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July 13, 2018
NEM Events

Please mark your calendars and plan to join us for upcoming NEM events. Agendas will be available shortly. Sponsorships are available. Please contact headquarters if you are interested in sponsorship.

NEM’s Summer Executive Committee Meeting and Mid-Atlantic Energy Summit will be held July 25-26, 2018, at the Hyatt Regency Baltimore Inner Harbor.

The confirmed speakers now include: Robert Powelson, Commissioner, FERC; Catherine Pugh, Mayor of Baltimore; Dallas Winslow, Chairman, Delaware PSC; Odogwu Linton, Commissioner, Maryland PSC; Upendra Chivukula, Commissioner, NJBPU; Dan Mumford, Director, Office of Competitive Market Oversight, PAPUC; Cary Hinton, Policy Advisor, DCPSC; Richard Mroz, Commissioner Emeritus, NJBPU; Erin O'Connell-Diaz, Commissioner Emeritus, Illinois Commerce Commission; Craig Glazer, VP, Federal Government Policy, PJM; Jennifer Taylor, Managing Principal, New Economy West Consulting; and a Maryland Energy Administration representative. Additional invitations are outstanding. The Draft Agenda is available here. You may register here.

NEM’s Western Energy Policy Roundtable will be held October 24-26, 2018, at Caesars Palace in Las Vegas, Nevada. You may register here.

Order on Out of Market Payments to Resources and the PJM Capacity Market

FERC issued an Order addressing two proposals filed by PJM and a complaint regarding the impact of out of market payments received by resources on the PJM capacity market. "Out-of-market payments, whether made or directed by a state, allow the supported resources to reduce the price of their offers into capacity auctions below the price at which they otherwise would offer absent the payments, causing lower auction clearing prices. As the auction price is suppressed in this market, more generation resources lose needed revenues, increasing pressure on states to provide out-of-market support to yet more generation resources that states prefer, for policy reasons, to enter the market or remain in operation. With each such subsidy, the market becomes less grounded in fundamental principles of supply and demand." FERC found that PJM's tariff was producing unjust and unreasonable results under the circumstances. However, it did not adopt either of PJM's proposed remedies.

FERC proposed a different remedy as follows: "Specifically, this approach would (i) modify PJM’s MOPR such that it would apply to new and existing resources that receive out-of-market payments, regardless of resource type, but would include few to no exemptions; and (ii) in order to accommodate state policy decisions and allow resources that receive out-of-market support to remain online, establish an option in the Tariff that would allow, on a resource-specific basis, resources receiving out-of-market support to choose to be removed from the PJM capacity market, along with a commensurate amount of load, for some period of time. That option, which is similar in concept to the Fixed Resource Requirement (FRR) that currently exists in the Tariff, is referred to in this order as the FRR Alternative. Unlike the existing FRR construct, the FRR Alternative would apply only to resources receiving out-of-market support." FERC set the proposal for a paper hearing with initial submissions due sixty days after the date of the Order and replies due ninety days after the date of the Order.

Both Commissioner LaFleur and Commissioner Glick dissented from the Order. Commisisoner LaFleur cautioned that "through its action today, the majority signals its intent to adopt, through a 90 day paper hearing, the most sweeping changes to the PJM capacity construct since the market’s inception more than a decade ago. If ultimately adopted, this proposal would fundamentally rebalance the resource adequacy responsibilities of the states, the Commission, and PJM." LaFleur explained that "Perversely, the expanded FRR construct could actually encourage states to remove preferred resources from the market and instead rely on direct subsidies to support them, as they would receive guaranteed capacity obligations as FRR resources. Given the clean energy targets set by many states, this construct could end up hastening the demise of the capacity markets, rather than preserving them." Commissioner Glick's dissent argued that "by 'mitigating' state policies of which the Commission disapproves in an attempt to prop up the wholesale rates received by so called 'competitive' resources, the Commission is directly interfering with state efforts to shape the generation mix."

The full text of the Order is available on the NEM Website.

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Clean Energy DC Bill Introduced

In a final meeting this week before the summer recess, the "CleanEnergy DC Omnibus Amendment Act of 2018", B22-0904, was introduced in the DC Council. The bill was referred to the Committee on Transportation and the Environment and the Committee on Business and Economic Development, with hearings likely to be scheduled on the bill this fall.

Important provisions of the "CleanEnergy DC" bill include:
1. Increases the District's renewable portfolio standard (RPS) to 100% by 2032 with a minimum of 5% from solar.
2. Beginning in 2020, electricity suppliers (including SOS suppliers) must obtain at least 26% of supply thru long-term (7 years+) power purchase agreements (PPAs) with Tier 1 renewable sources, increasing to 52% by 2021 and to 80% by 2022.
3. Beginning in 2022, electricity suppliers shall meet their RPS requirements by obtaining at least 70% of their RECs from long-term (7 years +) PPAs.
4. REC purchases would be limited to the PJM interconnection region.

The full text of the Clean Energy DC Bill is available on the NEM Website.

