Source: http://regulations.delaware.gov/register/may2006/proposed/9%20DE%20Reg%201734%2005-01-06.htm
Timestamp: 2017-12-17 23:12:08
Document Index: 35411980

Matched Legal Cases: ['§ 351', '§10118', '§114', '§351', '§502', '§353', '§355', '§209', '§10111', '§209', '§351', '§354', '§10118', '§351']

9 DE Reg 1734 05-01-06
Reg. Docket No. 56: Notice of Proposed Rule-making and Public Hearing Concerning Renewable Energy Portfolio Standards
IN THE MATTER OF THE ADOPTION OF THE RULES |
TO IMPLEMENT THE RENEWABLE ENERGY |
PORTFOLIO STANDARDS ACT, 26 DEL.C. §§ 351-363, | PSC REGULATION DOCKET NO. 56
AS APPLIED TO RETAIL ELECTRICITY SUPPLIERS |
In PSC Order No. 6793 (Dec. 6, 2005), the Commission issued a set of regulations for public comment and designated a Hearing Examiner to conduct further proceedings. On March 7, 2006, the Hearing Examiner issued a written report with revised regulations that were proposed for adoption by the Commission. On April 11, 2006, the Commission voted to adopt the Hearing Examiner’s Report and publish the revised regulations for further public comment. In connection with the authority given to it, the Commission now proposes to adopt new rules and regulations to govern the Renewable Energy Portfolio Standards obligations of electric suppliers.
The text of the revised Rules proposed to be adopted is set forth as Attachment “A” to PSC Order No. 6885 (Apr. 11, 2006). Such proposed Rules will be published in the January 2006 volume of the Delaware Register of Regulations. In summary form:
ORDER NO. 6885
AND NOW, to-wit, this 11th day of April, 2006, the Commission having received and considered the Findings and Recommendations of the Hearing Examiner, previously designated in the above-captioned matter, which were submitted after a duly publicized evidentiary hearing, and having heard from all parties and the Commission Staff that there are no exceptions to said Findings and Recommendations;
AND WHEREAS, based upon the recommendations of the Hearing Examiner, the Commission has determined that the evidence of record supports approving the Rules and Procedures to Implement the Renewable Energy Portfolio Standard, as proposed by Commission Staff;
2. That the Commission finds that the proposed rules may reflect substantive changes from the earlier published rules (Jan. 2006), and may constitute a new proposal within the meaning of 29 Del.C. §10118(c). Staff represents that these proposed rules are as set forth in Attachment “A” to the Report. A copy of the Report of the Hearing Examiner with Attachment "A" is attached hereto as Exhibit "A".
3. That the Secretary of the Commission shall transmit to the Registrar of Regulations for publication in the Delaware Register the notice attached hereto as Exhibit "B" and the proposed regulations attached to the Hearing Examiner's Report as Attachment "A" for publication on May 1, 2006.
4. That the Secretary of the Commission shall cause the notice attached hereto as Exhibit "B" to be published in The News Journal and the Delaware State News newspapers on or before May1, 2006.
5. That the Secretary of the Commission shall cause the notice attached hereto as Exhibit "B" and the proposed regulations attached to the Hearing Examiner's Report as Attachment "A" to be sent by United States mail to all persons who have made timely written requests for advance notice of the Commission's regulation-making proceedings.
6. All written comments, suggestions, and compilations of data, briefs, or other written materials concerning the proposed regulations shall be submitted to the Commission on or before June 1, 2006.
7. That the Commission will hold a public hearing on June 6, 2006 at 1:00 PM to consider adoption of the proposed regulations attached to the Hearing Examiner's Report as Attachment "A”.
8. That the public utilities regulated by the Commission are notified that they may be charged for the cost of this proceeding under 26 Del.C. §114.
9. That the Commission reserves the jurisdiction and authority to enter such further Orders in this matter as may be deemed necessary or proper.
