Annual report of the North Carolina Utilities Commission to the Governor of North Carolina, the Environmental Review Commission and the Joint Legislative Utility Review Committee, regarding renewable energy and energy |
Previous | 7 of 10 | Next |
|
small (250x250 max)
medium (500x500 max)
Large
Extra Large
large ( > 500x500)
Full Resolution
|
This page
All
|
ANNUAL REPORT REGARDING RENEWABLE ENERGY AND ENERGY EFFICIENCY PORTFOLIO STANDARD IN NORTH CAROLINA REQUIRED PURSUANT TO G.S. 62-133.8(j) DATE DUE: OCTOBER 1, 2011 SUBMITTED: SEPTEMBER 30, 2011 RECEIVED BY THE GOVERNOR OF NORTH CAROLINA THE ENVIRONMENTAL REVIEW COMMISSION AND THE JOINT LEGISLATIVE COMMISSION ON GOVERNMENTAL OPERATIONS SUBMITTED BY THE NORTH CAROLINA UTILITIES COMMISSION i TABLE OF CONTENTS EXECUTIVE SUMMARY...................................................................................... 1 BACKGROUND.................................................................................................. 16 2011 LEGISLATION........................................................................................... 17 COMMISSION IMPLEMENTATION ................................................................... 18 Rulemaking Proceeding ............................................................................. 18 Renewable Energy Facilities ...................................................................... 25 North Carolina Renewable Energy Tracking System (NC-RETS) .............. 31 Environmental Impacts ............................................................................... 33 ELECTRIC POWER SUPPLIER COMPLIANCE................................................ 34 Monitoring of Compliance with REPS Requirement ................................... 34 Cost Recovery Rider .................................................................................. 35 Electric Public Utilities ................................................................................ 36 Electric Membership Corporations and Municipally-Owned Electric Utilities......... 43 RECOMMENDATIONS ...................................................................................... 55 CONCLUSIONS ................................................................................................. 55 ii APPENDICES 1. Docket No. E-100, Sub 113, In the Matter of Rulemaking Proceeding to Implement Session Law 2007-397 - Letter from Chairman Edward S. Finley, Jr., North Carolina Utilities Commission, to Secretary Dee Freeman, North Carolina Department of Environment and Natural Resources (June 1, 2011) - Letter from Robin W. Smith, Assistant Secretary for Environment, North Carolina Department of Environment and Natural Resources, to Chairman Edward S. Finley, Jr., North Carolina Utilities Commission (August 22, 2011) - Order Denying the Use of Thermal RECs to Satisfy Poultry Waste Set-Aside Requirement (October 8, 2010) - Order on Cost Recovery of Swine and Poultry Waste Energy by an Electric Public Utility (November 23, 2010) - Order Amending Rules R8-64 Through R8-69 and Adopting Final NC -RETS Operating Procedures (January 31, 2011) 2. Renewable Energy Facility Registrations - Order Accepting Registration of New Renewable Energy Facilities Fueled by Co-Firing Biomass, Including Primary Harvest Whole Trees, Docket No. E-7, Subs 939 and 940 (October 11, 2010) - Order Declaring Yard Waste, Municipal Solid Waste and the Percentage of Syngas Derived from Yard Waste and Municipal Solid Waste to be Renewable Energy Resources, Docket No. SP-100, Sub 28 (April 18, 2011) - Order Accepting Registration of a New Renewable Energy Facility Producing Electricity and Steam from Landfill Gas, Docket No. SP-100, Sub 9 (July 5, 2011) - Orders Accepting Registrations of New Renewable Energy Facilities Producing Solar Thermal Hot Water, Docket Nos. RET-4, Sub 5 and RET-8, Subs 12, 13 and 14 (August 15, 2011) iii 3. Miscellaneous Dockets - Order Extending Deadline for the Issuance of Historic RECS, Docket No. E-100, Subs 113 and 121 (December 10, 2010) - Order Granting Request to Transfer Renewable Energy Certificates, Docket No. EMP-17, Sub 1 (March 25, 2011) - Order Revoking Registrations of New Renewable Energy Facilities, Docket No. E-100, Sub 130 et al. (June 7, 2011 and July 6, 2011) - Order Granting Request to Transfer Renewable Energy Certificates, Docket No. E-7, Sub 992 (August 26, 2011) - Order Approving REPS and REPS EMF Riders, Docket No. E-2, Sub 974 (November 17, 2010) - Order Approving REPS and REPS EMF Riders, Docket No. E-7, Sub 984 (August 23, 2011) 1 EXECUTIVE SUMMARY In August 2007, North Carolina enacted comprehensive energy legislation, Session Law 2007-397 (Senate Bill 3), which, among other things, established a Renewable Energy and Energy Efficiency Portfolio Standard (REPS), the first renewable energy portfolio standard in the Southeast. Under the REPS, all electric power suppliers in North Carolina must meet an increasing amount of their retail customers’ energy needs by a combination of renewable energy resources (such as solar, wind, hydropower, geothermal and biomass) and reduced energy consumption. Pursuant to G.S. 62-133.8(j), the Commission is required to report by October 1 of each year to the Governor, the Environmental Review Commission, and the Joint Legislative Commission on Governmental Operations on the activities taken by the Commission to implement, and by electric power suppliers to comply with, the REPS requirement. 2011 Legislation During the 2011 Session of the General Assembly, the legislature enacted two amendments to Senate Bill 3. First, Session Law 2011-55 (Senate Bill 75) amended G.S. 62-133.8(a) by adding a new subdivision (3a) defining “electricity demand reduction” and adding G.S. 62-133.8(b)(2)(g) and (c)(2)(g) to include electricity demand reduction as a means by which an electric power supplier can meet its REPS obligation. Second, Session Law 2011-309 (Senate Bill 710) amended G.S. 62-133.8(f) by adding language that allows electric power suppliers to use renewable energy certificates (RECs) derived from the thermal energy of a combined heat and power facility that uses poultry waste as a fuel to meet the REPS poultry waste set-aside requirement. Commission Implementation Rulemaking proceeding Immediately after Senate Bill 3 was signed into law, the Commission initiated a proceeding in Docket No. E-100, Sub 113 to adopt rules to implement the REPS and other provisions of the new law. On February 29, 2008, the Commission issued an Order adopting final rules implementing Senate Bill 3. Since issuing this Order, the Commission has issued a number of orders interpreting various REPS provisions, including the following orders issued and other actions taken since October 1, 2010: 2 • On November 23, 2010, in Docket No. E-100, Sub 113, in response to a Joint Motion by numerous electric power suppliers, the Commission issued a Declaratory Order