HB69: Renewable energy portfolio standard program; required participation of electric utility.

HOUSE BILL NO. 69
Offered January 11, 2012
Prefiled December 19, 2011
A BILL to amend and reenact § 56-585.2 of the Code of Virginia, relating to renewable power goals to be met by electric utilities in providing renewable power; Virginia Sustainable Energy Fund created.
Patron-- Englin

Committee Referral Pending

Be it enacted by the General Assembly of Virginia:

1.  That § 56-585.2 of the Code of Virginia is amended and reenacted as follows:

§ 56-585.2. Sale of electricity from renewable energy sources.

A. As used in this section:

"Electric utility" or "utility" means an investor-owned electric utility or an electric distribution cooperative.

"Renewable energy" shall have the same meaning ascribed to it in § 56-576, provided such renewable energy is (i) generated or purchased in the Commonwealth or in the interconnection region of the regional transmission entity of which the participating electric utility is a member, as it may change from time to time; (ii) generated by a public an electric utility providing electric service in the Commonwealth from a facility in which the public utility owns at least a 49 percent interest and that is located in a control area adjacent to such interconnection region; or (iii) represented by certificates issued by an affiliate of such regional transmission entity, or any successor to such affiliate, and held or acquired by such an electric utility, which validate the generation of renewable energy by eligible sources in such region. "Renewable energy" shall not include electricity generated from pumped storage, but shall include run-of-river generation from a combined pumped-storage and run-of-river facility.

"Renewable energy source" means a facility at which a form of renewable energy is used to generate electricity.

"Renewable power goal" means the amount of electric energy sold by an electric utility to retail customers in the Commonwealth that is required to be generated by a renewable energy source in a calendar year as specified in subdivisions C 1 through C 6.

"Total electric energy sold in the base year" means total electric energy sold to Virginia jurisdictional retail customers by a participating utility in calendar year 2007, excluding an amount equivalent to the average of the annual percentages of the electric energy that was supplied to such customers from nuclear generating plants for the calendar years 2004 through 2006.

B. Any investor-owned incumbent Each electric utility may apply to the Commission for approval to participate in a renewable energy portfolio standard program, as defined that fails to meet the renewable power goals commencing in 2014 shall be required to pay an alternative compliance payment as set forth in this section. The Commission shall approve such application if the applicant demonstrates that it has a reasonable expectation of achieving 12 percent of its base year electric energy sales from renewable energy sources during calendar year 2022, and 15 percent of its base year electric energy sales from renewable energy sources during calendar year 2025, as provided in subsection D. Effective July 1, 2012, the Commission shall not approve any request for a rate adjustment clause in connection with an investor-owned electric utility's participation in the renewable energy portfolio standard program that existed prior to July 1, 2012.

C. It is in the public interest for utilities to achieve the goals set forth in subsection D, such goals being referred to herein as "RPS Goals". Accordingly, the Commission, in addition to providing recovery of incremental RPS program costs pursuant to subsection E, shall increase the fair combined rate of return on common equity for each utility participating in such program by a single Performance Incentive, as defined in subdivision A 2 of § 56-585.1, of 50 basis points whenever the utility attains an RPS Goal established in subsection D. Such Performance Incentive shall first be used in the calculation of a fair combined rate of return for the purposes of the immediately succeeding biennial review conducted pursuant to § 56-585.1 after any such RPS Goal is attained, and shall remain in effect if the utility continues to meet the RPS Goals established in this section through and including the third succeeding biennial review conducted thereafter. Any such Performance Incentive, if implemented, shall be in lieu of any other Performance Incentive reducing or increasing such utility's fair combined rate of return on common equity for the same time periods. However, if the utility receives any other Performance Incentive increasing its fair combined rate of return on common equity by more than 50 basis points, the utility shall be entitled to such other Performance Incentive in lieu of this Performance Incentive during the term of such other Performance Incentive. During each calendar year commencing on or after January 1, 2013, the minimum amount of renewable energy acquired by an electric utility for sale to its retail customers in the Commonwealth shall be:

1. In calendar year 2013, an amount equal to three percent of the total electric energy sold in the base year;

2. In each of calendar years 2014 and 2015, an amount equal to five percent of the total electric energy sold in the base year;

3. In calendar year 2016, an amount equal to five percent of the total electric energy sold in the base year;

4. In calendar year 2017, an amount equal to 12 percent of the total electric energy sold in the base year;

5. In each of calendar years 2018 and 2019, an amount equal to 15 percent of the total electric energy sold in the base year; and

6. In calendar years 2020 and each year thereafter, an amount equal to 20 percent of the total electric energy sold in the base year.