IN THE MATTER OF THE ADOPTION OF RULES TO IMPLEMENT THE RENEWABLE ENERGY PORTFOLIO STANDARDS ACT, 26 DEL.C. §§351-363, AS APPLIED TO RETAIL ELECTRICITY SUPPLIERS
William F. O’Brien, duly appointed Hearing Examiner in this Docket pursuant to 26 Del.C. §502 and 29 Del.C. ch. 101, by Commission Order No. 6793, dated December 6, 2005, reports to the Commission as follows:
On behalf of Delaware Public Service Commission Staff:
JAMES MCC. GEDDES, ESQUIRE
On behalf of the Delaware Energy Office:
JOHN C. CITROLO, DEPUTY PUBLIC ADVOCATE
On behalf of Constellation New Energy, Inc.:
STEPHEN SUNDERHAUF, MANAGER OF PROGRAM EVALUATIONS DEPARTMENT
On behalf of PEPCO Energy Services:
CARLA G. PETTUS, ESQUIRE
1. On July 12, 2005, the Delaware General Assembly enacted new legislation, entitled the Renewable Energy Portfolio Standards Act (“Act”), which requires retail electricity suppliers in Delaware to derive a percentage of their electricity supply from eligible renewable energy resources. The General Assembly authorized the Delaware Public Service Commission (the “Commission”) to administer the Act and, in so doing, directed the Commission to adopt rules governing the Act’s implementation by July 31, 2006.
2. On August 23, 2005, by PSC Order No. 6697, the Commission opened Regulation Docket No. 56 to develop standards under the Act and directed Staff to conduct workshops to gain input from interested parties regarding proposed rules. After conducting two workshops and otherwise collaborating with Delaware stakeholders, Staff drafted a proposed regulation entitled Rules and Procedures to Implement the Renewable Energy Portfolio Standard (“Rules” or ‘regulation’) and submitted it to the Commission.
3. On December 6, 2005, by PSC Order No. 6793, the Commission directed publication of notice of the proposed regulation, which included, among other things, publication in the Delaware Register of Regulations on January 1, 2006. The Commission set a deadline of February 2, 2006, for the filing of comments by interested parties, and scheduled a public hearing for February 14, 2006. Written comments were filed by the Delaware Energy Office (“DEO”)(Ex. 3), Delmarva Power & Light Company (“Delmarva Power”)(Ex. 4), and Constellation NewEnergy, Inc. (“Constellation”)(Ex. 5).
4. In accordance with PSC Order No. 6793, a duly noticed public hearing was conducted at the Commission’s offices in Dover on February 14, 2006. Representatives of Staff, the Division of the Public Advocate, the Delaware Energy Office, Delmarva Power, Constellation, and PEPCO Energy Services, Inc. participated in the hearing. Appearing at the hearing, but not participating, were Janine Schleiden from PJM Interconnection, LLC and Paul Sample from the Delaware General Assembly, Division of Research. One member of the public attended the hearing and offered comment, as summarized below.
5. At the hearing, Staff submitted written testimony, which described certain changes it had made to its proposed regulation based on the written comments received. (Ex. 2). In addition, the other participants placed their written comments into the record and cross-examined Staff’s witness. At the conclusion of the hearing, the record was left open in order to allow Staff to submit a final proposed regulation based on further discussions with the participants during and after the hearing.
6. In accordance with the post-hearing schedule, Staff, on March 1, 2006, submitted its final proposed regulation (Ex. 6). Staff also provided a redlined version of the final proposal (Ex. 7), as well as a three-page, post-hearing memorandum describing each post-hearing modification that it had made to its proposed regulation (Ex. 8). After receiving these documents into evidence, I closed the record, which now consists of eight exhibits and a 66-page verbatim transcript of the proceedings. I have considered all of the record evidence of this docket and, based thereon, I submit for the Commission’s consideration these Findings and Recommendations.
7. Staff’s proposed regulation consists of five sections establishing renewable energy portfolio standards and governing compliance requirements for retail electricity suppliers. (Ex. 6.) The first section of the Rules contains definitions of the terms used in the regulation. The second section addresses the purpose and scope of the regulation and identifies the entities that will be subject to the regulation. In general, the Rules apply to all retail electricity sales in Delaware except those from a Municipal Electric Company or from an exempt Rural Electric Cooperative, and excluding sales to an exempt Industrial Customer. The second section identifies the steps that must be taken for Rural Electric Cooperatives and Industrial Customers to be exempt from the regulations.