on cost recovery for the purchase of renewable energy by electric public utilities when the purchase of energy does not include the renewable energy certificates (RECS) associated with the production of the energy. The Commission held that an electric public utility can recover through its fuel cost rider the total delivered cost of the purchase of energy generated by a swine or poultry waste-to-energy facility where the RECS associated with the production of the energy are purchased by another North Carolina electric power supplier to comply with the REPS statewide swine and poultry waste set-aside requirements. • On January 31, 2011, in Docket No. E-100, Sub 113, the Commission issued an Order amending Commission Rule R8-64 through R8-69, and approving final Operating Procedures for the North Carolina Renewable Energy Tracking System (NC-RETS). In addition, on August 24, 2010, in Docket No. E-100, Sub 113, the Commission issued an Order requesting comments on measurement and verification (M&V) of the amounts of reduced energy consumption reported and used for REPS compliance, especially with regard to energy efficiency and demand-side management activities of electric membership corporations and municipal power suppliers. Numerous parties filed comments and reply comments. Also, on August 25, 2010, in Docket No. E-100, Sub 113, the Commission issued an Order requesting that the Public Staff convene a working group of technical experts and other interested stakeholders and make recommendations to the Commission regarding the appropriate assumptions and methodology for reasonably estimating the useful thermal energy produced by an unmetered solar thermal facility and the number of RECs earned by that facility. The Public Staff has facilitated several meetings of the working group and filed two reports on the working group’s recommendations. Renewable energy facilities Senate Bill 3 defines certain electric generating facilities as “renewable energy facilities” or “new renewable energy facilities.” RECs associated with electric or thermal power generated at such facilities may be used by electric power suppliers to comply with the REPS requirement as provided in G.S. 62-133.8(b) and (c). In its rulemaking proceeding, the Commission adopted rules providing for certification or report of proposed construction and registration of renewable energy facilities and new renewable energy facilities. As of July 27, 2011, the 3 Commission has accepted registration statements filed by 337 facilities. A list of these facilities may be found on the Commission’s website at www.ncuc.net. The Commission has issued a number of orders since October 1, 2010 addressing issues related to the registration of a facility, such as the definition of “renewable energy resource,” including the following: • On October 8, 2010, in Docket No. E-100, Sub 113, the Commission issued an order denying a request by Peregrine Biomass Development Company, LLC, to allow thermal RECs to be used to meet the swine and poultry waste set-aside requirements. • On October 11, 2010, in Docket Nos. E-7, Subs 939 and 940, the Commission accepted for registration as renewable energy facilities Duke Energy Carolinas’ Buck and Lee Steam Stations, and concluded that primary harvest wood products, including wood chips from whole trees, are “biomass resources” and “renewable energy resources” under G.S. 62-133.8(a)(8). • On April 18, 2011, in Docket No. SP-100, Sub 28, the Commission issued an Order on Request for Declaratory Ruling concluding that yard waste and the percentage of refuse-derived fuel (RDF) used by ReVenture Park Investments I, LLC (ReVenture), as fuel are renewable energy resources and that the percentage of synthesis gas (Syngas) produced from yard waste and RDF used by ReVenture as fuel is a renewable energy resource. • On July 5, 2011, in Docket Nos. SP-100, Sub 9 and SP-967, Sub 0, the Commission issued an Order accepting as a new renewable energy facility the planned addition by Raleigh Steam Producers, LLC, and Wake Gas Producers, LLC, of three electric generators to produce combined heat and power from landfill gas. • On August 15, 2011, in Docket Nos. RET-4, Sub 5 and RET-8, Subs 12, 13 and 14, the Commission issued Orders accepting registration of residential solar thermal water heating facilities on 1,129 homes at the U.S. Marine Corps Camp Lejeune in Jacksonville, North Carolina, allowing a representative sample of the homes to be metered to determine the number of Btus of thermal energy and metered solar thermal RECs that will be produced by the 1,129 systems. North Carolina Renewable Energy Tracking System (NC-RETS) Pursuant to G.S. 62-133.8(k), enacted in 2009, the Commission was required to develop, implement, and maintain an online REC tracking system no 4 later than July 1, 2010, in order to verify the compliance of electric power suppliers with the REPS requirements. On February 2, 2010, after evaluating the bids received in response to a request for proposals, the Commission signed a Memorandum of Agreement (MOA) with APX, Inc. (APX), to develop and administer an online REC tracking system for North Carolina, the North Carolina Renewable Energy Tracking System (NC-RETS). APX successfully launched NC-RETS on July 1, 2010, and by letter dated September 3, 2010, the Commission accepted the system and authorized APX to begin billing users pursuant to the MOA. RECS have been successfully created by and imported into NC-RETS, and the electric power suppliers have used the system to demonstrate compliance with the 2010 REPS solar set-aside requirement. Environmental impacts The Commission has not identified, nor has it received from the public or the North Carolina Department of Environment and Natural Resources (DENR), any comments regarding direct, secondary, and cumulative environmental impacts of the implementation of the REPS provisions of Senate Bill 3. DENR noted that there continues to be interest in the development of renewable energy resources and the REPS appears to have spurred much of this interest. Electric Power Supplier Compliance Pursuant to Senate Bill 3, electric power suppliers are required, beginning in 2012, to meet an increasing percentage of their retail customers’ energy needs by a combination of renewable energy resources and energy reductions from the implementation of energy efficiency and demand-side management measures. In addition, as of 2010, each electric power supplier must meet a certain percentage of its retail electric sales with solar RECs from certain solar facilities. Monitoring compliance with REPS requirement Monitoring by the Commission of compliance with the REPS requirement of Senate Bill 3 is accomplished through the annual filing by each electric power supplier of an REPS compliance plan and an REPS compliance report. Pursuant to Commission Rule R8-67(b), on or before September 1 of each