A utility shall receive double credit toward meeting the renewable energy portfolio standard for energy derived from sunlight or from onshore wind, and triple credit toward meeting the renewable energy portfolio standard for energy derived from offshore wind.

D. To qualify for the Performance Incentive established in subsection C, the total electric energy sold by a utility to meet the RPS Goals shall be composed of the following amounts In determining the amount of a utility's sales of electric energy from that is renewable energy sources, as adjusted the Commission shall adjust for any sales volumes lost through operation of the customer choice provisions of subdivision A 3 or A 4 of § 56-577:

RPS Goal I: In calendar year 2010, 4 percent of total electric energy sold in the base year.

RPS Goal II: For calendar years 2011 through 2015, inclusive, an average of 4 percent of total electric energy sold in the base year, and in calendar year 2016, 7 percent of total electric energy sold in the base year.

RPS Goal III: For calendar years 2017 through 2021, inclusive, an average of 7 percent of total electric energy sold in the base year, and in calendar year 2022, 12 percent of total electric energy sold in the base year.

RPS Goal IV: For calendar years 2023 and 2024, inclusive, an average of 12 percent of total electric energy sold in the base year, and in calendar year 2025, 15 percent of total electric energy sold in the base year.

A utility may apply renewable energy sales achieved or renewable energy certificates acquired during the periods covered by any such RPS Goal that are in excess of the sales requirement for that RPS Goal to the sales requirements for any future RPS Goal.

E. A An investor-owned utility participating in such program shall have the right to recover all incremental costs incurred for the purpose of such participation in such program complying with the renewable power goals, as accrued against income, through rate adjustment clauses as provided in subdivisions A 5 and A 6 of § 56-585.1, including, but not limited to, administrative costs, ancillary costs, capacity costs, costs of energy represented by certificates described in subsection A, and, in the case of construction of renewable energy generation facilities, allowance for funds used during construction until such time as an enhanced rate of return, as determined pursuant to subdivision A 6 of § 56-585.1, on construction work in progress is included in rates, projected construction work in progress, planning, development and construction costs, life-cycle costs, and costs of infrastructure associated therewith, plus an enhanced rate of return, as determined pursuant to subdivision A 6 of § 56-585.1. An electric distribution cooperative shall have the right to recover all incremental costs incurred for the purpose of complying with the renewable power goals to the extent permitted under § 56-585.3. All incremental costs of the RPS program complying with the renewable power goals shall be allocated to and recovered from the utility's customer classes based on the demand created by the class and within the class based on energy used by the individual customer in the class, except that the incremental costs of the RPS program complying with the renewable power goals shall not be allocated to or recovered from customers that are served within the large industrial rate classes of the participating utilities and that are served at primary or transmission voltage.

