Thursday, May 28, 2009

Vermont Renewable Energy and Energy Efficiency Act of 2009 to become law

Governor Douglas did not veto the Renewable Energy and Energy Efficiency Act passed by the legislature and so it will become law. We tracked this bill as it worked its way through the House and Senate. According to Renewable Energy Vermont, the statute's components, include:
  • a standard offer price for certain types of renewable energy;
  • clarification that thermal energy fits within the purview of the Clean Energy Development Fund (CEDF);
  • regulatory incentives ensuring utilities can recover permitting costs for renewable energy;
  • a requirement that ANR reconsider its policy prohibiting wind on State lands;
  • improvements to residential and commercial-building standards;
  • pilot downtown-community renewable-energy projects in Montpelier and Randolph (combined heat and power facilities);
  • clean energy assessment districts that would allow towns, cities, and incorporated villages to use municipal bonds to finance residential renewable-energy or energy-efficiency projects; and
  • limitations on the power of municipalities and deeds to prohibit residential installation of renewable-energy and energy-efficiency devices, such as solar panels and residential wind turbines
One of the more controversial aspects of the statute pertains to the inclusion of a so-called "standard offer" - which establishes a minimum price to be paid by consumers for certain types of renewable energy. In Governor Douglas' letter summarizing his concerns about the statute, he compares the standard offer to PURPA, the 1978 statute that required utilities to purchase power from independent power producers under long-term fixed contracts. As an interesting aside, some proposals for a national renewable portfolio standard use amendments to PURPA as the legislative vehicle.

The standard offer applies to renewable energy facilities with a plant capacity of 2.2 MW or less and will be available until at least 50 MW of qualifying capacity comes online in Vermont. For most renewable energy sources, the contracts would range from 10-20 years, but solar contracts must range from 10-25 years.

The statute requires the Public Service Board (PSB) to set minimum standard offer contract prices by January 15, 2010. In setting prices, the Board is directed to 1) calculate a generic cost of each form of renewable energy, and 2) allow a rate of return on equity comparable to the highest rate of return received by a Vermont investor-owned utility. The statute gives the PSB broad discretion to make "adjustments" to the factors above to "ensure that the price provides sufficient incentive for the rapid development and commissioning" of the new renewable facilities.

The statute also establishes "interim" standard offer prices that will apply pending the Board's determination of prices by January 15, 2010. The interim prices stated in the statute are the following:
  • $0.12 per kWh for a plant using methane from a landfill or agriculture operation;
  • $0.20 per kWh for wind power facilities up to 15 kW;
  • $0.30 per kWh for solar power;
  • for hydropower facilities, wind facilities between 15 kW - 2.2 MW, and certain biomass facilities, the price is equal to the average residential rate per kWh charged by all in-state retail electricity providers weighted in accordance with each such provider's share of the state's load at the time the plant first comes on line.
The statute directs the PSB to review the above interim prices in a noncontested case docket to determine whether they constitute "a reasonable approximation" of the prices the PSB will establish by January 15, 2010 in consideration of the statutory criteria. The Board is directed to adjust any price found not to constitute such an approximation. The PSB must complete this review by September 15, 2009.

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