Note: This is a courtesy copy of the adoption. The official version will be published in the New Jersey Register on April 5, 2004. Should there be any discrepancies between this courtesy copy and the official version, the official version will govern.
NEW JERSEY BOARD OF PUBLIC UTILITIES
Courtesy Copy of Adopted Amendments to N.J.A.C. 14:4-8
RENEWABLE ENERGY PORTFOLIO STANDARDS
BOARD OF PUBLIC UTILITIES 2
Summary of Public Comments and Agency Responses: 3
General Comments: 4
14:4-8.1 Purpose and scope 21
14:4-8.2 Definitions 22
14:4-8.3 Minimum percentage of renewable energy required 24
14:4-8.4 Compliance with solar electric generation requirements 39
14:4-8.5 Compliance with class I renewable energy requirements 42
14:4-8.6 Compliance with class II renewable energy requirements 45
14:4-8.7 Requirements that apply to both class I and class II renewable energy 47
14:4-8.8 Renewable Energy Certificates (RECs) 49
14:4-8.9 Board issuance of solar RECs 58
14:4-8.10 Alternative compliance payments (ACPs and SACPs) 65
14:4-8.11 Demonstrating compliance, reporting and record keeping 71
14:4-8.12 Penalties 73
Summary of Agency-Initiated Changes: 75
Federal Standards Statement 75
14:4-8.2 Definitions 76
14:4-8.3 Minimum percentage of renewable energy required 77
14:4-8.4 Compliance with solar electric generation requirements 77
14:4-8.5 Compliance with class I renewable energy requirements 78
14:4-8.6 Compliance with class II renewable energy requirements 79
14:4-8.8 Renewable Energy Certificates (RECs) 80
14:4-8.9 Board issuance of solar RECs 80
14:4-8.10 Alternative compliance payments (ACPs and SACPs) 82
14:4-8.11 Demonstrating compliance, reporting and record keeping 82
14:4-8.12 Penalties 83
BOARD OF PUBLIC UTILITIES
Adopted Amendments: N.J.A.C. 14:4-8 (Renewable Energy Portfolio Standards)
Proposed: October 6, 2003 at 35 N.J.R. 4445(a)
Adopted: March 3, 2004, by the New Jersey Board of Public Utilities, Jeanne M. Fox, President, and Frederick F. Butler, Carol J. Murphy, Connie O. Hughes, and Jack Alter, Commissioners
Filed: March 5, 2004
Authority: N.J.S.A. 48:2-13 and 48:3-49 et seq., in particular 48:3-51 and 48:3-87
BPU Docket Number: EX 03080616 (companion to BPU Docket Number EX 04020093)
Effective Date: April 5, 2004
Expiration Date: January 9, 2006
The Board of Public Utilities (Board or BPU) is herein adopting amendments to its rules governing renewable energy portfolio standards. The rules, set forth at N.J.A.C. 14:4-8, implement provisions of the New Jersey Electric Discount and Energy Competition Act, N.J.S.A. 48:3-49 et seq. (EDECA). These amendments implement several recommendations made by Governor McGreevey's Renewable Energy Task Force (Task Force) in a report submitted to the Governor on April 24, 2003. A copy of the report can be found on the Board's website at www.bpu.state.nj.us.
N.J.A.C. 14:4-8 (Subchapter 8), Renewable energy portfolio standards, requires each electric power supplier and basic generation service provider that sells electricity to retail customers in New Jersey to include in its New Jersey electric energy portfolio a percentage of electricity generated from renewable energy sources. (An energy portfolio is the combined energy generated or supplied by a company.) The renewable portfolio standards (RPS) are intended to encourage the development of renewable sources of electricity and cleaner generation technology; minimize the environmental impact of air pollutant emissions, water use, wastewater discharges, land use impacts and waste generation caused by traditional fossil fuel and nuclear electricity generation; reduce the possible transport of air pollutant emissions; and minimize any adverse environmental impact from the deregulation of energy generation. Because electricity generation can be a significant source of air pollution, the RPS are also a component of New Jersey's efforts to meet State and Federal clean air goals.
The proposed amendments were published on October 6, 2003 at 35 N.J.R. 4445(a). The proposed amendments provided for the option of an alternative compliance payment (ACP) as a means of RPS compliance, as an efficient mechanism to mitigate unreasonable REC prices that might be caused by an unforeseen lack of supply or exertion of market power. After these amendments were proposed on October 6, 2003, the Board adopted ACP rates for 2004 on December 18, 2003, based on the recommendations of the ACP Advisory Committee.
The Board held a public hearing on the proposal on October 30, 2003, and also accepted written comments on the proposal through December 5, 2003. Thirty-two persons submitted comments, which are summarized below, with the Board's responses.