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ORMD Annual Retail Electric Market Report

The Office of Retail Market Development provided its annual report on retail electric market competition to the legislature. The report finds that the number of alternative retail electric suppliers (ARES) and agents, brokers and consultants (ABCs) certified by the ICC to serve retail customers has been increasing. There are 103 certified ARES and 399 certified ABCs. Although the number of customers choosing to receive competitive supply has declined, the total usage supplied by ARES has increased since last year. There are 1.77 million residential customers and 228,241 nonresidential customers taking service from an ARES.

With respect to consumer savings, the report finds that:

"On average, residential ARES customers in the ComEd territory paid around $10.2 million more per month during the last twelve months when compared to the ComEd Price-to-Compare (PTC)3 and $11.5 million more per month during the last twelve months when compared to the ComEd PTC including the Purchased Electricity Adjustment (PEA).4 In terms of cents per kWh, residential ARES customers in the ComEd territory paid about 1.289 cents/kWh more when compared to the ComEd PTC only, and about 1.445 cents/kWh more when including the PEA.

In the Ameren Illinois territory, residential ARES customers paid around $6 million more per month during the last twelve months when compared to the Ameren Illinois PTC and $7.4 million more per month during the last twelve months when compared to the Ameren Illinois PTC including the PEA. In terms of cents per kWh, residential ARES customers in the Ameren Illinois territory paid about 1.073 cents/kWh more when compared to the Ameren Illinois PTC only, and about 1.330 cents/kWh more when including the PEA."

The report included important caveats to the savings calculations including: 1) the computations are total, or aggregate, savings and the savings for individual customers differ from these averages; 2) the computations are ex-post calculations that do not account for how utility default rates would differ under different customer migration amounts; 3) Most of the ARES with residential customers have at least one offer, usually at a higher price, that features a renewable energy content higher than what is required under the RPS Illinois Renewable Portfolio Standard; 4) the computations do not capture rewards and incentives that are not part of the ARES electric supply rates.

For future action by the legislature and Commission, the Report proposes that electric utilities be required to include the Price-to-Compare (PTC) on all bills for residential and small commercial retail customers and that all ARES be required to include the PTC on solicitations or materials marketing electric power or energy services to a residential or small retail commercial electric customer that contains a price per kilowatt-hour. In the coming year, ORMD Staff also plans to explore methodologies for reporting of value-added incentives offered through the retail choice market as well as the collection of data on customer participation in the market.

The full text of the ORMD Report is available on the NEM Website.

New York
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Off Shore Wind Standard and ESCO Obligations

The Commission adopted an off shore wind standard and associated LSE procurement obligations. In brief, "the Commission determines that a series of actions related to offshore wind are necessary to help achieve the CES goal, as part of a strategy to reduce statewide greenhouse gas emissions by 40% by 2030 in a fair and cost-effective manner. The Commission therefore adopts a supplementary goal, to contribute toward the overall objective of the CES, whereby the quantity of electricity supplied by renewable resources and consumed in New York State should include the output of 2.4 GW of new offshore wind generation facilities by 2030. The supplementary goal is based on contributions towards achievement by each New York Load Serving Entity (LSE) serving retail customers, including the non-jurisdictional Long Island Power Authority (LIPA) and New York Power Authority (NYPA).

In furtherance of this supplementary goal, the Commission adopts an Offshore Wind (OSW) Standard to maximize the value potential of new offshore wind resources by jump-starting the industry to serve New York State. The primary components of the OSW Standard include: (a) initial procurement solicitations, to be held by NYSERDA, NYPA and/or LIPA in 2018 and 2019, for ORECs associated with approximately 800 MW of offshore wind (i.e., Phase 1); and (b) an obligation on LSEs to obtain, on behalf of their retail customers, the ORECs procured in Phase 1 in an amount proportional to their load."

With respect to LSE compliance obligations, including ESCOs, the Commission decided that,

"For purposes of the Phase 1 procurement, all LSEs serving retail load within a regulated distribution utility territory will be required to satisfy the compliance obligation and thereby be responsible for supplying a defined percentage of retail load with supply derived from eligible offshore wind resources. This will include investor-owned utilities serving in their role as electric commodity supplier of last resort, jurisdictional municipal utilities, competitive ESCOs serving electric commodity to retail customers, and community choice aggregators not otherwise served by an ESCO.34 Other non-jurisdictional utilities, such as LIPA and NYPA, are also expected to adopt offshore wind energy targets that are proportional to their load and reflect the Statewide goal. . . . .

As under the CES program, each LSE will be responsible for supplying a defined percentage of retail load with supply derived from eligible offshore wind resources. This will place compliance costs primarily on generation supply charges, where they are most appropriately applied. ESCOs that are concerned about their ability to flow through these additional costs to their supply customers will have ample time to build in these new compliance obligations into new contracts since the time difference between the procurement and obligation (i.e., the average time it takes to build an offshore wind development) will likely be at least five years, which is more than sufficient time to negotiate new supply contracts that generally have average tenures of only one to two years in duration."

The full text of the Order is available on the NEM Website.

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