year, each electric power supplier is required to file with the Commission an REPS compliance plan providing specific information regarding its plan for complying with the REPS requirement of Senate Bill 3. Pursuant to Commission Rule R8-67(c), each electric power supplier is required to annually file with the Commission an REPS compliance report. While an REPS compliance plan is a forward-looking forecast of an electric power supplier’s REPS requirement and its plan for meeting that requirement, an REPS compliance report is an annual look back at the RECs earned or purchased and energy savings actually realized 5 during the prior calendar year and the electric power supplier’s compliance in meeting its REPS requirement. Cost recovery rider G.S. 62-133.8(h) authorizes each electric power supplier to establish an annual rider up to an annual cap to recover the incremental costs incurred to comply with the REPS requirement and to fund certain research. Commission Rule R8-67(e) establishes a procedure under which the Commission will consider approval of an REPS rider for each electric public utility. The REPS rider operates in a manner similar to that employed in connection with the fuel charge adjustment rider authorized in G.S. 62-133.2 and is subject to an annual true-up. Electric public utilities Progress Energy Carolinas, Inc. In its 2011 REPS compliance plan, PEC stated that its overall compliance strategy is to meet the REPS requirement with the most cost-effective and reliable renewable energy resources available. PEC has adopted a competitive bidding process for the purchase of energy or RECs from renewable energy facilities whereby market participants have an opportunity to propose projects on a continuous basis. Through this RFP, PEC has executed fifty (50) contracts for solar, hydro, biomass, landfill gas, and wind RECs. In addition, PEC and other participants in a state-wide collaborative have executed two contracts for swine waste-to-energy RECs and continue to negotiate with other potential suppliers, PEC stated that it is committed to taking all actions necessary to comply with the swine and poultry waste set-aside requirements. However, PEC stated that it is doubtful that there will be sufficient energy derived from swine waste within the state to enable PEC to meet the 2012 swine waste set-aside requirement. Similarly, although PEC has executed one contract for poultry waste RECs, PEC cautions that it uncertain whether there will be sufficient poultry waste facilities in operation to enable PEC to meet the 2012 obligation. In its 2010 REPS compliance report, filed on June 3, 2011, in Docket No. E-2, Sub 1000, PEC indicated that it acquired sufficient solar RECs to meet the 2010 requirement of 0.02% of its 2009 retail sales. Further, PEC stated that counting banked RECs, energy efficiency projections, contracted future purchases, and the ability to use 25% out-of-state RECs each year, it expects to have sufficient RECs to achieve REPS compliance through 2014. On November 15, 2010, the Commission issued an Order approving PEC’s Residential Service SunSense Solar Rebate Rider SSR-1 (SunSense). SunSense is an experimental solar photovoltaic (PV) rebate program under which residential customers who install rooftop solar PV generating systems will receive a one-time participation payment of $1,000 per kW of installed capacity and monthly bill credits based on the RECs produced by their system. The solar 6 RECs will be the property of PEC. The Commission previously approved a similar SunSense PV program for commercial customers. PEC implemented the commercial PV program in July 2009 with a target of adding 5 MW of grid-tied solar PV per year and a standard offer to purchase commercial solar hot water RECs to promote development of this technology. On November 17, 2010, the Commission issued an Order in Docket No. E-2, Sub 974 approving an REPS charge of $0.58 per month for residential customers, $2.90 per month for commercial customers, and $28.93 per month for industrial customers, each of which is below the incremental cost cap established in G.S. 62-133.8(h). In addition, the Commission approved PEC’s 2009 REPS compliance report. A hearing was held on PEC’s 2010 REPS compliance report and 2011 REPS cost recovery rider on September 27, 2011. A final decision is pending before the Commission. Duke Energy Carolinas, LLC In its 2011 REPS compliance plan, Duke stated that it is building a diverse portfolio of cost-effective renewable energy and energy efficiency resources. Specifically, the key components of Duke’s plan include: (1) direct investment in renewable energy resources at existing or new Duke-owned facilities; (2) partnerships with third-party renewable resource suppliers through power purchase agreements; (3) purchases of unbundled RECs from both in-state and out-of-state suppliers; and (4) utilization of cost-effective energy efficiency savings. Duke believes that implementation of these strategies will yield a balanced and prudent portfolio of qualifying resources and a flexible mechanism for REPS compliance. Further, Duke stated that it is confident that it will meet its solar set-aside requirement under its 2011 REPS obligation by pursuing a number of strategies, including: (1) Duke-owned solar photovoltaic distributed generation program; (2) power purchase agreements for solar generation; and (3) purchase of in-state and out-of-state unbundled solar RECs, including RECs from solar thermal facilities. With regard to the swine and poultry waste set-aside requirement, Duke’s primary strategy is to jointly procure swine waste-to-energy resources with PEC and other electric power suppliers. Duke has entered into four long-term REC purchase agreements with developers of swine waste-to-energy facilities in North Carolina. However, the production dates and projected production estimates for the facilities have materially changed and Duke now believes that compliance with the 2012 swine waste set-aside requirement is unlikely. On March 10, 2011, in Docket No. E-7, Sub 984, Duke filed its 2010 REPS compliance report and an application for approval of an REPS rider. On August 23, 2011, the Commission issued an Order approving an REPS charge of $0.49 per month for residential customers, $2.44 per month for commercial customers, and $26.97 per month for industrial customers, each of which is below the incremental cost cap established in G.S. 62-133.8(h). In addition, the Commission approved Duke’s 2010 REPS compliance report, including a finding 7 that Duke acquired sufficient solar RECs to meet the 2010 requirement of 0.02% of its 2009 retail sales. Dominion North Carolina Power In its 2011 REPS compliance plan, Dominion stated that it intends to meet its REPS requirement through the use of new renewable energy, energy efficiency, and unbundled RECs. Dominion plans to use unbundled solar RECs to meet its 