Renewable portfolio standards and credits; electricity derived from biofuels; electric utility purchases of renewable energy and customer-generated electricity; distributed generation rules; granting rule-making authority; and requiring the exercise of rule-making authority. (FE)

Current law generally requires electric utilities and retail electric cooperatives (electric providers) to ensure that, in a given year, a specified percentage of the electricity that the electric provider sells to customers or members is renewable energy. These requirements are commonly referred to as renewable portfolio standards (RPSs), and they include deadlines that apply to an electric provider's renewable energy percentage (REP). An electric provider's REP for a particular year is the percentage that results from dividing the electric provider's renewable resource credits (RRCs) by the total electricity sold by the electric provider in that year. There are two types of RRCs. The first type is based on electricity derived from renewable energy. An electric provider creates one RRC of that type for each megawatt hour of electricity derived from renewable energy that the electric provider sells to customers or members. The second type is based on specified energy-related uses that displace the use of nonrenewable energy. Electric providers, as well as their customers and members, may create the second type of RRC, pursuant to rules promulgated by the PSC. Electric providers may use RRCs that they create, or purchase RRCs created by others, to comply with an REP for a particular year.

Regarding the first type of RRC described above, the bill allows an electric provider to create two RRCs, instead of one RRC, for each megawatt hour of electricity that meets specified requirements. First, the electricity must be generated by either: 1) a facility that generates electricity and thermal energy used for industrial, commercial, heating, or cooling purposes; or 2) a facility that generates electricity from direct radiant energy received from the sun. Second, the electric generating facility must commence operation prior to January 1, 2020. Third, if the electricity is purchased by an electric utility, the purchase must satisfy certain requirements. Fourth, the electric generating facility must be located in this state.

Regarding the second type of RRC described above, the bill makes changes to the solar energy-related uses that are eligible to create RRCs, including defining integrated light pipe technology that is eligible to create RRCs.

The bill also makes changes to REPs. For the year 2009, current law prohibited an electric provider from decreasing its REP below its baseline renewable percentage (BRP), which is defined as the average of the electric provider's REP for 2001, 2002, and 2003. For the year 2010, current law required an electric provider to increase its REP at least two percentage points above its BRP. For the years 2011 to 2014, current law prohibits an electric provider from decreasing its REP below the percentage required in 2010. For the year 2015, unless an exception applies, current law requires an electric provider to increase its REP at least six percentage points above its BRP, and for each year thereafter, current law prohibits an electric provider from decreasing its REP below the percentage required in 2015. The exception applies to an electric provider whose BPR exceeds 12 percent and whose REP for the year 2014 exceeds 14 percent. An electric provider who qualifies for the exception must maintain its REP in the years 2015 and thereafter at a level that is at least two percentage points above its BRP.

This bill eliminates the exception that applies in the years 2015 and thereafter.

For the year 2015, the bill requires an electric provider to increase its REP at least six percentage points above its BRP, and for the years 2016 to 2019, prohibits an electric provider from decreasing its REP below the percentage required for the year 2015. For the year 2020, the bill requires an electric provider to increase its REP at least sixteen percentage points above its BPR, and for the years 2021 to 2029, prohibits an electric provider from decreasing its REP below the percentage required for the year 2020. For the year 2030, the bill requires an electric provider to increase its REP at least twenty-six percentage points above its BRP, and for each year thereafter, the bill prohibits an electric provider from decreasing its REP below the percentage required for 2030.

The bill also limits an electric provider's use of electricity derived from hydroelectric power to satisfy an REP required in the year 2020 and thereafter. For the years 2020 to 2029, an electric utility may count such electricity for not more than 25 percent of its REP. For the year 2030 and thereafter, an electric utility may count such electricity for not more than 20 percent of its REP.

Biofuels.

The bill also requires an electric provider to ensure that a specified percentage of the electricity sold to retail customers or members (retail electricity) is derived from "biofuels," which the bill defines as, with certain exceptions, fuels produced by the anaerobic fermentation of material derived from living organisms.

For the years 2020 to 2029, the bill requires an electric provider to ensure that not less than 0.3 percent of its retail electricity is derived from biofuels. For year 2030 and each year thereafter, not less than 0.5 percent must be derived from biofuels.