8. The third section governs the Commission’s administration of the standards including: (1) certifying eligible energy resources; (2) ensuring compliance with the renewable energy standards (beginning with a cumulative minimum percentage of electricity generated by renewable energy resources of 1 percent in 2007 and reaching a 10 percent cumulative level in 2019); and (3) verifying compliance with the renewable energy standards. Suppliers comply with the minimum percentage requirements by accumulating Renewable Energy Credits (“RECs”), which are equivalent, on a one-to-one basis, to mega-watt hours of energy derived from eligible renewable energy resources. Suppliers may buy and sell RECs for compliance purposes. In lieu of using a REC, suppliers have the option of making an alternative compliance payment (“ACP”), escalating from $25 per megawatt-hour in the first year a supplier uses an ACP to $50 after four years of using ACPs to meet compliance requirements.
9. The fourth section of the regulation addresses an electricity supplier’s recovery of costs incurred in complying with the renewable energy standards. The fifth and final section addresses Delaware’s Freedom of Information Act, the persons who may file a complaint under the Rules, and the penalties for failure to comply with the Rules.
10. Rick Holmes, a resident of Wilmington and Vice President (for Delaware) of the Mid-Atlantic Solar Energy Association, offered comments at the February 14th hearing in support of solar hot water systems. (Tr. 59-61.) Mr. Holmes first noted that the definition of ‘eligible energy resource’ in the proposed Rules, and under the Act, includes “solar energy technology that includes solar radiation to produce electricity.” Mr. Holmes recommended, however, that eligible solar energy technology include solar radiation that displaces electricity rather than just that which produces electricity. Mr. Holmes asserted that a 2-kilowatt solar electric system (which produces electricity) is about 15 to 20 percent efficient whereas a 2-kilowatt solar hot water system (which displaces electricity use) is closer to 70 percent efficient. He also noted that solar hot water has been included in federal tax credit legislation. Mr. Holmes emphasized, however, that he does not wish to include solar heated swimming pools as an eligible solar resource.
11. DEO. Charlie T. Smisson, Jr., State Energy Coordinator, submitted written comments on behalf of the Delaware Energy Office, which were admitted into the record by stipulation of the participants. (Ex. 3; Tr. 56-57.) Mr. Smisson noted that the DEO has oversight duties under the Act as well as a long history of facilitating the installation of renewable and alternative energy technologies in Delaware.
12. Mr. Smisson recommended that the Commission adopt the proposed rules, with two exceptions. First, Mr. Smisson objected to Staff’s proposed method for determining which Industrial Customers are exempt from the regulation. (Ex. 3 at 2-3) Under §353(b) of the Act, electricity sales to industrial customers “with a peak demand in excess of 1,500 kilowatts” are exempted from the regulations. Proposed Section 2.2.2, however, allows exemption for customers with multiple accounts totaling in excess of 1,500 kilowatts, served by a single supplier, if “the aggregate of their accounts with an NAICS Manufacturing Sector Code... have a Peak Demand of at least 751 kilowatts...”. According to Mr. Smisson, this section will allow industrial customers to exempt non-manufacturing loads, such as off-site office buildings, from the Rules because only 751 kilowatts of peak demand needs to be attributable to manufacturing activities. Mr. Smisson asserted that Section 2.2.2 effectively lowers the 1,500 kilowatts peak demand threshold established in the Act for an industrial customer and is, therefore, inconsistent with the Act. (Id. at 2.)
13. Second, Mr. Smisson testified that proposed Section 3.2.6 improperly ties the determination of what type of metering is permissible for a small generator to the types of metering allowed under the applicable utility’s tariff. (Id. at 3-4.) Under §355(c) of the Act, “small eligible energy sources, 100 kilowatts of capacity or less” may aggregate generation to meet the Act’s requirements as long as they document their level of generation with “appropriate metering.” Proposed Section 3.2.6, however, adds that “appropriate metering” is defined in the applicable utility’s tariff then in effect. According to Mr. Smisson, use of the utility’s tariff to define “appropriate metering” undermines the Act’s intent, which is to allow flexible or alternative metering arrangements. (Id. at 4.)