2011 and beyond solar requirements and has entered into contracts to purchase sufficient RECs through 2013. As determined in the Commission’s September 22, 2009 Order, Dominion is exempt from the 25% limit on the use of out-of-state RECs for REPS compliance found in G.S. 62-133.8(b)(2)(e). Dominion stated that it has purchased solar RECs for REPS compliance from out-of-state to minimize compliance costs. In addition, Dominion has entered into long term contracts with five companies for the purchase of swine waste-to-energy RECs. Dominion further noted that on February 22, 2011, the Commission issued Orders approving four Dominion energy efficiency programs. On July 9, 2010, Dominion filed its 2009 REPS compliance report. On June 22, 2011, the Commission issued an Order requesting that the Public Staff file comments on Dominion’s 2009 compliance report by September 1, 2011. In particular, the Commission requested the Public Staff to assess whether Dominion is likely to meet its future REPS obligations without exceeding the cost caps established under G.S. 62-133.8(h). On August 30, 2011, the Public Staff filed comments concluding that Dominion will be able to meet its REPS obligation for the foreseeable future without exceeding the cost caps and that Dominion’s 2009 REPS compliance report should be approved by the Commission. On August 25, 2011, Dominion filed its 2010 REPS compliance report. Dominion stated that it met its 2010 REPS solar set-aside obligation by purchasing unbundled out-of-state solar RECs. Dominion again elected not to file an application for an REPS rider in 2011. EMCs and municipally-owned electric utilities There are thirty-one (31) electric membership corporations (EMCs) serving customers in North Carolina, including twenty-six (26) that are headquartered in the state. Twenty-five of the EMCs are members of North Carolina Electric Membership Corporation (NCEMC), a generation and transmission (G&T) services cooperative that provides wholesale power and other services to its members. In addition, there are seventy-four (74) municipal and university-owned electric distribution systems serving customers in North Carolina. Fifty-one of the North Carolina municipalities are participants in either North Carolina Eastern Municipal Power Agency (NCEMPA), or North Carolina Municipal Power Agency Number 1 (NCMPA1), municipal power agencies that 8 provide wholesale power to their members. The remaining municipally-owned electric utilities purchase their electric power from wholesale electric suppliers. By Orders issued August 27, 2008, the Commission allowed twenty-three (23) EMCs to file their REPS compliance plans on an aggregated basis through GreenCo Solutions, Inc. (GreenCo),1 GreenCo and the fifty-one (51) municipal members of the power agencies to file through NCEMPA and NCMPA1. On May 3, 2011, the Commission issued an Order approving GreenCo’s 2008 REPs compliance report, with a brief discussion noting that the energy efficiency RECs reported therein are subject to measurement and verification (M&V) based on the submission of further M&V data and the resolution of M&V issues pending in Docket No. E-100, Sub 113 with regard to reduced energy consumption. On September 1, 2010, GreenCo filed its 2009 REPS compliance report stating that it had secured adequate resources to meet its members’ solar set-aside obligation for 2010. On January 24, 2011, the Commission held a public hearing on the 2010 Integrated Resource Plans (IRP) and REPS compliance reports filed by the public utilities and cooperatives. On August 30, 2011, the Public Staff filed comments on GreenCo’s 2009 REPS compliance report stating that it found no violations of the REPS statute or Commission’s rules in the report or the compliance efforts of GreenCo and recommending that the Commission approve the GreenCo report. On September 19, 2011, in Docket No. E-100, Sub 128, GreenCo filed its 2011 REPS compliance plan and 2010 REPS compliance report with the Commission on behalf of its member EMCs, as well as Mecklenburg Electric Cooperative and Broad River Electric Cooperative. GreenCo stated that it intends to use its members’ allocations from SEPA, RECs purchased from both in-State and out-of-state renewable energy facilities, and energy efficiency savings from eleven recently approved energy efficiency programs to meet its members’ REPS obligations. In addition, GreenCo is continuing to work with the collaborative of other electric power suppliers to meet the swine and poultry set-aside requirements. In its 2010 REPS compliance report, GreenCo stated that it secured adequate resources to meet the solar set-aside obligation for 2010, as well as the 2012 and 2013 solar requirement. Lastly, for 2010, the REPS incremental costs incurred by GreenCo’s members were significantly less than the costs allowed under the per-account cost cap in G.S. 62-133.8(h). 1 Effective May 1, 2010, Blue Ridge Electric Membership Corporation is no longer a member of GreenCo. 9 EnergyUnited Electric Membership Corporation On August 27, 2010, in response to an Order by the Commission, EnergyUnited Electric Membership Corporation (EnergyUnited) filed revised 2008 and 2009 REPS compliance reports together with its 2010 IRP. On August 30, 2011, the Public Staff filed comments on EnergyUnited’s 2008 and 2009 REPS compliance reports stating that it found no violations of the REPS statute or Commission’s rules in the reports or the compliance efforts of EnergyUnited and recommending that the Commission approve EnergyUnited’s reports. On August 30, 2011, EnergyUnited filed its 2011 IRP and REPS compliance plan and 2010 REPS compliance report. In its report, EnergyUnited stated that it met its 2010 solar set-aside requirement by purchasing solar RECs. In its 2011 compliance plan, EnergyUnited stated that it has purchased enough solar RECs to meet its 2011 obligation. Over the next two years, EnergyUnited plans to begin evaluating options to fulfill the remainder of its solar needs. In addition, EnergyUnited plans to use landfill gas generation along with RECs from SEPA and others to begin to meet its general REPS obligation in 2012 and beyond. Tennessee Valley Authority On November 12, 2010, Tennessee Valley Authority (TVA) filed an aggregated 2010 REPS compliance plan and 2009 REPS compliance report on behalf of its four wholesale customers serving retail customers in North Carolina: Blue Ridge Mountain Electric Membership Corporation, Mountain Electric Coop, Inc., Tri-State Electric Membership Corporation, and Murphy Power Board. TVA stated that its 2010 solar set-aside requirement was 116 MWh and its plan for meeting the requirement was to purchase solar RECs. For 2011, the solar set-aside requirement is projected to be 117 MWh and TVA’s plan for meeting the requirement is to generate the energy at its facilities and/or purchase solar RECs. For the general 2012 REPS