The Vermont Public Service Board has seen a spate of activity over the past several months in the renewable energy arena.  This has included both broad policy setting as well as project-specific decisions.  Much of the activity has centered around the Standard Offer Program.

The SPEED Standard Offer Program, created by the Legislature in 2009, established a guaranteed long-term price that is available to renewable energy projects of 2.2 MW or less.  After an initial round of PSB proceedings in 2009 and 2010 that set the rates for each technology type (solar, wind, biomass and hydro), as well as addressing program implementation issues, the Board has largely focused on reviewing individual projects under section 248.  Many of the program-related documents can be found at www.vermontspeed.com and on the Public Service Board’s website.

More recently, the Board has again focused on program-wide issues.  For example, on July 7^th, 2011, the PSB issued a revised Standard Offer Contract, making a number of changes to the standard offer contract that are largely designed to clarify the rights of the project developers (producers).  See our blog post on July 9^th.

In future posts we will review the Board’s rulings regarding Standard Offer technology caps, SPEED Facilitator costs, the Board’s new price-setting docket for Standard Offer projects, and the Board’s permit decisions on a number of standard offer projects.

On July 8th the Vermont Public Service Board issued a decision in which it established the method by which Standard Offer renewable energy projects will contribute towards covering the costs of the Standard Offer Program’s Facilitator.

Under Vermont’s Sustainably Priced Energy Enterprise Development (“SPEED”) statute, the Board is required to determine the SPEED Facilitator’s “reasonable expenses arising from its role and the allocation of such expenses among plant owners and Vermont retail electricity providers.”  Prior to issuance of the July 8^th order, the SPEED Facilitator’s costs were borne solely by the utilities.

In its recent decision, the Board determined that, in general, the SPEED Facilitator’s costs should be allocated on a 50/50 basis as between the utilities and the owners of standard-offer projects.  However, it chose not to allocate the costs to projects that are in the standard-offer program but are still under development in order to avoid creating the risk of those projects dropping out of the queue prematurely.  Instead, the Board allocated costs between the utilities and the operational standard-offer projects.  The result is that until all of the standard-offer projects are commissioned (up to the 50 MW program ceiling), the utilities will be allocated a larger share of the costs than the standard-offer projects.

Under the Board’s adopted methodology, costs are allocated to operating projects based upon a project’s capacity, capacity factor, standard offer rate, and technology type.  The rates are as follows:

By way of example, a 2.2 MW solar project would incur $2640/year over the 25 year life of the contract.  While this is a relatively minor cost, Standard Offer developers are always watching their financial pro formas closely, particularly as federal and state tax incentives become less available or certain.

On July 7^th, 2011, the PSB issued a revised Standard Offer Contract, making a number of changes to the standard offer contract that are largely designed to clarify the rights of the project developers (producers).

The most significant changes include the following:

• Tax credits are now explicitly excluded from “Other Products Related to Electric Generation” that are transferred to the SPEED Facilitator (and then to the distribution utilities) along with project energy, capacity and REC attributes.  The change thus clarifies the understanding that project producers retain the rights to federal and state tax credits.

• A new milestone has been added, requiring Producers to file a petition for a Certificate of Public Good under 30 V.S.A. § 248 within one year of executing the contract.  The purpose of this change is to ensure that projects in the Standard Offer queue are moving forward and, if not, allowing new projects to enter the queue.

• In the event of a default by the SPEED Facilitator, a presumption arises that the Producer should be relieved of the requirement that it only sell project power through the Standard Offer program.

• Producers may now request Board review of any decision by the SPEED Facilitator that “materially impacts Producer.”

• Producers must be given notice and an opportunity to be heard before the Board amends the Contract.

• Other changes designed to clarify Producer’s (and their lenders’) rights in the event of defaults and force majeure events.

• Producers are required to file an application for SPEED Certification (Board Rule 4.305) with the Board within 30 days after contract execution.  This is largely a paperwork requirement.

• Producers may request the Board to permit the capacity of the project to exceed the amount specified in Attachment A of the Standard Offer contract (beyond the +/-5% allowance).  The Board will address such requests on a case by case basis.

The Board’s Order provides that the revised contract will be used on a going forward basis for all new projects and can be adopted by existing producers at their discretion.

Some project developers are hopeful that, as they look to traditional lenders for project financing, the revised contract will provide a greater measure of certainty and clarity.

The Public Service Board has lifted the so-called “technology caps” applicable to the SPEED Standard Offer program in an Order dated June 3, 2011.  The technology caps limited any renewable technology sector — solar, wind, biomass, farm methane, landfill gas, and hydro — projects from filling more than 25% of the project queue for the 50 MW ceiling created under the SPEED statute (see section 8005(b)(2)).

The technology caps have been in place since the Board’s Order of September 30, 2009 and resulted in the need to create waiting lists for technologies that were oversubscribed (total projects exceeded 12.5 MW (25%)).  Many of the resource categories remained undersubscribed, including biomass, farm methane, landfill gas, and hydro.

In reaching its decision to lift the caps, the Board first reviewed the existing status of the standard offer program.  At present, 44 projects totaling 36 MW of capacity have executed standard offer contracts, or roughly 72% of the 50 MW ceiling.  But only 15 of the 44 projects have been constructed and are operating, as follows:

• four solar projects (3.26 MW total),
• nine farm methane (3.09 MW total),
• one landfill methane (0.56 MW), and
• one hydro (0.68 MW).

The total capacity of the 15 operating projects is 7.59 MW, representing 15% of the 50 MW ceiling.  It was thus apparent to the Board that the program was falling short of maximizing the amount of renewable energy that was being brought on-line.

The Board observed that the purpose of the technology caps was to balance the competing goals of technological diversity and rapid deployment.  However, “[g]iven that the technology caps have been in place since September 30, 2009, and there are projects in each technology category, it appears that the goal of rapid deployment should now take precedence over technological diversity.”

In order to preserve an opportunity for resource diversity, and to recognize that different technologies require different project-development times, the Board directed the SPEED Facilitator to admit projects on an alternating basis from the solar and wind waiting lists, beginning with solar.  If the program is not yet fully subscribed to the 50 MW ceiling by January 2012 and there are no projects on waiting lists, the Board may notify potentially eligible existing hydroelectric plants of the availability of a standard-offer contract.

With the technology caps lifted, several solar projects have moved from the waiting list to the queue, resulting in 6.2 MW in newly executed contracts.  Additional projects should be able to move on to the queue before the 50 MW ceiling is reached.