A public hearing on the proposal was held on October 30, 2003, before Lance Miller, Chief of Staff, the Board's designated hearing officer. The Board also accepted written comments on the proposal through December 5, 2003. At the direction of the hearing officer, the transcript and filed written comments were certified directly to the Board for its consideration. Thirty-two persons submitted comments, which are summarized below, with the Board's responses. The record is available for review by contacting Kristi Izzo, Secretary of the Board, at:
ATTN: BPU Docket Number: EX 04020093
Two Gateway Center
Newark, New Jersey 07102
Summary of Public Comments and Agency Responses:
The following persons submitted timely comments on the proposal:
1. Brent Beerley, Community Energy, Inc. (CEI);
2. Chip Bircher, Utility Solar Water Heating Initiative (H20);
3. Richard Bonte, Solar Living, Inc. (SLI);
4. Michael G. Briggs, Reliant Resources, Inc. (RRI);
5. Adam Browning, Vote Solar Initiative (VS);
6. Gregory Eisenstark, Public Service Electric and Gas Company (PSE&G);
7. Pamela Frank, Sun Farm Ventures (SFV);
8. Julie L. Friedberg, Thelen Reid & Priest LLP, on behalf of Jersey Central Power & Light (JCP&L);
9. Frank E. Giordano, Pollution Control Financing Authority of Camden County (PCFACC);
10. Andrew Golembeski, Everpower Global (EG);
11. Derek Grasso, American Ref-Fuel (ARF);
12. Adam Kaufman, Independent Energy Producers of New Jersey (IEPNJ);
13. Frederic Lee Klein, Northeast Utilities Service Company, on behalf of Select Energy (Select);
14. John Lerch, Schweitzer-Mauduit International, Inc. (SMI);
15. James P. McCormick, Strategic Energy LLC (SE);
16. Alan Nogee, Union of Concerned Scientists (UCS);
17. Ed O'Brien, McConnell Energy Solutions (McConnell);
18. James O’Hern, Consensis LLC (CS);
19. Delores Phillips, Energy Photovoltaics (EPV);
20. Lyle Rawlings, Mid-Atlantic Solar Energy Industries Association (MSEIA);
21. Emily Rusch, New Jersey Public Interest Research Group (NJPIRG);
22. Tim Ryan, Arcadia Wind Power/Blue Water Wind (AWP);
23. Roger M. Schwarz, Mid Atlantic Power Supply Association (MAPSA);
24. David Sims, Ecological Systems (ES);
25. Sy Sims, Ecological Systems (ES2);
26. Jeff Tittel, Sierra Club (Sierra);
27. Jim Torpey, Madison Energy Consultants; and Tom Leyden, PowerLight Corp.; on behalf of PV NOW (PVN);
28. Badrhn Ubushin, Division of the Ratepayer Advocate (RPA);
29. J. Mack Wathen, Pepco Holdings, Inc. (PHI);
30. Scott A. Weiner, Center for Energy, Economic and Environmental Policy, Edward J. Bloustein School of Planning and Public Policy, Rutgers University (CEEEP);
31. David Weisman, Energy Outfitters (EO); and
32. Maria Zannes, Integrated Waste Services Association (IWSA).
General Comments:
1. COMMENT: We are excited by the prospects for investment in New Jersey. Your early and aggressive commitment to an RPS is evidence that New Jersey “gets it” --- that New Jersey recognizes that renewable energy is a vital and essential component of a viable economic and environmental strategy for the 21st century. (AWP)
RESPONSE: The Board acknowledges this comment in support of the rules. It is the Board's policy to expand the growth of renewable energy as an economic, environmental, and energy tool for the State. The amendments adopted herein implement the recommendations of the Renewable Energy Task Force. The Renewable Energy Task Force, representing energy suppliers, solar and wind energy generators and other renewable energy generators, utilities, consumer and environmental groups, as well as several government departments and agencies, recommended policies to the BPU to achieve Governor McGreevey's goal of making New Jersey the national leader in the development of renewable energy. After extensive analysis and discussion, the Task Force recommended setting a goal of 120,000 megawatt hours of new photovoltaic solar generation located within New Jersey by 2008, and developing policies designed to meet that goal. A copy of the Task Force Report can be viewed at http://www.state.nj.us/bpu/reports/RenEnergyTFR.pdf. The Renewable Energy Task Force unanimously endorsed the recommendations in the Task Force Report. The recommendations set ambitious but achievable goals that are reflected in the rules adopted herein.