goal of 3%, TVA projected its cooperatives’ requirement to be 18,000 MWh. In addition to the swine and solar set-aside portion, this requirement will be met by a combination of wind RECs, hydro generation, demand-side management and energy efficiency. On August 30, 2011, the Public Staff filed comments on TVA’s 2009 REPS compliance report. The Public Staff stated that TVA did not obtain any RECs for the four cooperatives to whom TVA sells electricity and did not impose any incremental costs on the cooperatives. The Public Staff recommended that the Commission approve TVA’s report. On August 31, 2011, TVA filed its 2011 REPS compliance plan and 2010 compliance report. TVA reiterated that it plans to meet its cooperatives’ solar set-aside obligation by generating solar energy at its facilities and facilities owned by 10 others, and/or purchasing solar RECs. For the general 2012 REPS goal of 3%, TVA will meet this requirement by a combination of wind RECs, hydro generation, demand-side management and energy efficiency. TVA met its cooperatives’ 2010 solar set-aside requirement by purchasing solar RECs. Halifax Electric Membership Corporation On October 15, 2010, Halifax Electric Membership Corporation (Halifax) filed its 2010 REPS compliance plan and 2009 REPS compliance report. Halifax’s 2010 REPS compliance plan stated that its 2010 solar set-aside requirement was 38,740 kWh and its plan for meeting the requirement was to purchase solar RECs. For 2011, Halifax’s solar set-aside requirement is projected to be 39,097 kWh, and Halifax’s plan for meeting the requirement is to generate the energy at its 98.56 kW solar PV facility to be completed in the later part of 2010 and/or purchase solar RECs. For the general 2012 REPS goal of 3%, Halifax projected its requirement to be 5.9 MWh. In addition to the swine and solar set-aside portion, this requirement will be met by a combination of SEPA energy entitlements, wind RECs, and energy efficiency. On May 3, 2011, the Commission issued an Order concluding that Halifax’s 2008 REPS compliance report did not comply with the requirements of G.S. 62-133.8 and Commission Rule R8-67, mainly because Halifax had allocated the costs of demand-side management (DSM) and energy efficiency (EE) programs that pre-dated Senate Bill 3 as incremental REPS compliance costs. The Commission held, among other things, that energy savings from existing EE programs can be counted toward the REPS requirement, but the costs of existing programs are not incremental costs under G.S. 62-133.8(h). The Commission ordered Halifax to file revised 2008 and 2009 REPS compliance reports consistent with the Commission’s Order by September 1, 2011. On August 29, 2011, Halifax filed updates to its 2008 and 2009 REPS compliance reports. Halifax’s revised reports included, among other information, adjustments to the cost of some energy efficiency programs and REC balances. On September 1, 2011, Halifax filed its 2011 REPS compliance plan and 2010 REPS compliance report. Halifax stated that it intends to meet its REPS requirement with a combination of SEPA energy entitlements, EE programs, solar energy production, solar and wind RECs and additional resources to be determined on an ongoing basis. Further, Halifax noted that it is a participant in the collaborative effort of electric power suppliers to meet the swine and poultry waste set-aside requirements. With regard to its 2010 solar set-aside obligation, Halifax met that requirement by generating solar energy on its 98.56 kW solar PV system and purchasing solar RECs. 11 North Carolina Eastern Municipal Power Agency On May 3, 2011, the Commission issued an Order concluding that NCEMPA’s 2008 REPS compliance report did not comply with the requirements of G.S. 62-133.8 and Commission Rule R8-67 for several reasons, including: (1) NCEMPA allocated the costs of DSM and EE programs that pre-dated Senate Bill 3 as incremental REPS compliance costs; (2) NCEMPA included net lost revenues as a cost of REPS compliance; and (3) NCEMPA relied on its wholesale power provider’s REPS compliance to satisfy a portion of NCEMPA’s REPS obligation. The Commission ordered NCEMPA to file revised 2008 and 2009 REPS compliance reports consistent with the Commission’s Order by September 1, 2011. On August 31, 2011, the Commission received the 2011 REPS compliance plan and 2010 REPS compliance report filed by NCEMPA on behalf of its members, along with revised 2008 and 2009 REPS compliance reports. In its 2011 REPS compliance plan, NCEMPA stated that its members will meet their REPS requirements by purchasing RECs, as well as utilizing SEPA allocations and EE and DSM savings. NCEMPA identified a number of demand-side management and energy efficiency programs that its members may implement to produce energy savings for REPS compliance. NCEMPA stated that it has entered into contracts to purchase various types of RECs and will continue to investigate the market for unbundled RECs as a cost-effective means of REPS compliance. NCEMPA reiterated that it is prohibited from purchasing power to meet the REPS set-aside requirement, including its solar set-aside requirement. However, it met its 2010 solar set-aside requirement by purchasing solar RECs. In addition, NCEMPA has executed contracts to purchase sufficient solar RECs to meet its requirements through 2013. In addition, NCEMPA is participating jointly with other electric power suppliers to meet the aggregate swine and poultry waste set-aside requirements beginning in 2012. Finally, NCEMPA estimates that its incremental costs for REPS compliance will be less than its per-account cost cap in 2011 through 2013. North Carolina Municipal Power Agency No. 1 On May 3, 2011, the Commission issued an Order concluding that NCMPA1’s 2008 REPS compliance report did not comply with the requirements of G.S. 62-133.8 and Commission Rule R8-67, mainly because NCMPA1 did not allocate the costs of acquiring RECs in 2008 to NCMPA1’s 2008 REPS costs. Rather, NCMPA1 asserted that it had no REPS obligation in 2008 and, therefore, should defer its allocation of the RECs costs until the RECs are retired for compliance with G.S. 62-133.8. The Commission disagreed, holding that NCMPA1’s obligation to meet the general 3% REPS target beginning in 2012 necessitated that NCMPA1 plan for compliance with its REPS obligation by purchasing and banking REPS in 2008 through 2011, and the cost of those 2008 RECs should be allocated in 2008. The Commission ordered NCMPA1 to file 12 revised 2008 and 2009 REPS compliance reports consistent with the Commission’s Order by September 1, 2011. On August 31, 2011, the Commission received the 2011 REPS compliance plan and 2010 REPS compliance report filed by NCMPA1 on behalf of its members, along with revised 2008 and 2009 REPS compliance reports. In its 2011 compliance plan, NCMPA1 stated that, in addition to the implementation of