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ACT NO. 61


Public service; portfolio standards; renewable energy;

SPEED program; transmission planning

This act establishes requirements of the state's retail electricity providers with respect to the use of new renewable energy sources. In particular, it requires that each retail electricity provider supply an amount of energy equal to its total incremental energy growth between January 1, 2005 and January 1, 2012 through the use of electricity generated by new renewable resources. (Note that since the focus is on growth of demand, incentives for conservation are implicitly encouraged and are of equal value.) It provides that the retail electricity provider may meet this requirement through eligible new renewable energy credits, new renewable energy resources with renewable energy credits still attached, or a combination of those credits and resources. New renewable energy is defined to include increases in efficiency or output from existing sources, provided that in the case of combustion, the system must result in an incrementally higher level of energy conversion efficienc y or significantly reduced emissions. It also provides a number of conditions on the imposition of the requirement: (1) no retail electricity provider shall be required to provide in excess of a total of 10 percent of its calendar year 2005 retail electric sales with electricity generated by new renewable resources; (2) a retail provider may obtain an exemption from the requirement if the retail electricity provider demonstrates and the public service board determines that compliance with the standard would impair the provider's ability to meet the public's need for energy services after safety concerns are addressed, at the lowest present value life cycle cost, including environmental and economic costs; (3) in lieu of or in addition to purchasing tradeable renewable energy credits to satisfy the portfolio requirements, a retail electricity provider in this state may pay to a renewable energy fund established by the public service board an amount per kilowatt hour as established by the board, or the board may require any proportion of this amount to be paid to the energy conservation fund established under 30 V.S.A. § 209(d); (4) in the case of members of the Vermont Public Power Supply Authority, portfolio requirements may be met in the aggregate. The act requires the public service board to issue progress reports to the general assembly, with respect to Vermont's load growth, the use of renewable energy credits, the implementation of the SPEED program (explained in the next paragraph), an assessment of the supply portfolios of Vermont retail electricity providers and the resources available to meet new supply requirements likely to be triggered by the expiration of major power supply contracts, and other specified matters.

The act also creates a Sustainably Priced Energy Enterprise Development (SPEED) program. The SPEED program is to encourage the in-state development of renewable sources of electricity, which are referred to as "qualifying SPEED resources" as well as the development of certain combined heat and power facilities that may consume nonrenewable sources of fuel, as long as the system meets specified requirements, which include a requirement that the system as a whole have total system efficiency of at least 65 percent. Under the SPEED program, the public service board may: designate an agent to purchase and resell electricity generated by the project; allow the developer of a SPEED resource that is one megawatt or less to sell that power under a long term contract that is established at a specified margin below the hourly spot market price; encourage Vermont's retail electricity providers to secure long-term contracts for renewable energy that are anticipated to be below the long-term market price, over the lives of the projects; make available to Vermont retail electricity providers for purchase through the SPEED program, on a pro rata basis, a specified portion of the power generated under the program; create a mechanism by which a retail electricity provider may establish that it has a sufficient amount of renewable energy, or qualifying resources in its portfolio so that equity requires that the retail electricity provider be relieved from provisions that would require the purchase of SPEED power; release an applicant from meeting a requirement in 30 V.S.A. § 248(b)(2) that there be established a need for the facility. The act provides that if the board finds that the amount of renewable energy SPEED resources coming into service after January 1, 2005, but prior to January 1, 2013, exceeds total statewide growth in demand during the period of time between January 1, 2005 and January 1, 2012, or if it finds that the amount of qualifying SPEED resources exceeds 10 pe rcent of total statewide load for calendar year 2005, the portfolio standards established under this act shall not be in force. In this determination, electricity produced at all facilities owned by or under long-term contract to Vermont retail electricity providers, whether it is generated inside or outside Vermont, that is new renewable energy shall be counted. If by July 1, 2012, the board determines that the goals have not been met, the portfolio standards shall go into effect in one year. The act makes SPEED resources eligible for VEDA funding.