14. Constellation. Martha A. Duggan, Vice President, Regional Government and Regulatory Affairs, submitted written comments on behalf of Constellation, which were admitted into the record by stipulation of the participants. (Ex. 5; Tr. 58.) Ms. Duggan recommended that Staff:
(1) clarify the definition of “Retail Electricity Product” under Section 1.1 by specifying that multiple electrical energy offerings with the same “Generation Attributes” may be considered a single Product, despite any differences in pricing methods;
(2) clarify Section 2.2 by specifying that industrial customers that seek exemption from the Rules must inform its retail supplier of its intention to claim such exemption;
(3) add a requirement, under Section 3.1.6.1, that Staff notify suppliers (two years in advance of any change) that it is considering implementation of a tracking system for Renewable Energy Credits other than the system used by PJM;
(4) clarify Section 3.2.2 by specifying that reporting requirements apply to green and non-green products but do not require reporting on specific retail products within those categories;
(5) add language to Section 3.3.4.6 stating that increases in Alternative Credit Payments will occur only after a determination has been made that the Retail Electricity Supplier has not conducted adequate planning; and
(6)clarify and modify Section 4.3 so that suppliers’ notice requirements to customers relating to cost recovery reflect the differences in billing functions performed by retail electricity suppliers and an Electric Distribution Company.
(Id. at 2-7.)
15. Delmarva Power. Randall V. Griffin, Associate General Counsel, submitted written comments on behalf of Delmarva Power, which were admitted into the record by stipulation of the participants. (Ex. 4; Tr. 57-58.) Mr. Griffin recommended that Staff add a Section 3.1.6.2 that permits the retroactive creation of Renewable Energy Credits for electricity produced after June 1, 2006, by a renewable generator that did not become certified until after such date. Mr. Griffin stated that allowing retroactive creation of RECs in this manner is consistent with the Act and will ensure that additional RECs are available for use by suppliers for RPS compliance purposes.
16. In addition, Mr. Griffin recommended that the Rules permit renewable energy generating entities to be certified as Delaware Eligible Energy Resources based upon comparable generator RPS certifications granted by other states. (Id. at 2.) According to Mr. Griffin, permitting reciprocity will increase the number of RECs available for RPS compliance purposes in Delaware, where the electricity market is much smaller than most other PJM states and, therefore, less attractive for renewable generators interested in selling RECs. Mr. Griffin provided language that could be added under Section 3.1.2 that would permit reciprocity for generator certification requirements.
17. Finally, Mr. Griffin recommended that Section 3.3.1 allow suppliers to submit their RPS compliance report within 120 days of the end of each compliance year, rather than within 90 days. (Id.) Mr. Griffin asserted that 90 days places too much burden on suppliers, especially when PJM does not finalize its revenue data until the close of a 60-day settlement period. Mr. Griffin noted that Maryland allows five months for RPS compliance reporting and the District of Columbia allows 120 days.
18. Staff. At the hearing, Staff submitted written testimony from David Bloom, Public Utilities Analyst, in which Mr. Bloom responded to the comments provided by the participants. (Ex. 2.) Mr. Bloom described the changes that Staff made to its proposed Rules, based on the comments, and explained why certain recommendations were not accepted. Mr. Bloom also answered participants’ questions under cross-examination. (Tr. 41-48.)
19. Mr. Bloom testified that Staff accepted Constellation’s recommendations regarding the definition of Retail Electricity Product under Section 1.1 and the notice requirements for Industrial Customers that seek exemption from the rules. (Ex. 2 at 2-3.) Mr. Bloom did not revise Section 3.1.6.1 to require two years notice from the Commission before changing renewable energy tracking systems, as recommended by Constellation, because a situation may arise where the Commission needs to cease using the PJM tracking system immediately and will not be able to wait two years to create another system. (Id. at 3-4.) Regarding Constellation’s request that the Commission place certain restrictions on increases in Alternative Compliance Payments, Mr. Bloom asserted that any alteration of the ACP schedule would conflict with the Act and he declined therefore to make the proposed revision. In response to Constellation’s concern regarding a supplier’s obligation to notify its customers of RPS cost recovery through billing inserts, Mr. Bloom asked Retail Electric Suppliers to work with Delmarva and the Delaware Electric Cooperative to develop an appropriate billing arrangement that will allow for compliance with the notification requirements.