demand-side management and energy efficiency programs by its members, NCMPA1 intends to investigate and develop new renewable energy facilities; review proposals for renewable resources, including biomass, hydro, solar and wind; and negotiate and execute agreements for cost-effective resources. NCMPA1 intends to continue to investigate local, regional, and national markets for cost-effective RECs and may consider issuing an RFP for RECs. NCMPA1 and its members do not anticipate entering into any wholesale power purchase agreements that would meet the requirements of G.S. 62-133.8(c)(2)(e). NCMPA1 met its 2010 REPS solar set-aside requirement by a combination of purchases of energy from solar facilities and purchases of solar RECs. In addition, it has contracts for the acquisition of sufficient solar RECs to meet its requirements through 2012 and issued an RFP for additional solar resources in July 2011. Further, NCMPA1 intends to identify development opportunities for additional solar facilities to be located within its members’ service areas or at municipal customer locations and investigate various other regional supply-side options. NCMPA1 is participating jointly with other electric power suppliers to meet the swine and poultry waste set-aside requirement beginning in 2012. NCMPA1 has entered into agreements for the purchase of both in-state and out-of-state unbundled swine RECs sufficient to meet its REPS obligation in 2013 through 2017. However, because of delays in development of the swine waste-to-energy facilities the 2012 goal will not be met. NCMPA1 has entered into agreements to purchase combination biomass and poultry waste in-state RECs and poultry out-of-state RECs sufficient to meet the 2012 poultry set-aside requirement. NCMPA1 is pursuing the procurement of other poultry RECs to meet its 2013 requirement. Finally, NCMPA1 estimates that its incremental costs for REPS compliance will be less than its per-account cost cap in 2011 through 2013. Fayetteville Public Works Commission, Winterville and Oak City On October 15, 2010, Fayetteville Public Works Commission (FPWC) filed its 2009 REPS compliance report. The report stated that FPWC has engaged in several activities that resulted in FPWC’s receipt of RECs to be carried forward for use in complying with FPWC’s REPS obligations in 2010 and beyond. Examples discussed in the report include the distribution of free compact fluorescent light bulbs (CFLs) to FPWC’s customers in 2008 and 2009, the $martWorks pilot program that has yielded reductions in energy use by 100 customers, and FPWC’s 2009 Southeastern Power Administration (SEPA) allocation. In addition, FPWC noted that it completed work on its LEED-certified 13 customer service center in late November 2009, and anticipates that the energy savings at this facility will be significant in 2010 and later years. On October 13, 2010, the towns of Winterville and Oak City filed their 2009 REPS compliance reports. Winterville stated that in 2009 it earned a total of 33 RECs by operation of the town’s CFL and energy savings kit programs. These RECs will be carried forward for use in meeting Winterville’s future REPS obligations. Oak City’s report stated that the town did not purchase or produce any RECs in 2009. In a corresponding 2010 REPS compliance plan filed on October 13, 2010, Oak City stated that it is studying various REPS compliance strategies and expects that the town’s primary strategy will involve energy efficiency programs. On August 30, 2011, the Public Staff filed comments on the 2009 REPS compliance reports of Winterville, Oak City and FPWC. The Public Staff recommended that the Commission approve the Winterville and Oak City reports as filed. With regard to FPWC’s report, the Public Staff noted FPWC’s request to rely on REPS compliance by its wholesale power supplier, Progress Energy Carolinas, and FPWC’s inclusion of lost retail sales in its REPS costs were inconsistent with Commission decisions, noting that after FPWC filed its 2009 report the Commission decided in Docket E-48, Sub 6 that as a general rule neither a cooperative or municipal electric supplier can rely on its wholesale provider’s REPS compliance, and that it is not acceptable for a cooperative or municipal supplier to include lost retail revenues as a cost of REPS compliance. After noting two additional exceptions, the Public Staff recommended that the Commission approve FPWC’s 2009 compliance report. On August 31, 2011, Winterville filed its 2011 REPS compliance plan and 2010 REPS compliance report. Winterville stated that it continues to implement existing energy efficiency programs and investigate the potential for implementing new programs. In addition, the town plans to purchase solar RECs to meet its 2011 through 2013 solar set-aside requirement. Winterville’s 2010 REPS compliance report stated that it met its 2010 solar set-aside obligation by purchasing solar RECs. On September 1, FPWC and Winterville filed their 2011 REPS compliance plans and 2010 REPS compliance reports. FPWC’s 2011 compliance plan stated it has continued several efforts resulting in FPWC’s receipt of RECs to be carried forward for use in complying with FPWC’s REPS obligations in 2011 and beyond. Examples include the $martWorks pilot program that has yielded reductions in energy use by customers, and FPWC’s SEPA allocations. In addition, FPWC noted the energy savings produced by its LEED-certified customer service center, as well as plans to implement building modification programs expected to yield energy efficiency RECs in 2011 and later years. FPWC is participating 14 jointly with other electric power suppliers to meet the aggregate swine and poultry waste set-aside requirements beginning in 2012. In addition, FPWC plans to purchase sufficient solar RECs to meet its requirements through 2012. For 2013, FPWC intends to facilitate the development of a solar facility that will provide a portion of its RECs and purchase the remaining portion on the open market. In its 2010 REPS compliance report, FPWC stated that it met its 2010 solar set-aside requirement by purchasing solar RECs. In its 2011 REPS compliance plan, Winterville stated that it continues to implement existing energy efficiency programs and investigate the potential for implementing new programs. Winterville stated that it has earned RECs by operation of the town’s energy savings programs and these will be carried forward for use in meeting Winterville’s future REPS obligations. In addition, the town plans to purchase solar RECs to meet its 2011 through 2013 solar set-aside requirement. Winterville’s compliance report stated that it met its 2010 solar set-aside obligation by purchasing solar RECs. On September 2, 2011, Oak City filed its 2011 REPS compliance plan and 2010 REPS compliance report. Oak City’s compliance plan stated that it will continue to consider energy efficiency options, but will need to purchase RECs to meet its requirements during the next few years. Oak City’s compliance report stated that it acquired one REC to meet the 2010 solar set-aside requirement. Town of Fountain The Town of Fountain did not file a REPS compliance report for 2008 or 2009 or a REPS compliance plan in 2008, 2009 or 2010. On June 22, 2011, the Commission issued an Order requiring Fountain to file its 2008, 2009 and 2010 REPS compliance reports, as well as its 2010 and 2011 REPS compliance plans by September 1, 2011. On September 20, 2011, the Commission received a letter from Fountain’s attorney stating that the Town had assumed that REPS reports on its behalf were being filed by the Town’s electric supplier, Pitt-Greene EMC. However, the Town recently learned that this was not the case. The letter stated that the Town is working on the REPS reports and will submit them no later than December 31, 2011. Wholesale Providers Meeting REPS Requirements PEC, as the wholesale provider, has agreed to meet the REPS requirements for the towns of Black Creek, Lucama, Stantonsburg, and Waynesville. Similarly, Duke has agreed to meet the REPS requirements for Blue Ridge EMC, Rutherford EMC, the towns of Dallas and Forest City, and the cities of Concord, Highlands and Kings Mountain, and Dominion has agreed to meet the REPS requirements for the Town of Windsor. The towns of Macclesfield, Pinetops, and Walstonburg have previously filed letters stating that the City of Wilson, as their wholesale provider, has agreed to include their loads with its own 15 for reporting to NCEMPA for REPS compliance. Halifax has agreed to meet the REPS requirement for the Town of Enfield. Recommendation The Commission recommends that G.S. 62-300 be amended to add a $25.00 filing fee for applications for registration of renewable energy facilities. The Commission has received more than 1,300 reports of proposed construction and registration applications since the implementation of Senate Bill 3. A reasonable fee for registration applications will help defray the cost of processing the applications and issuing orders of registration. Conclusions All of the electric power suppliers except for the Town of Fountain appear to have met the 2010 solar set-aside requirement of Senate Bill 3. However, as stated in the 2010 Report and as highlighted again in this report, numerous issues continue to arise in the implementation of Senate Bill 3 that have required interpretation by the Commission of the statutory language: e.g., the definition of biomass, the electric power suppliers’ obligations under the set-aside provisions, the eligibility of renewable energy facilities and resources to meet the set-aside provisions, etc. If the plain language of the statute was ambiguous, the Commission attempted to discern the intent of the General Assembly in reaching its decision on the proper interpretation of the statute. 16 BACKGROUND In August 2007, North Carolina enacted comprehensive energy legislation, Session Law 2007-397 (Senate Bill 3), which, among other things, established a Renewable Energy and Energy Efficiency Portfolio Standard (REPS), the first renewable energy portfolio standard in the Southeast. Under the REPS, all electric power suppliers in North Carolina must meet an increasing amount of their retail customers’ energy needs by a combination of renewable energy resources (such as solar, wind, hydropower, geothermal and biomass) and reduced energy consumption. Beginning at 3% of retail electricity sales in 2012, the REPS requirement ultimately increases to 10% of retail sales beginning in 2018 for the State’s electric membership corporations and municipally-owned electric providers and 12.5% of retail sales beginning in 2021 for the State’s electric public utilities. In G.S. 62-133.8(j), the General Assembly required the Commission to make the following annual report: No later than October 1 of each year, the Commission shall submit a report on the activities taken by the Commission to implement, and by electric power suppliers to comply with, the requirements of this section to the Governor, the Environmental Review Commission, and the Joint Legislative Commission on Governmental Operations. The report shall include any public comments received regarding direct, secondary, and cumulative environmental impacts of the implementation of the requirements of this section. In developing the report, the Commission shall consult with the Department of Environment and Natural Resources.2 On October 1, 2008, the Commission made its first annual report pursuant to G.S. 62-133.8(j),3 and last year, on October 1, 2010, the Commission made its third annual report.4 2 G.S. 62-133.8(j) was amended by Session Law 2011-291 to require that the annual REPS Report be submitted to the Joint Legislative Commission on Governmental Operations, rather than the Joint Legislative Utility Review Committee. The remaining sections of this report detail, as required by the General Assembly, developments related to Senate Bill 3, activities undertaken by the Commission during the past year to implement Senate Bill 3, and actions by the electric power suppliers to comply with G.S. 62-133.8, the REPS provisions of Senate Bill 3. 3 Annual Report of the North Carolina Utilities Commission to the Governor of North Carolina, the Environmental Review Commission and the Joint Legislative Utility Review Committee Regarding Energy and Energy Efficiency Portfolio Standard, October 1, 2008 (2008 REPS Report). 4 Annual Report of the North Carolina Utilities Commission to the Governor of North Carolina, the Environmental Review Commission and the Joint Legislative Utility Review Committee Regarding Energy and Energy Efficiency Portfolio Standard, October 1, 2010 (2010 REPS Report). 17 2011 LEGISLATION During the 2011 Session of the General Assembly, the legislature enacted two amendments to Senate Bill 3. First, Session Law 2011-55 (Senate Bill 75) was ratified by the General Assembly on April 21, 2011, and signed by the Governor on April 28, 2011. It was effective on April 28, 2011. In Sec. 1, Senate Bill 75 amended G.S. 62-133.8(a) by adding a new subdivision (3a), which states: “Electricity demand reduction” means a measurable reduction in the electricity demand of a retail electric customer that is voluntary, under the real-time control of both the electric power supplier and the retail electric customer, and measured in real time, using two-way communications devices that communicate on the basis of standards. In Secs. 2 and 3, Senate Bill 75 amended G.S. 62-133.8(b)(2) and (c)(2), respectively, by adding new subdivisions (g) to state that electricity demand reduction is a means by which electric public utilities, electric membership corporations and municipalities can meet their REPS requirements. Second, Session Law 2011-309 (Senate Bill 710) was ratified by the General