News/Resources: ALERTS & NEWSLETTERS
April 26, 2012
Earlier this month, the Connecticut Public Utilities Regulatory Authority (PURA) approved a plan developed by Connecticut’s two investor-owned utilities, The Connecticut Light and Power Company and The United Illuminating Company, to procure solar, wind, fuel cell and other renewable energy projects as required by 2011 Connecticut energy legislation. To accomplish this, the utilities will issue a Request for Proposals (RFP) to procure “Renewable Energy Credits” produced by certain renewable facilities under 15-year contracts.
Under the RFP, solar, wind and small hydropower projects, referred to as Zero Emission Renewable Energy Credit (ZREC) projects, up to one megawatt in size can be bid into the solicitation, with the utilities selecting eligible projects beginning with the least expensive until a total of $8,000,000 in first year contract value has been awarded. In addition, fuel cells and some biomass projects, referred to as Low Emission Renewable Energy Credit (LREC) projects, of up to two megawatts can bid, and the utilities will select projects for 15-year contracts totaling $4,000,000 (in first year value).
Minimum Eligibility Requirements
Projects must meet certain minimum eligibility requirements (output, separate meter behind the host’s load, location, not segmented, among others). After the utilities determine that a project meets these requirements, selection will be based solely on the ZREC/LREC price requested by the developer. Except for projects for which at least 50% of the value of the technology to be installed was or will be manufactured, researched or developed in Connecticut (which are given a slight monetary advantage for bid evaluation purposes only), all projects which are deemed eligible will be evaluated solely on price.
Section IV.A. of the PURA Decision requires that the solicitation “will be conducted as soon as practicable.” Various contracts that are to be included in the RFP must be submitted to PURA before the RFPs can be issued, but it is likely that the RFP will be issued within the next few weeks.
Based on the timeframe in the utilities’ solicitation plan, once the RFP is issued bids for eligible projects must be submitted within 5 weeks, and bids evaluated and contracts awarded 4 weeks later. Once a project is selected, the developer will have 2 weeks to execute a standard form contract with the utility for the
purchase of ZRECs or LRECs (available on the PURA website) and an additional 3 weeks to provide financial assurance to guaranty performance (equal to either 10% or 20% of the value of the ZRECs or LRECs for the first year of the contract).
Developers who are working with site hosts on projects to be bid into the RFP will be under significant time pressure to ensure that, once selected, the proposed project has been vetted and warrants putting at risk the financial assurance of $10,000-$40,000 that could be required 60 days after the bids are submitted. Any selected project for which the developer does not execute the contract or provide financial assurance in a timely manner will be disqualified.
Each project will be required to begin producing electricity within 12 months of the date set for achieving commercial operation under the contract or risk loss of the financial assurance. Each project will also be faced with various hurdles, some unique to the project or its location and host, which may greatly affect the ability of the project to reach operational status in time. Some of these issues that must be considered include local and state permitting, local property taxes, interconnection to the grid, complying with ISO New England standards, obtaining approval from PURA as a Class I renewable energy source, and finalizing a lease and a power purchase agreement with the host. Developers must also be familiar with differing (and possibly changing) rules related to net metering available to private hosts and municipalities. Certain options for navigating local permitting by way of a Connecticut Siting Council proceeding might be available. In addition, Connecticut has certain legal limitations that differ from other states, such as prohibitions on power lines crossing a public road, that need to be recognized.
With significant financial assurance at stake if a project fails to meet the deadlines incorporated into the contract, failure to address these issues in a timely and thorough manner could result in the loss of the financial assurance securing the developer’s performance under the contract.
Attorneys at Brown Rudnick are well versed in the workings of the ZREC and LREC process, and in all aspects of developing renewable energy projects, and are available to help in any way.