed the RECs from distributed generators ownership to fulfill their renewable energy procurement obligations under California’s Renewable Portfolio Standard (RPS). The state’s solar industry disagreed, arguing that the utilities had no right to claim ownership of a customer’s generated clean power. Allowing owners of solar distributed generation systems to retain ownership of RECs produced by their facilities supports the California Solar Initiative’s goal of making the solar industry self sufficient. The Commission agreed with the solar industry, holding that allowing generators to retain ownership of RECs will help the economics of solar and other renewable distributed generation facilities, and will hopefully spur further development of renewable generation. Under the decision, generation owners may choose to retire their RECs to back their own environmental claims or to sell their RECs to provide an additional revenue stream. Currently, the sale of RECs occurs on a voluntary basis and pursuant to compliance markets, but when and if the Commission allows utilities to apply unbundled RECs toward their RPS obligations, generation owners would be able to sell their RECs to utilities.
Additionally, the California legislature is considering Assembly Bill 94 which, if passed, would require retail sellers of electricity to provide 33 percent of their retail sales from renewable power by 2020. The existing RPS requires retail sellers to provide 20% of their sales from renewables by 2010. Municipal utilities and irrigation districts, which administer their own renewables goals, are exempt from these requirements. According to a report by the California Energy Commission, the state does not appear to be on course to meet the 20% RPS goal for 2010.
On January 9, 2007, the Florida Public Service Commission adopted new rules to promote the development of renewable energy generation in the state. The rules, Rule 25-17.200 to Rule 25-17.310, F.A.C., will provide developers of renewable energy with a greater variety of pricing options when entering into agreements to sell energy to the state’s investor-owned utilities. Qualifying renewable generating facilities are those that meet the criteria established in the Federal Energy Regulatory Commission’s Rules at 18 C.F.R. Sections 292.101 through 292.207 which define small power producers and cogenerators.
In addition to existing requirements, the new rules require investor-owned utilities to provide continuous standard offer contracts based upon a multi-unit portfolio of avoidable fossil-fueled generating units planned by investor-owned utilities in their ten-year site plans. The new rules also provide options within each standard offer for a renewable generator to select: (a) the term of contract, ranging from ten years to life of the avoided unit; (2) the starting date for capacity and fixed energy payments, where applicable, starting as early as the in-service date of the renewable generating facility; and (3) the annual/monthly level of capacity and fixed energy payments, where applicable, over the life of the contract.
The new rules also clarify that RECs remain the exclusive property of the renewable generator. A requirement for reopening contracts is included in the event new environmental or other government standards to control carbon emission from power plants are adopted. All electric utilities, including municipal utilities and rural electric companies, must report on the level of renewable generation in their service area on an annual basis.
The greater flexibility provided by the Florida Commission’s new rules should assist in financing new projects and strengthen the position of existing facilities.