Under the bill, biofuel-derived retail electricity may be used to comply with either the foregoing percentages or an REP described above. However, any biofuel-derived retail electricity that is used to comply with the foregoing percentages may not be used also to comply with an REP. The bill also establishes a goal that, by December 31, 2030, 0.5 percent of all electric energy consumed in the state is renewable energy derived from biofuels. No later than June 1, 2031, the PSC must submit a report to the legislature stating whether the state has met that goal and, biennially thereafter, must submit reports until the goal is achieved.

Electric utility purchases of renewable energy.

With certain exceptions, this bill requires the PSC to issue an order directed at each retail electric utility that requires the utility to offer to purchase the renewable energy generated at renewable facilities within the utility's service territory that are constructed after the effective date of the PSC's order. The bill defines "renewable facility" as an electric generating facility that derives energy from: 1) photovoltaic energy; 2) wind power; 3) gas made from renewable resources; or 4) any other renewable resource specified by rule by the PSC. In addition, to qualify as a "renewable facility," the facility must be a small-scale facility, as defined by rule by the PSC. The PSC's orders must specify standard purchase terms for each type of renewable facility, including terms for prices paid for renewable energy, payment schedules, and maximum limits on generating capacity. In specifying terms for renewable energy prices, the PSC must consider production costs, reasonable rates of return on investment, and state and federal incentives available to facility owners and operators. The PSC's orders may also include other conditions, including the following: 1) requirements for adjusting the standard purchase terms based on changes in operating costs; and 2) different prices for renewable energy generated at renewable facilities of the same type that have different generating capacities. The PSC's orders must also prescribe for each type of renewable facility a standardized agreement incorporating the applicable terms and conditions.

The bill allows the PSC to limit a requirement of a utility to purchase renewable energy under an order described above. The PSC may base a limit on the number of renewable facilities, the total installed generating capacity of renewable facilities, or the total amount of renewable energy that must be purchased. However, a limit must be consistent with the purpose of the bill's requirements regarding the orders, which the bill specifies is to maximize the development and deployment of distributed renewable energy generation technologies used at renewable facilities without unreasonable impacts on rates.

The bill also allows the PSC to exempt small and large retail electric utilities from certain of the above requirements. Under the bill, a small utility is one that had retail electric sales of less than 2,500,000 megawatt hours in 2013, and a large utility is one that had retail electric sales of 2,500,000 megawatt hours or more in 2013. For a small or large utility, the PSC may exempt the utility from the requirement to purchase renewable energy from particular types of renewable facilities. For a large utility, the PSC may exempt the utility from all of the above requirements. However, a large utility is not eligible for either of the foregoing exemptions unless the PSC finds that the utility's voluntary initiatives are consistent with the purpose of the bill's requirements regarding the orders, as described above.

The bill also does the following: 1) requires the PSC to periodically review its orders and, as appropriate, revise the standardized agreements prescribed in the orders; 2) specifies that a utility that purchases renewable energy as directed in an order acquires the RRCs associated with the renewable energy, unless otherwise specified by the parties; and 3) allows a utility and owner or operator of a renewable facility to agree to renewable energy purchases on terms and conditions that differ from those specified in an order.

The bill also requires an electric utility to purchase electricity generated from renewable resources by certain customers at specified prices. The duty is limited to customers whose electric generation capacity does not exceed two megawatts. For customer-generated electricity that does not exceed the amount of electricity that the electric utility sells to a customer, the utility must pay a price equal to the retail electricity price the utility charges the customer. For customer-generated electricity in excess of that amount, the electric utility must pay prices set by the PSC by order that reflect certain wholesale prices. Payments must be calculated and made for each billing cycle, but are subject to adjustment based on annual calculations. The PSC must issue orders specifying requirements for the purchases, and the orders must limit annual purchases to an amount not exceeding one percent of annual electricity sales by all electric utilities.

Distributed generation facilities.

Under current law, the PSC must promulgate rules establishing standards for the connection of distributed generation facilities to electric distribution facilities. Current law defines "distributed generation facility" as an electric generating facility that: 1) satisfies certain location requirements; and 2) has a capacity of no more than 15 megawatts. Under this bill, an electric generating facility is a distributed generation facility if it satisfies the location requirements and has a capacity of no more than 20 megawatts. The bill also requires the PSC to review the service rules and practices of electric utilities to determine whether they promote the development of distributed generation facilities, and to report its findings to the legislature. In addition, the PSC must promulgate rules to prohibit any service rules or practices that do not promote, or that impede, the development of distributed generation facilities.