Public Service Commission of Utah Investigates Third-Party Power Purchase Agreements For Renewable Energy Generation
On October 12, 2009, the Public Service Commission of Utah ("PSC") joined the ranks of several other states in the west, including Oregon, when it established a docket to investigate whether, and the extent to which, certain third-party arrangements for renewable energy generation are subject to the PSC's jurisdiction. www.psc.utah.gov/utilities/misc/miscindx/0999912indx.html, Pursuant to the notice, the PSC may consider the following issues:
- Whether the third-party is a public utility under Utah law;
- Whether the third-party is a public utility under Utah law when arrangements are entered into primarily as a financing mechanism for distributed renewable energy generation systems whereby a third-party owns the renewable generation equipment, which is installed on a utility customer's premises, there is a long-term contract with the customer to supply a portion of that customer's electricity use, and payments are based on kilowatt-hours;
- Whether the third-party is a public utility under Utah law when (i) there is a single relationship between the third-party owner of the generation and a customer or (ii) there are multiple customers taking power from the same third party;
- Whether the third-party is a public utility under Utah law when arrangements involve the leasing of distributed generation equipment from non-utility lessors to lessees that are also retail customers of utilities.
Comments and/or legal briefs regarding the above issues must be filed with the PSC by November 16, 2009. A technical conference to discuss the specific terms and conditions surrounding third-party financing arrangements and other issues will be held on November 23, 2009, at 1:30 p.m. to 4:00 p.m., Fourth Floor Hearing Room Room 401, Heber M. Wells State Office Building, 160 East 300 South, Salt Lake City, Utah.
DOE to release eagerly awaited commercial solicitation
On a webinar yesterday, Michael Fraser, Senior Program Manager at the DOE, advised that the DOE plans to release a commercial solicitation for the loan guarantee program later this month or in early October. The current solicitation that is active for renewable energy projects requires that projects satisfy the innovative requirement. A project is defined as innovative only if it has not been employed in three or more similar applications in the US of five years duration. Thus many established renewable energy projects such as those utilizing wind or geothermal technology that is tested and proven, cannot apply under the current solicitation. The release of a commercial soliciation has been eagerly awaited by renewable energy project developers. These loans will be backed by private banks as well with DOE typically only guaranteeing 80-90% of the loan. DOE hopes that this structure will motivate private lenders to perform much of the due diligence necessary and only bring shovel-ready and bankable projects to the table. Interest rates on the loan are anticipated to run at Treasury plus 25 to 75 basis points. This is a very attractive interest rate but there are substantial fees associated with the program that will offset a portion of this value. The other key factor for projects to consider is whether they will be able to meet American Reinvestment and Recovery Act requirements and thus be eligible to have their credit subsidy costs covered by government funding. I am cautiously optimistic that DOE will be successful with these efforts and we will see a flurry of good projects moving forward Q1-Q2 2010 with the assistance of this program.
Show me the Money: DOE Proposes Amendments to its Loan Guarantee Program
Today, the Department of Energy (DOE) issued a notice of proposed rulemaking to amend 10 CFR Part 609, the rule regulating the loan guarantee program authorized by section 1703 of Title XVII of the Energy Policy Act of 2005. The two principal goals of section 1703 of Title XVII are to encourage commercial use of new or significantly improved energy-related technologies and to achieve substantial environmental benefits. (See these recent alerts regarding the DOE loan guarantee program and the related application process)
After reexamining Title XVII, the DOE has concluded that the statute does not require a first lien on all project assets. DOE has discovered that its current requirement that it be in lien position is in conflict with the financing structure of many energy projects. For example, many utility scale power plants are jointly owned by public power agencies, cooperative power systems and investor-owned utilities. In these cases, it may not be commercially feasible to obtain a lien on all project assets or the credit of a sponsor may be sufficient to support a more modest pledge of assets.
Furthermore, DOE has found that other parties are interested in participating as co-lenders, co-guarantors, or insurers of Title XVII loans. However, these other parties expect to share, on a pari passu basis, in any collateral securing such loans.
Consequently, DOE proposes two amendments to the current rules:
- Delete the requirement of a first priority lien on all project assets and leave to the Secretary (of DOE) the determination of an appropriate collateral package, as well as intercreditor arrangements; and
- Allow the Secretary (of DOE) to determine if pari passu lending is in the best interests of the United States
Interested parties have 30 days to provide comments to the proposed rule. Comments may be submitted in the following manner:
- Through the Federal Rulemaking Portal
- Email to lgprogram@hq.doe.gov
- Postal Mail / Hand Delivery / Courier to:
David G. Franz, Director, Loan Guarantee Program Office
Office of the Chief Financial Officer
1000 Independence Ave., S.W.
Washington, D.C. 20585-0121
More information may be had by contacting David Franz at the above address or by calling 202-586-8336
Show me the Money: $54 million in Funding for State Energy Programs
From our colleague Christina Asavareungchai:
Today, the Department of Energy announced more than $54 million in Recovery Act funding to four states under its State Energy Program ("SEP"). Here is how the funds will be used in Nevada, Rhode Island, Vermont, and Wisconsin:
Nevada will use its SEP funds to create a revolving loan fund, which will help finance renewable energy and energy efficiency projects. Nevada will also perform energy efficiency retrofits in state buildings and schools, in addition to installing more energy-efficient street and traffic lights statewide. After demonstrating success in the execution of its plan, Nevada will receive additional funds of over $17 million, for a total of almost $35 million.