The act requires the public service board to establish or adopt a system of tradeable renewable energy credits for renewable resources that may be earned by electric generation qualifying for the renewables portfolio standard. The act allows the public service board and department to encourage certain efficient combined heat and power facilities, and to allow retail electricity companies credit for efforts taken to encourage efficient combined heat and power facilities, by the state's efficiency utility. The act repeals the $17.5 million cap on the expenditures that may be made by the efficiency utility and provides that the amount of the charge shall be reviewed for unrealized energy efficiency potential and shall be adjusted as necessary in order to realize all reasonably available, cost-effective energy efficiency savings. It allows the board to exempt a customer from the charge during a particular year if the customer demonstrates that, during the preceding year, it impl emented an extraordinary amount of cost-effective energy efficiency at the customer's own expense or incurred extraordinary costs on those measures and got no reimbursement for those measures. It requires the board to consider the retail rate impacts of the actions taken by the efficiency utility.

The act also requires that on or before September 1, 2006, the public service board shall establish by rule or order standard provisions, including applicable fees that are required to cover the total cost of interconnection to be paid by the qualified distributed generator, for agreements providing for interconnection between the facilities of a retail electricity provider under the jurisdiction of the board and the facilities of a qualified distributed generator.

The act expresses state policy that is to be urged by the state before the New England Independent System Operator, and in proceedings before the Federal Energy Regulatory Commission, and before other tribunals. The policy would be that all available resources - transmission, strategic generation, targeted energy efficiency, and demand response resources - should be treated comparably in analysis, planning, and access to funding. The policy would provide that the principal criterion for approving and selecting a regional transmission solution should be whether it is the least-cost solution to a system need on a total cost basis.

The act establishes requirements with respect to transmission planning within the state, requiring VELCO and its co-owners to submit ten-year plans. The objective of the plans shall be to identify the potential need for transmission system improvements as early as possible, in order to allow sufficient time to plan and implement more cost-effective nontransmission alternatives to meet reliability needs, wherever feasible. It also would identify the demand or supply parameters that generation, demand response, energy efficiency, or other nontransmission strategies would need to address to resolve the reliability deficiencies identified. It establishes a public meeting process pursuant to which a utility preparing the plan would present a draft of the plan and facilitate a public discussion to identify and evaluate nontransmission alternatives. Before the department of public service takes a position before the board concerning the construction of new transmission or a transmi ssion upgrade with significant land use ramifications, the department shall hold one or more public meetings with the legislative bodies or their designees of each town, village, or city that the transmission lines cross, and shall engage in a discussion with the members of those bodies or their designees and the interested public as to the department's role as public advocate.

The act requires the department of public service on or before January 1, 2006 to investigate and report to specified legislative committees with respect to matters, including the extent to which an aggressive regionwide implementation of energy efficiency and renewable energy programs might affect the price of spot market power in the New England ISO through the effect of those programs on bid prices, where the clearing price of the electric market is reduced due to reduced electric demand.

The act allows the public service board to embark on performance-based ratemaking on its own motion or on motion of the department of public service, and not only at the request of the utility. It makes it clear that these programs may offer incentives, decreasing the extent to which the financial success of distribution utilities between rate cases is linked to increased sales to end use customers and may be threatened by decreases in those sales.

The act requires the department of public service to report back to the general assembly with recommendations regarding a statewide energy code for commercial buildings. The act requires the public service board to report to the legislature with an explanation of the results of any alternative form of regulation approved by the board, and if no such form has been approved, an explanation of why no such form has been approved. It requires biennial reports to the legislature from the board on how the state might best continue to meet its energy goals, including whether the state should meet its load growth over the succeeding 10 years, up through 2023, by a continuation of the SPEED program.

The act provides that a person may become a member of a cooperative by purchasing and paying the cooperative for renewable energy certificates or other environmental attributes associated with the generation of electricity.

It requires the department of public service to report to the general assembly by January 15, 2006 with recommended procedures and efforts and initiatives to date concerning the involvement of the public in the development and siting of wind energy facilities. It requires the department of public service to study and make recommendations on the feasibility of establishing grant programs for new renewable generation systems on farms. And finally, it requires the public service board and the department of public service to report to the general assembly by no later than January 15, 2006 and again by no later than January 15, 2007 with respect to the net revenue loss and the net revenue gain to Vermont ratepayers, utilities, and Vermont-based generators as a result of any tariff relating to locational generation capacity; and the options available to mitigate the cost impacts of any such tariff.

Effective Date: July 1, 2005

Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont