The Vermont Senate Natural Resources & Energy Committee took testimony last week on H.40, the proposed renewable portfolio standard bill passed by the House on March 10. The bill would replace the Sustainably Priced Energy Enterprise Development (SPEED) Program with the Renewable Energy Standard and Energy Transformation (RESET) Program. The hearings are especially timely in light of a recent decision related to Renewable Energy Credits by the State of Connecticut’s utility commission strongly encouraging Vermont to implement a renewable portfolio standard to replace the SPEED Program.
The RESET Program will require all Vermont retail electricity providers to either produce a fixed percentage of their retail electric sales from renewable energy plants, or purchase renewable energy credits from sources of power that can be delivered in New England. Electricity providers will have to satisfy requirements in three distinct categories to comply with the program: Total Renewable Energy, Distributed Renewable Generation, and Energy Transformation. All three requirements will take effect in 2017, and will increase over time until 2032.
The Total Renewable Energy standard will require electricity providers to obtain a certain percentage of their power from renewable sources, by either building renewable generation facilities, purchasing power from renewable generators, or purchasing renewable energy credits (RECs). The requirement will start at 55% of each provider’s annual retail electric sales, and increase to a maximum of 75% in 2032. The Distributed Renewable Generation requirement can be satisfied through electricity provided by a distributed generation facility smaller than 5 MW, or with a net metering facility. It will start at 1% of each utility’s retail electric sales, and increase to a maximum of 10% in 2032. In addition, Distributed Renewable Generation will be counted toward the Total Renewable Energy standard.
The third category in the RESET bill will require electricity providers to take on “Energy Transformation Projects,” which are activities other than electric generation that result in a net reduction in fossil fuel consumption and greenhouse gas emission by their customers. The current bill lists home weatherization, support for electric vehicles, and high-efficiency heating systems as examples. The energy transformation requirement will start at 2% of annual retail electric sales, and increase to a maximum of 12% in 2032.
The Connecticut Public Utilities Regulatory Authority’s recent decision about RECs derived from renewable energy generated in Vermont may be a factor in the bill’s consideration and ultimate outcome. On March 25, the Authority issued its final decision on a challenge to the marketability under Connecticut law of RECs generated under Vermont’s SPEED program. Critics of the program argued that since RECs generated in Vermont counted toward the 2012 SPEED goal of 10 percent of statewide electric retail sales, Connecticut utilities could not include Vermont RECs in their renewable portfolios, as Connecticut law excludes RECs already claimed toward another state’s renewable portfolio standards from eligibility under its own program.
The Connecticut Authority ruled that counting Vermont RECs toward the SPEED Program’s current renewable energy goals does not constitute double counting of RECs generated in Vermont. It found that at present the SPEED Program is “dramatically unlike an RPS,” since it does not establish any “direct annual goal” toward which RECs are counted. But the Authority declined to say what would happen after 2017, when target amounts of renewable energy will take effect. It did note that after 2017, the SPEED Program “may trigger a claim” that Vermont’s RECs cannot be counted towards Connecticut’s renewable portfolio standards. The Authority wrote that H.40, if enacted, “would provide more certainty today that SPEED 2017 goals would be administered in a way that is entirely compatible with other state RPS programs.” In other words, in order for RECs generated in Vermont to be eligible toward Connecticut’s renewable portfolio standard after 2017, Vermont will need to implement its own renewable portfolio standard, whether by legislation or by Public Service Board rule.
The Senate Committee heard testimony from three different witnesses addressing the double-counting issue. Darren Springer of the Department of Public Service submitted an economic analysis of the bill prepared by the Legislative Joint Fiscal Office. The JFO noted the difficulty of establishing a “base economic case” under current law. The analysis, which was drafted prior to the Connecticut decision, stated that the uncertainty surrounding Vermont-generated RECs had “depressed the value of these RECs to the point that a ‘current law’ baseline analysis would probably need to assume significant future electricity price increases.” Despite the Connecticut Authority’s positive decision with regard to current Vermont-generated RECs, its warning with regard to post-2017 RECs seems to corroborate the JFO’s assessment. Michael Zahner of the Vermont Chamber of Commerce expressed concerns about the costs associated with transitioning to renewable energy, but noted that “The continued ability to sell RECs into the New England market is central to retaining regional competiveness.” Finally, Patty Richards of the Washington Electric Cooperative testified that since her company’s REC sales amount to $2–3 million per year, clarification of the eligibility of Vermont REC’s for other states’ renewable portfolio standards is an important issue for it.
We will continue to track the bill as it makes its way through the Senate.