2. COMMENT: We have some concerns about how, if at all, New Jersey’s RPS program will be integrated with New Jersey’s Basic Generation Service (BGS) auction. The current bid process for BGS in New Jersey --- a structure that appears to emphasize short-term supply options over long-term investments --- discourages developers from investing in cleaner energy technologies requiring greater initial capital expenditures which are offset, however, by far lower life cycle operating costs because they require a longer lead time and greater market certainty, such as offshore wind projects. Without the certainty of long-term power purchase agreements, it is highly unlikely that significant new wind resources will be built in New Jersey. Wind energy projects, like any power projects, must have long-term offtake agreements from credit-worthy entities. In the case of offshore wind projects, where construction costs are greater and capital risk larger, it is a virtual certainty that such projects will not be developed without the ability to enter into long-term power purchase agreements. We respectfully request that the Board explore ways to integrate its RPS program with its BGS initiative to facilitate the development of new renewable energy technologies in New Jersey. One approach might be for the Board, as part of any future BGS auction, to direct that a specified portion or amount of any new auction be set aside for renewable energy technologies that meet the state’s RPS program requirements and that suppliers be authorized to enter into long-term (20 year) power purchase contracts with successful bidders. Other approaches may also warrant consideration. (AWP)
RESPONSE: The Board recognizes that coordination of the RPS with the BGS procurement process provides administrative efficiencies for suppliers, which could result in lower electricity prices for customers. The adopted amendments are timed to require compliance with the new RPS percentages on June 1, 2004, the beginning of year two of the post-transition period to competitive electricity service. Thus, with this adoption the RPS compliance and reporting period is now concurrent with BGS compliance requirements. The rules specify the percentages of electricity that must come from solar technologies and class I and class II renewable energy sources for each reporting year thereafter. Successful bidders in the BGS procurement process are able to enter long-term power purchase contracts for the electricity to serve BGS customers, but it is inconsistent with the principles of competitive markets to require suppliers to do so. The Board acknowledges the importance of long-term contracts to the development of renewable energy facilities. The Board fully supports the development of a vibrant and market-based renewable energy certificate (REC) program that will assist in financing for renewable energy projects. The Governor's Renewable Energy Task Force Report recommended that the Board establish a committee of the New Jersey Clean Energy Council to address and advise the Board and staff on ways to reduce barriers to the advancement of renewable energy facilities in New Jersey and the region in order to help meet the RPS requirements. Through the Council, Board staff have worked to address this through its Renewable Energy Advanced Power (REAP) Program. The REAP program guarantees financing for eligible projects. In addition, the BPU, through its Office of Clean Energy (OCE), will continue to work with the New Jersey Economic Development Authority (EDA), the New Jersey Commerce Commission, and other State financing authorities to develop additional financing and credit support to meet the needs of renewable energy development in the State. The Clean Energy Council has recommended that Board staff, through the Rutgers Center for Energy, Economics, and Environmental Policy, establish a work group to evaluate the use of portfolio management as a tool for long term energy planning in New Jersey's deregulated energy market.
3. COMMENT: Because prices offered to end-users are a function of a supplier’s own costs, the imposition of an above-market SACP [solar alternative compliance payment] in lieu of solar RECs could lead to higher prices and fewer choices to customers. In New Jersey’s multi-year basic generation service (“BGS”) contracts, suppliers are prohibited from passing these higher costs directly through to retail customers and instead would be forced to absorb them. At the time these contracts were entered into, the inclusion of solar energy in a supplier’s portfolio mix was not mandated and therefore not factored into BGS pricing. We respectfully request that BGS providers that have locked into these contracts be exempt from any solar requirement because it could cause them significant financial harm. If the SACP is set at a level that is cost-prohibitive to either suppliers or to end-users, the Board may risk promoting the development of renewable energy to the detriment of the New Jersey retail competitive market. (Select)
RESPONSE: Please see the response to comment 4 below.
4. COMMENT: The proposed rule does not include any provisions for fair and just compensation for BGS suppliers holding 34-month tranches effective August 1, 2003 through May 31, 2006. The increased RPS percentages and the solar carve-out were not factored into their bid price and cannot be recovered under this proposal. We estimate the economic losses to these BGS suppliers will range from over $1.7 million to over $4.5 million. We respectfully request the Board to adopt one of three options:
1) The Board could exempt the 34–month tranches from the new RPS requirements. Suppliers holding these 34–month tranches would continue to operate under the existing rule, including the existing ramp-up schedule, until these tranches expire in May 2006; or
2) The Board could adopt language similar to Maryland's, which allows suppliers to increase the price of electric delivery by the incremental cost of any new RPS requirements; or
3) The Board could allow suppliers to recover their fair incremental costs of complying with the expanded RPS requirements through May 2006 from the Clean Energy Fund. An example of suggested rule language for the third option is as follows:
For each 34 – month BGS tranche held for the August 1, 2003 through May 31, 2006 period, the supplier shall be entitled to compensation from the Clean Energy Fund for the incremental cost of the expanded RPS. This compensation shall be determined as follows: