This thread discusses the Content article: Renewable energy rules take up energy in Jefferson City

This response is posted on behalf of Warren Wood of the Missouri Energy Development Association:

Let’s Support Competitive Renewable Energy Industries



In November ’08 voters passed Prop C by a 2-1 margin. This initiative petition requires that investor-owned utilities (IOUs) generate 15% of their energy from renewable energy resources by 2021 if doing so would not result in electric rates being more than 1% higher than they would be absent this requirement. To encourage local development of renewable energy resources Prop C includes a 25% adder for energy or renewable energy credits from in-state renewable energy projects (adder for counting toward the 15% by 2021 mandate), a solar ‘carve out’ that requires that 2% of the renewable energy be from solar projects, and a $2/watt rebate for solar systems up to 25,000 watts.



Over a period of months, starting in late ’09, the Missouri Public Service Commission (PSC) hosted several workshops with stakeholders to develop a draft rule. A public hearing was held in April of this year and a ‘final’ rule was initially published on June 2nd. My hats off to the PSC’s staff for their efforts to navigate what is a very complicated and difficult statute to implement in agency rules.



The rule issued on June 2nd followed the vast majority of the specific statutory requirements in Prop C, including the 25% adder for in-state projects, the solar ‘carve out’ and the $2/watt rebate for solar systems. Several provisions of the rule however went beyond what the voters approved when they voted for Prop C. Three issues in particular were problematic for a broad coalition of consumer and industrial customer advocates and electric service providers:



* 1% Retail Rate Impact – The rule calculated the 1% retail rate impact over a 10 year averaging period and specifically excluded previous renewable energy resource investments that did not exceed the 1% limit from the calculation. The way this language was crafted the 1% cap was an illusion and customers would have seen rate impacts that significantly exceeded 1% in the future.



* Solar Standard Offer Contract – The rule required that in addition to a $2/watt rebate and a possible 30% tax credit customers installing solar systems would be able to receive an up-front payment for 10 years worth of solar renewable energy credits. The rule also permitted customers to stop operating their system and still keep the up-front payment they had received from the electric service provider. Put together these subsidies would likely cover 85% or more of the cost of installing these systems. While this would certainly spur greater development of solar energy in Missouri it would come with a heavy price tag on everyone else.



* Geographic Sourcing / Bundling – The rule required that any renewable energy credits used to comply with Prop C be ‘bundled’ with a sale of electricity to Missourians. This requirement effectively mandates that renewable energy projects be local, regardless of cost or competitiveness and this mandate is on top of Prop C’s 25% incentive for building in-state facilities. Renewable Energy Credits (RECs) are used in many states as a means to comply with renewable energy standards like Prop C by purchasing the green attributes of energy from renewable energy resources. Purchasing of RECs supports development of renewable energy projects throughout the country where they make the most financial sense. Prop C specifically recognized the importance of RECs and states that “A utility may comply with the standard in whole or in part by purchasing RECs” and in discussions with the proponents of Prop C it was represented that utilities would be able to go to any state for the purchase of RECs. The requirement to bundle RECs with sale of electricity is not consistent with Prop C and would drive up cost to electric service providers and ultimately their customers.



As a result of the provisions in the rule that the customer advocates and electric service providers disagreed with a hearing of the legislative body that reviews state agency rules was requested. This oversight body is the Joint Committee on Administrative Rules (JCAR) and is composed of five senators and five representatives. JCAR held three hearings on this rule, the most hearings they have ever held on one rule.



In response to concerns expressed by several stakeholders the PSC made the solar standard offer contract a voluntary provision. This change allows electric service providers to propose terms for these contracts and the purchase of solar renewable energy credits to the PSC for approval but does not mandate that utilities provide large subsidies to solar systems that other customers would pick up the tab for.



Also, in response to concerns expressed by stakeholders, the PSC removed thirteen words from the retail rate impact provision. This language required that when calculating the 1% retail rate impact renewable energy resources previously determined not to exceed the 1% threshold be excluded. While deletion of this language does improve the 1 ˝ pages of text describing how the 1% retail rate impact shall be calculated it does not resolve other problems with this portion of the rule and consumer advocates and electric service providers continue to support further changes to this language to align it with the provisions of Prop C.



In JCAR’s final hearing, they passed a motion disapproving the requirement in the rule that electricity associated with any purchased RECs be sold to Missourians. Simply put, they viewed this requirement as beyond the scope of Prop C and beyond the rulemaking authority granted to the PSC in statute. This finding did not however do anything to reduce the percentage mandates on renewable energy generation by future dates or the 25% in-state incentive specified in Prop C so strong in-state incentives continue to be included in the rule.



In the weeks ahead I anticipate several stakeholders will seek judicial review of the decisions of the PSC, JCAR and the Secretary of State regarding this complicated and contentious issue. Additional changes to this rule being sought by my organization and consumer advocates are in support of aligning the specific provisions of the rule with the law voters approved in late ’08 and development of competitive renewable energy industries.



Warren Wood

Executive Director

Missouri Energy Development Association