F. A Each electric utility participating in such program shall apply towards meeting its RPS Goals renewable power goals any renewable energy from existing renewable energy sources owned by the participating utility or purchased as allowed by contract at no additional cost to customers to the extent feasible. A utility participating in such program shall not apply towards meeting its RPS Goals renewable power goals any renewable energy certificates attributable to any renewable energy generated at a renewable energy generation source in operation as of July 1, 2007, that is operated by a person that is served within a utility's large industrial rate class and that is served at primary or transmission voltage. A participating utility shall be required to fulfill any remaining deficit needed to fulfill its RPS Goals renewable power goals from new renewable energy supplies at reasonable cost and in a prudent manner to be determined by the Commission at the time of approval of any application made pursuant to subsection B. A participating utility may sell renewable energy certificates produced at its own generation facilities located in the Commonwealth or, if located outside the Commonwealth, owned by such utility and in operation as of January 1, 2010, or renewable energy certificates acquired as part of a purchase power agreement, to another entity and purchase lower cost renewable energy certificates and the net difference in price between the renewable energy certificates shall be credited to customers. Utilities participating in such program shall collectively, either through the installation of new generating facilities, through retrofit of existing facilities or through purchases of electricity from new facilities located in Virginia, use or cause to be used no more than a total of 1.5 million tons per year of green wood chips, bark, sawdust, a tree or any portion of a tree which is used or can be used for lumber and pulp manufacturing by facilities located in Virginia, towards meeting RPS renewable power goals, excluding such fuel used at electric generating facilities using wood as fuel prior to January 1, 2007. A utility with an approved application shall be allocated a portion of the 1.5 million tons per year in proportion to its share of the total electric energy sold in the base year, as defined in subsection A, for all utilities participating in the RPS program. A utility may use in meeting RPS renewable power goals, without limitation, the following sustainable biomass and biomass based waste to energy resources: mill residue, except wood chips, sawdust and bark; pre-commercial soft wood thinning; slash; logging and construction debris; brush; yard waste; shipping crates; dunnage; non-merchantable waste paper; landscape or right-of-way tree trimmings; agricultural and vineyard materials; grain; legumes; sugar; and gas produced from the anaerobic decomposition of animal waste.

G. The Commission shall promulgate such rules and regulations as may be necessary to implement the provisions of this section including a requirement that participants utilities verify whether theRPS renewable power goals are met in accordance with this section.

H. A utility shall satisfy the renewable power goals of acquiring renewable energy for sale to its retail customers in the Commonwealth by (i) self-generating renewable energy, (ii) purchasing sufficient renewable energy certificates, or (iii) a combination of clauses (i) and (ii). A utility shall submit documentation of compliance with the renewable power goals to the Commission at such times and in such format as the Commission requests. The Commission shall create and administer a renewable energy certificate certification, tracking, and reporting program. This program should include a process for determining when and how renewable energy certificates shall be created, accounted for, transferred, and retired. The renewable energy certificates program shall include a true-up period during which utilities may obtain the required number of renewable energy certificates in the marketplace to meet each year's renewable power goals.

I. If, after notice and opportunity for a hearing, the Commission determines that a utility has failed to meet its renewable power goal for a year, the Commission shall order the participating utility to make an alternative compliance payment. The amount of a participating utility's alternative compliance payment shall be the end-of-year market price for the equivalent renewable energy certificates needed to achieve the renewable power for the total amount of electricity from renewable energy sources that would satisfy the applicable requirement of subsection C for that year. Alternative compliance payments shall be paid into the Virginia Sustainable Energy Fund established pursuant to subsection J. Alternative compliance payments made by a participating utility shall not constitute an incremental cost of compliance with this section incurred by the participating utility under subsection E and shall not be recoverable by the participating utility under this section or subdivision A 5 d of § 56-585.1.

J. There is hereby created in the state treasury a special nonreverting fund to be known as the Virginia Sustainable Energy Fund, hereafter referred to as "the Fund." The Fund shall be established on the books of the Comptroller. All alternative compliance payments collected by the Commission pursuant to subsection I shall be paid into the state treasury and credited to the Fund. Interest earned on moneys in the Fund shall remain in the Fund and be credited to it. Any moneys remaining in the Fund, including interest thereon, at the end of each fiscal year shall not revert to the general fund but shall remain in the Fund. Moneys in the Fund shall be used solely for the purpose of providing funding for projects and programs that have the purpose of increasing the amount of electric energy generated from renewable energy sources in the Commonwealth.

K. Each investor-owned incumbent electric utility shall report to the Commission annually by November 1 commencing in 2013 on (i) its efforts, if any, to meet the RPS Goals renewable power goals, (ii) its overall generation of renewable energy, and (iii) advances in renewable generation technology that affect activities described in clauses (i) and (ii).

2.  That an investor-owned electric utility that prior to July 1, 2012, was authorized to receive a Performance Incentive as a consequence of its participation in the renewable energy portfolio standard program pursuant to § 56-585.2 of the Code of Virginia as it existed prior to the effective date of this act shall continue to receive its Performance Incentive following the effective date of this act until the effective date of an order of the State Corporation Commission establishing the utility's authorized rate of return on equity in the utility's next biennial rate review proceeding conducted pursuant to § 56-585.1 of the Code of Virginia.