Minnesota PUC Settles Longstanding Dispute over REC Ownership
Last week, the Minnesota Public Utilities Commission resolved a longstanding dispute over who owns Renewable Energy Credits (RECs) when the Power Purchase Agreement (PPA) is silent. Following the establishment of an REC tracking system for Minnesota, Xcel Energy asked the Commission to clarify ownership of RECs associated with 46 wind, biomass, hydro, and landfill gas facilities totaling 467.5 MW. These PPAs were written before the concept of RECs existed.
On August 17, 2010, the Commission resolved the dispute partially in favor of Xcel and partially in favor of the generators. The Commission divided the disputed PPAs into two categories: 1) PPAs signed under 1978 federal Public Utilities Regulatory Policy Act (PURPA) and 2) PPAs signed under Minnesota’s 1994 wind and biomass mandates (Minn. Stat. §§216B.2423 and 216B.2424).
For the PURPA contracts, the Commission decided that the generators are the rightful owners of RECs because they had only been paid avoided cost with no premium for the electricity being from renewable sources.
For the wind and biomass mandate PPAs, the Commission favored Xcel and decided that the utility had acquired ownership of the RECs, unless the generator can make a showing that the PPA is not silent on REC ownership. For this category, the Commission reasoned that Xcel had contracted to buy electricity that would meet specific renewable mandates. Without the RECs, the electricity would not satisfy the renewable mandates.
The Commission exempted two PPAs close to being privately settled from its decision as well as 13 PPAs that were already privately settled.
Filings related to the "silent PPAs" dispute can be found by searching for Docket No. E-002/08-440 in Minnesota’s eDocket system.
CPUC Proposed Decision on TRECs--Comments Due January 19
The California Public Utilities Commission ("CPUC") issued a proposed decision on December 23, 2009 that would, if adopted, allow California investor-owned utilities, energy service providers, and community choice aggregators to purchase renewable energy credits alone, without the associated energy (sometimes referred to as "unbundled renewable energy credits ("RECs)" or "tradable RECs"), to satisfy their obligations under California's RPS. California's largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—would be limited to meeting no more than 40% of their annual procurement targets under the RPS with tradable RECs, and a price cap of $50 would be imposed. The CPUC will revisit both the percentage cap and the cost cap and whether those caps should be revised within 24 months of the decision.
Out-of-state renewable energy projects could be adversely impacted if the proposed order were adopted. The proposed decision would define all renewable generation purchased from out-of-state facilities1 as the purchase of unbundled or tradable RECs, making any out-of-state renewable energy sale subject to the cap that bars the large investor-owned utilities from using such sales to meet more than 40% of their overall RPS obligation. Although the proposed decision states that this classification would apply only to contracts signed on or after the effective date of the decision, contracts signed prior to the effective date would be considered REC-only contracts from the effective date forward, and would be "subject to the limits and rules applying to REC-only contracts" according to the proposed decision. Furthermore, although the purchase of tradable RECs from out-of-state facilities would be permitted, the delivery requirement in the RPS legislation would still have to be met, so a comparable amount of power would have to be imported into the state, along with the RECs. The jurisdiction to determine whether and how this delivery requirement is met, however, still remains with the California Energy Commission.
Comments on the proposed decision are due on January 19, 2010, and reply comments are due January 25, 2010.
For additional information about the history and effect of the proposed decision, see our Stoel Rives alert on the topic.
California PUC Moves to Allow Unbundled RECs
The California Public Utility Commission issued a draft decision on October 29th authorizing the use of unbundled and tradable renewable energy certificates (“RECs” or “TRECs”) for compliance with California’s RPS.
The draft decision also outlines the structure and rules for a tradable REC market and for integrating these RECs into the RPS “flexible compliance system.” Comments are due on Nov. 18, 2008. The draft decision can be found here: http://docs.cpuc.ca.gov/efile/PD/92913.htm.
