By Lee Peterson
Virginia HB 2334 directs the State Corporation Commission (SCC) to conduct a pilot program in a certain utility’s service territory. Under the pilot program, a person that owns or operates a solar-powered or wind-powered electricity generation facility with a capacity between 50 kilowatts and one megawatt that is located on premises owned or leased by an eligible customer-generator will be allowed to sell the electricity generated from such facility exclusively to the eligible customer-generator under a power purchase agreement (PPA).
The PPA will provide for third-party financing of the costs of the renewable generation facility. This means a customer that wants renewable energy sourced power from wind or solar would not have to make a large upfront investment in equipment. A developer would build, own and maintain the system, selling the power produced under a power purchase agreement. The developer would be able to take the 30% Federal tax credit, in the case of solar, and pass the benefits along to a non-profit entity in the form of a lower power price.
The same would be true for other entities that do not have the financial ability to purchase a renewable energy system outright. The minimum size requirement does not apply to certain nonprofit entities. The legislation does not state if the maximum cap applies to non-profits but the lack of language exempting them would suggest it does. The SCC shall establish guidelines concerning aspects of the pilot program by December 1, 2013. This bill is identical to SB 1023.
In 2011, Dominion Power (Dominion) issued two “cease and desist” letters to Secure Futures,LLC for using a PPA between itself and Washington and Lee University (W&L). Dominion raised legal concerns over the selling of electricity to a customer in their exclusive service territory. Looking at massive litigation costs, Secure Futures and W&L agreed to convert the PPA into a lease.
With support from the Virginia Renewable Energy Association, the Virginia solar industry Virand statewide environmental groups, Secure Futures pushed for 2012 legislation to allow PPAs (HB 129) sponsored by Delegate Terry Kilgore (R-1). The legislation passed unanimously in the House, but was ultimately tabled in the Senate Commerce and Labor Committee.
The 2013 legislative session provided hope for PPA legislation, as Senator John Edwards (D-21) introduced PPA legislation in the form of SB 1023, at the request of Secure Futures, modeled after the previous year’s HB 129. In a surprise move in mid-January, Dominion supported PPA legislation, and requested amendments to the Edwards bill. Secure Futures and other stakeholders agreed to the amendments as compromise legislation. Delegate David Yancey (R-94) then introduced mirror legislation in the House. The two bills were passed unanimously in both of their respected branches in late February, moving to the Governor’s desk, where it was signed in March.
Highlights of the legislation:
- It is a pilot program, subject to review by the State Corporation Commission starting in 2015 and every two years thereafter
- It applies only to the certificated service territory of an investor-owned utility, referred to as the “Pilot Utility” (otherwise known as Dominion)
- Only applies to wind and solar (HB1917 also passed in March, 2013 defines solar thermal as a renewable energy source and is considered solar)
- There is a cap of 50 MW on PPAs as a part of the overall 1% net-metering cap (§56-594 of Virginia Code)
- Minimum project size is 50kW with a maximum of 1MW, tax exempt entities are exempt from the minimum – important to note that because of the 50kW minimum, homeowners will not be eligible to participate
- A third party PPA arrangement does not create a public utility and does not need to provide 100% of the customer’s electricity requirements.
Additional provisions require that a power generating facility subject to a third party PPA under this pilot serve only one customer and a PPA cannot serve multiple customers. A customer under a PPA agreement under this program is subject to the interconnection requirements imposed on eligible customer-generators pursuant to subsection C of §56-594 of the Code of Virginia, including the requirement that the customer bear the reasonable costs. At least thirty days before the effective date of a PPA, the parties intending to enter into a third party PPA must notify the Pilot Utility and the State Corporation Commission in writing.
Finally, an affiliate of the Pilot Utility shall be permitted to offer and enter into third party power purchase arrangements on the same basis as may any other person that satisfies the requirements of being a seller under a third party power purchase agreement under the pilot program. This means that Dominion has the authority to set up its own developer and provide third party PPA financing to customers as well, provided they follow the established guidelines in the legislation.
Summary
The original legislation was more accommodating across the state but to win Dominion’s acceptance it was adjusted in its scope; the original legislation provided for more renewable technologies and was to be offered statewide, whereas in its final iteration it only applies to solar and wind. The new law as it stands applies to Dominion’s territory only so American Electric Power (AEP) and the co-operatives are not participating. In addition, an affiliate of Dominion is allowed to offer third party PPAs like any other entity that satisfies the requirements under the law, introducing competition from the large utility against smaller developers.
The new legislation establishes a minimum system size of 50kW (except in the case of tax-exempt entities) and a maximum of 1MW, primarily benefitting potential commercial customers. Homeowners will not qualify for third-party PPAs as a typical system for a home is under 10kW.
The maximum allowed under the law is 50 megawatts of wind and solar installations using third party PPAs. This will count against the current net-metering cap of 1% of Dominion’s power generation. Dominion currently has approximately 27,000 MW of generation capacity in Virginia. Based on this, the 50 MW “pilot” equates to only 0.19% of Dominion’s generating capacity.
While this legislation is a positive start for renewable energy in Virginia it leaves out some important parties — other utilities, co-operatives and homeowners cannot participate. With only a 50 MW cap, it is uncertain how long this pilot will last. In states like California, Maryland, New Jersey and Connecticut, solar acceptance is growing because there are incentives like third party PPA financing available to homeowners.
Paul Risberg says
The real question is probably what the negotiated KWH price for the PPA might be. Has anyone entered into negotiations?