Bidding included in bill raising renewable energy requirements
In the wake of criticism over the cost to ratepayers of long-term energy contracts signed by National Grid and NStar to purchase power from Cape Wind, a panel of lawmakers on Tuesday endorsed a bill that would introduce competitive bidding to the renewable energy marketplace while more than doubling the amount of renewably energy utilities must purchase.
The Joint Committee on Telecommunications, Utilities and Energy endorsed a redrafted bill that would require utility companies over the next four years to purchase an additional 4 percent of peak-load power needs from renewable sources through a competitive bidding process.
Eleven members of the committee voted in favor and none opposed, though Rep. Tackey Chan (D-Quincy) and Sen. Marc Pacheco (D-Taunton) reserved their rights. The bill heads first to the Senate.
After labor and environmental groups objected to legislation that would have required energy companies to accept the lowest bid, the bill was updated to allow the Department of Public Utilities to consider whether a contract enhances electricity reliability, helps moderate system peak load requirements, is cost effective to ratepayers over the life of the contract, and, where feasible, creates additional employment and economic development.
Opponents of allowing utilities to accept the lowest bidder said such a change would advantage cheaper out-of-state renewable projects, driving jobs out of Massachusetts. The Department of Public Utilities would be empowered under the bill, an amended version of S 1679, to consider a range of factors when reviewing contracts.
"It won't necessarily be the lowest cost, but it will be the least cost," said Rep. John Keenan, a Salem Democrat and the House chair of the committee.
Secretary of Energy and Environmental Affairs Richard Sullivan said the Patrick administration was "pleased" to see long-term contracts preserved in the bill, and said the expansion of renewable requirements will stimulate job growth.
"Long-term contracts are important to the continued growth of the Commonwealth's clean energy sector, which employs more than 64,000 people at 5,000 companies statewide. Increasing the percentage of renewable energy utility companies must purchase will ensure continued job growth, greater economic benefits, and a cleaner environment for the people of Massachusetts," Sullivan said in a statement.
Sen. Benjamin Downing, the Senate co-chair of the committee, said the additional 4 percent purchasing requirements will be enforced on top of the 3 percent renewable energy portfolio already required under the Green Communities Act.
Utilities will be required to complete two procurements by December 2016 for the additional power, entering into 15 to 20-year contracts, instead of the previous 10 to 15-year timeframe.
Rep. Michael Knapik (R-Westfield), who filed the original renewable energy competitive bidding bill in the Senate, said he supports the bill and thanked the committee and its chairmen for working collaboratively.
Robert Rio, senior vice president for government affairs at Associated Industries of Massachusetts, said his group has long opposed long-term power contracts and worried that doubling the renewable energy requirement could have "serious negative consequences" for ratepayers.
"Essentially what we've done is taken an inefficient and costly program and doubled it, but there are some good things in the bill too that we believe will help electricity rates and we're reviewing it," Rio said.
The bill would also reduce the incentives for utilities to sign long-term renewable contracts criticized by Attorney General Martha Coakley as "sweetheart deals" by reducing the annual remuneration to the utility from 4 percent of the annual payments to 1 percent.
"The issue, particularly around competition and transparency, seems to be an important place to make changes, and I think this is a positive change that will only be good for Massachusetts providing for competition, so I support that," Coakley said.
Coakley called the reduction in remuneration for utilities a "good move forward," and said competition and reduced incentives should help offset any added costs from increased renewable purchasing requirements, which also carry potential economic development benefits.
Rio, of AIM, said he supports expanding the energy efficiency rebate program, and believes reducing the incentives for utilities to sign long-term contracts is a step in the right direction.
"We've never been a big believer in remuneration at all and thought that was just an added cost, so the fact that they reduced it to 1 percent is a good thing," Rio said.
The 14-page bill also updates the property classification of solar installations, extends the rate review period for the DPU from six months to 10 months, and allows for hydro power to count towards renewable energy goals, though it will not be subsidized.
"This is a new and improved GCA. If we were talking about the iPad, this would be the GCA2," Keenan said.
After NStar agreed to purchase 27.5 percent of Cape Wind power as part of a deal to complete a merger with Northeast Utilities, the Patrick administration was criticized for the appearance that the governor strong-armed the utility into buying power from the favored project.
House Minority Leader Brad Jones called the agreement "legalized extortion." Downing said the bill, if passed, would not affect past contracts.
"I think there's a really strong case to be made for Cape Wind that it's cost effective over the long term. What we did isn't a judgment upon what the Section 83 program was before, it's about what would be the best moving forward, and just as we don't think that least cost should be the (standard), we do think that a competitive bid on cost effective terms will help meet the broad variety of goals that we have," Downing said.
The bill also creates a voluntary accelerated rebate pilot program for the five largest electric and five largest gas users in each utility service territory, making them eligible for a 100 percent rebate for qualified energy efficiency measures.
The Department of Public Utilities would be directed under the bill to study the costs of low-income electric and gas programs, and the Department of Energy Resources would conduct a study of greenhouse gas emissions.