20. Mr. Bloom also responded to DEO’s comments. Mr. Bloom testified that Staff decided to keep its definition of “Industrial Customer” in Section 2.2.2, notwithstanding DEO’s concern that Staff’s definition lowers the peak demand threshold for exemption under the Act from 1,500 kilowatts to 751 kilowatts. (Id. at 6-7.) Mr. Bloom asserted that an Industrial Customer with multiple accounts should be eligible for exemption as long as its accounts total 1,500 kilowatts, as long as more than half of the load corresponds to NAICS Manufacturing Sector Codes. Mr. Bloom noted that Staff had to create a definition for “Industrial Customer” since the Act did not provide a definition and because neither Delmarva Power nor the Delaware Electric Cooperative has tariffs specifically designed for Industrial Customers.
21. Mr. Bloom testified that Staff accepted DEO’s recommendation regarding permissible metering for a small generator under Section 3.2.6. Staff, therefore, removed the language that it had added to the statutory language providing that small Eligible Energy Resources “document the level of generation, as recorded by appropriate metering.” Staff had added, but now has removed, the language “as defined in the applicable utility’s tariff.” DEO was concerned that the utility’s tariff may not contemplate alternative metering arrangements. Mr. Bloom emphasized, however, that the applicable utility’s tariff, as well as any interconnection agreements, still apply. (Id. at 7.)
22. Mr. Bloom testified that Staff did not accept any of Delmarva Power’s three recommendations. (Id. at 8-10.) First, Staff declined adding a section to the Rules that specifically would permit retroactive creation of RECs because Staff intended for June 1, 2006 to be the starting date for when RECs may be created. In addition, Delmarva Power’s proposal permitting retroactive REC creation is not consistent with PJM’s GATS Operating Rules, according to Mr. Bloom.
23. Second, Staff rejected Delmarva Power’s recommendation to revise Section 3.1.2 to permit REC reciprocity between states because of the possibility that other states’ regulations would change over time. (Id. at 9.) Third, Staff decided not to extend its deadline for submitting compliance reports from 90 to 120 days. (Id. at 9-10.) As grounds, Mr. Bloom noted that Delaware’s compliance year is June 1 through May 31, and because PJM finalizes its revenue data at the close of 60 days following the end of a calendar year, suppliers have close to seven months after the PJM settlement period to file their compliance report. In contrast, Maryland and the District of Columbia use the calendar year for compliance purposes.
24. In his post-hearing memorandum, dated March 1, 2006, Mr. Bloom made three additional modifications to the proposed Rules, in addition to various grammatical corrections. (Ex. 8.) First, Mr.Bloom added a new section, which reads:
Section 2.2.1.1.1 the Commission’s Staff shall, within thirty (30) days of receipt of the notice, provide to the Industrial Customer an acknowledgment of the status, exempt or non-exempt, of the Industrial Customer and...;
Mr. Bloom made this recommendation in order to ensure that all parties (i.e., the Industrial Customer, its Retail Electricity Supplier and Staff) are aware that the Industrial Customer has elected for exemption of its load. (Id. at 1-2.)
25. Second, Mr. Bloom added a new section, which reads:
Section 3.1.7.1 If a Generation Unit is deemed an Eligible Energy Resource under Section 3.1 and the Eligible Energy Resource’s GATS account continues to be maintained in good standing, the Eligible Energy Resource may achieve a Delaware designation for RECs recorded with PJM-EIS’s GATS for the calendar year being traded in GATS at the time of the Commission Staff’s approval of the Eligible Energy Resource, but no earlier than June 1, 2006.
Staff made this recommendation to ensure that RECs are available for use by Retail Electricity Suppliers for RPS compliance. (Id. at 2.)
26. Third, Mr. Bloom changed the filing date of the annual compliance report from within 90 days to within 120 days. As a result of this change, Staff also altered the date for Staff to notify the Retail Electricity Supplier of any compliance deficiencies from within 135 days to within 165 days. These changes affect Sections 3.2.2, 3.3.1, and 3.3.5. Staff made this revision to allow Retail Electricity Suppliers more time to submit a more accurate Report. (Id. at 2-3.)