Vermont will use its SEP funds to establish programs that advance energy efficiency across multiple sectors. Specifically, Rhode Island will support businesses and homes in their effort to reduce energy consumption, in addition to updating the state’s building energy codes. After demonstrating success in the execution of its plan, Rhode Island will receive additional funds of nearly $12 million, for a total of almost $24 million.
Wisconsin will use its SEP funds to help improve the energy efficiency of existing industrial facilities, in addition to investing in businesses that manufacture clean energy technologies and components. The state will also offer loans to a broad audience. After demonstrating success in the execution of its plan, Wisconsin will receive additional funds of nearly $28 million, for a total of over $55 million.
Rhode Island will use its SEP funds to offer financial assistance for renewable energy and energy efficiency projects in the public, private, and residential sectors, in addition to facilitating the installation of thermal solar renewable energy systems in low-income households. After demonstrating success in the execution of its plan, Vermont will receive additional funds of nearly $11 million, for a total of almost $22 million.
Show me the Money: $162 million Deployed to Seven State Energy Programs
From our colleague Christina Asavareungchai:
Today, the Department of Energy announced more than $162 million in Recovery Act funding to seven states and territories under their State Energy Programs (“SEPs”). Here is how the funds will be used in Colorado, Delaware, Indiana, Louisiana, Massachusetts, Pennsylvania, and Puerto Rico:
Colorado will use its SEP funds to remove financial barriers to the rapid acceleration of renewable energy and energy efficiency projects. Colorado will also help state agencies cut their energy use, in addition to significantly expanding an existing rebate and grants program for renewable energy projects. After demonstrating success in the execution of its plan, Colorado will receive additional funds of over $24 million, for a total of more than $49 million.
Delaware will use its SEP funds to help finance energy efficiency measures in homes, small businesses, commercial buildings, and manufacturing facilities. Delaware will also offer additional rebates for solar photovoltaic and solar hot water systems, small wind applications, and geothermal systems for buildings. After demonstrating success in the execution of its plan, Delaware will receive additional funds of over $12 million, for a total of more than $24 million.
Indiana will use its SEP funds to offer financial assistance for the deployment of energy efficient technologies and to finance training programs and educational outreach about the merits of energy conservation. After demonstrating success in the execution of its plan, Indiana will receive additional funds of over $34 million, for a total of more than $68 million.
Louisiana will use its SEP funds to support energy efficiency measures in commercial buildings, as well as new and existing homes. Louisiana will also finance energy efficiency retrofits for government buildings and will encourage the use of efficient street lighting. After demonstrating success in the execution of its plan, Louisiana will receive additional funds of over $35 million, for a total of almost $72 million.
Massachusetts will use its SEP funds to promote energy efficiency statewide, finance energy efficiency upgrades of public facilities, and facilitate the demonstration of energy efficiency solutions. After demonstrating success in the execution of its plan, Massachusetts will receive additional funds of over $27 million, for a total of almost $55 million.
Pennsylvania will use its SEP funds to help finance clean energy projects initiated by businesses, nonprofit organizations, universities, local governments, and utilities, in addition to establishing a revolving loan fund aimed at facilities projects, resource efficiency, and clean energy technologies. After demonstrating success in the execution of its plan, Pennsylvania will receive additional funds of almost $50 million, for a total of almost $100 million.
Puerto Rico will use its SEP funds to provide financial assistance for private sector energy projects, as well as for building retrofits in both the public and private sectors. Puerto Rico will also support the revision of building codes, the switch to more energy efficient traffic lights, and the establishment of an education and mass media outreach program. After demonstrating success in the execution of its plan, Puerto Rico will receive additional funds of over $18 million, for a total of over $37 million.
Show me the Money: Recovery Act Finance Opportunities Conference
On July 17, 2009, the Puget Sound Regional Council hosted a Regional American Recovery and Reinvestment Act Coordination meeting. At this meeting, there was a presentation on Bond Financing, Loan Guarantees, and Tax Credits plus a discussion on monetizing energy efficiency savings.
In case you missed this meeting, I want you to be aware of a couple of resources.
First, on July 31, 2009, there is a workshop regarding Recovery Act Finance Opportunities in Washington. The workshop will be hosted by the Washington Department of Commerce (formerly the Department of Community Trade and Economic Development or CTED) and held in Bellevue, and you can register here.
Second, our tax group has issued an informative, yet concise, alert regarding the grant in lieu of the production tax credit (available here).