27. The Commission has the authority and jurisdiction to promulgate regulations under 26 Del.C. §209(a) and 29 Del.C. §10111 et seq. Pursuant to 26 Del.C. §209(a), the Commission may fix “just and reasonable” regulations governing any public utility. In addition, Section 2 of the Renewable Energy Portfolio Standards Act directs the Commission to “adopt rules and regulations necessary to implement the provisions of this Act...” Under these statutes, the Commission has jurisdiction to promulgate Staff’s proposed Rules in this docket.
28. The final proposed regulation, which is attached to the proposed Order in this case as Exhibit “B”, closely follows the Act, which is codified primarily at 26 Del.C. §§351-363. In fact, the most significant provisions, such as: (a) the minimum levels of supply from renewable resources required over the next twelve years, which range from 1 to 10 percent of sales; (b) the list of Eligible Energy Resources; and (c) the creation of tradable renewable energy credits (“RECs”) which are used to meet compliance requirements; simply replicate provisions found in the Act. For the administrative details, however, Staff used its discretion (with ample input from the participants) to set more specific reporting requirements, to sharpen certain definitions, and generally to establish implementation procedures.
29. Based on the comments submitted and the statements made at the hearing, all of the participants generally support the proposed Rules. While Staff accepted just one of the two recommendations made by DEO, Mr. Gallagher stated that DEO found the final proposed Rules to be acceptable. (Tr. 55.) After initially declining Delmarva Power’s recommendations regarding retroactive REC creation and the amount of time allotted for reporting, Staff made certain concessions in its final proposed Rules that moved towards Delmarva Power’s positions. To wit, Staff allowed for an earlier recognition of RECs in Delaware and extended the deadline for annual reporting from 90 to 120 days from the end of the reporting period. (Ex. 8 at 2-3.) In addition, Staff’s decision not to allow jurisdictional reciprocity for RECs is reasonable, given the administrative burden that of tracking changes in other state’s requirements and the possibility that Staff would not agree that another state’s requirements are appropriate.
30. Mr. Bloom addressed each of Constellation’s concerns (Ex. 2 at 2-5; Tr. 29-34; Ex. 8 at 1-2). As summarized above, Staff adopted several of Constellation’s recommendations designed to clarify certain sections and rejected other suggestions as contrary to the Act. In addition, Staff declined to place a two-year notice requirement on the Commission for implementing a new renewable energy tracking system if the Commission finds that the PJM’s system is no longer suitable. (Ex. 2 at 3.) As noted by Mr. Bloom, if the Commission must cease use of PJM’s system on short notice, it will not be able to wait two years before implementing a replacement system.
31. Staff did not make any changes to its proposed Rules based on Mr. Holmes’s recommendation, under public comment, that electricity use that is displaced by solar energy (e.g., with a solar hot water system) qualify as an eligible resource, rather than just electricity produced by solar energy. (Tr. 59-61.) This change would contradict the Act’s requirement that qualifying solar energy “produce electricity that powers electricity generators,” under §354 (e)(1), as apparently recognized by Mr. Holmes. I agree, therefore, with Staff’s decision not to add electricity displaced by solar energy to the list of eligible resources.
32. In summary, after considering comments from all of the interested parties, Staff has proposed rules that are consistent with the Act and which implement the Act in a reasonable manner. As such, and for all of the above reasons, I recommend that the Commission adopt, as just and reasonable, Staff’s proposed regulation (Ex. 6). A proposed form of Order implementing the above recommendation is appended, as Attachment “A,” for the Commission’s convenience. I will also note that, based on the changes Staff made to the proposed regulation published in the Delaware Register in January of 2006, it is likely that the Commission will need to republish the proposed Rules, and establish a new 30-day comment period. See 29 Del.C. §10118(c).
9 DE Reg. 1734 (05/01/06)(Prop.)
The Act is codified, in main part, at 26 Del.C. §§351-363.
Ex. 1 consists of the affidavits of publication of notice from The News Journal and Delaware State News newspapers. Notice was also sent to those entities that had participated in the prior workshops.