Assembly on June 18, 2011, and signed by the Governor on June 27, 2011. It was effective on June 27, 2011. Section 1 of Senate Bill 710 made several findings regarding the need to allow the use of renewable energy certificates (RECs) derived from the thermal energy of a combined heat and power facility that uses poultry waste as a fuel to meet the REPS poultry waste set-aside requirement. Among the reasons cited in Sec. 1 are the difficulty that electric power suppliers have experienced in procuring electricity derived from poultry waste at a reasonable cost, the benefit of diversifying the State’s viable options for generating electricity from renewable energy resources, and the benefits derived by improving the State’s air quality. Section 2 of Senate Bill 710 amended G.S. 62-133.8(f) by adding the phrase “or an equivalent amount of energy,” as follows (in pertinent part): For calendar year 2014 and for each calendar year thereafter, at least 900,000 megawatt hours of the total electric power sold to retail electric customers in the State or an equivalent amount of energy shall be supplied, or contracted for supply in each year, by poultry waste combined with wood shavings, straw, rice hulls, or other bedding material. This amendment to G.S. 62-133.8(f) was in response to the Commission’s decision in Docket No. E-100, Sub 113, as more fully discussed below, that thermal RECs could not be used to meet the poultry set-aside requirement. 18 COMMISSION IMPLEMENTATION Rulemaking Proceeding As detailed in the Commission’s 2008 REPS Report, after Senate Bill 3 was signed into law the Commission initiated a proceeding in Docket No. E-100, Sub 113 to adopt rules to implement the REPS and other provisions of the new law. On February 29, 2008, the Commission issued an Order adopting final rules implementing Senate Bill 3. The rules, in part, require each electric power supplier to file an annual REPS compliance plan and an annual REPS compliance report to demonstrate, respectively, reasonable plans for and actual compliance with the REPS requirement. In its 2010 REPS Report, the Commission noted that it had issued a number of orders interpreting various provisions of Senate Bill 3, in which it made the following conclusions: • Tennessee Valley Authority’s (TVA) distributors making retail sales in North Carolina and electric membership corporations (EMCs) headquartered outside of North Carolina that serve retail electric customers within the State must comply with the REPS requirement of Senate Bill 3, but that the university-owned electric suppliers, Western Carolina University and New River Light & Power Company, are not subject to the REPS requirement. • Each electric power supplier’s REPS obligation, both the set-aside requirements and the overall REPS requirements, should be based on its prior year’s actual North Carolina retail sales. • An electric public utility cannot use existing utility-owned hydroelectric generation for REPS compliance, but may use power generated from new small (10 MW or less) increments of utility-owned hydroelectric generating capacity. • The solar, swine waste, and poultry waste set-aside requirements should have priority over the general REPS requirement where both cannot be met without exceeding the per-account cost cap established in G.S. 62-133.8(h). • The set-aside requirements may be met through the generation of power, purchase of power, or purchase of unbundled RECs. 19 • The 25% limitation on the use of out-of-state RECs applies to the general REPS obligation and each of the individual set-aside provisions. • The electric power suppliers are charged with collectively meeting the aggregate swine and poultry waste set-aside requirements and may agree among themselves how to collectively satisfy those requirements. • RECs associated with the electric power generated at a biomass-fueled combined heat and power facility located in South Carolina and purchased by an electric public utility in North Carolina would be considered as in-State pursuant to G.S. 62-133.8(b)(2)(d), but that RECs associated with out-of-state renewable generation not delivered to and purchased by an electric public utility in North Carolina and RECs associated with out-of-state thermal energy would not be considered to be “in-State” RECs pursuant to G.S. 62-133.8(b)(2)(d). • Consistent with prior Commission decisions, only RECs associated with the percentage of electric generation that results from methane gas that was actually produced by poultry or swine waste may be credited toward meeting the poultry and swine waste set-aside requirements. Thus, not all of the methane gas produced by the anaerobic digestion of swine or poultry waste, as well as “other organic biodegradable material,” would qualify toward the set-aside requirements because the other material described as mixed with the poultry or swine waste is responsible for some percentage of the resulting methane gas. • In response to a joint motion filed by Progress Energy Carolinas, Inc. (PEC), Duke Energy Carolinas, LLC (Duke), Dominion North Carolina Power (Dominion), North Carolina Electric Membership Corporation (NCEMC), North Carolina Eastern Municipal Power Agency (NCEMPA), and North Carolina Municipal Power Agency Number 1 (NCMPA1) (jointly, the Electric Suppliers), in Docket No. E-100, Sub 113, the Commission concluded that issuance of a joint request for proposals (RFP) by the Electric Suppliers is a reasonable means for the Electric Suppliers to work together collectively to meet the swine waste resource set-aside requirement. • In response to a motion filed in Docket No. E-100, Sub 113 by PEC on behalf of Dominion, Duke, NCEMC, GreenCo Solutions, Inc., North Carolina Sustainable Energy Association, North Carolina Pork Council, Fibrowatt LLC, Green Energy Solutions NV, Inc., Attorney General and Public Staff, the Commission approved a Pro Rata Mechanism (PRM) as a reasonable and appropriate means for the State’s electric power 20 suppliers to meet the aggregate swine and poultry waste set-aside obligations of G.S. 62-133.8(e) and (f). The PRM provides that (1) the statewide aggregate swine and poultry waste set-aside requirements should be allocated among all of the electric power suppliers based upon the ratio of each electric power supplier’s prior year’s retail sales to the State’s total retail sales; (2) an electric power supplier shall be deemed to be in compliance with the swine or poultry waste set-aside requirement once it has satisfied its allocated share of the statewide aggregate requirement or has reached its incremental cost cap pursuant to G.S. 62-133.8(h); (3) no electric power supplier shall be obligated to satisfy more than its allocated share of the statewide aggregate swine or poultry waste set-aside requirement; and (4) electric power suppliers may jointly procure renewable energy resources in order to satisfy their individual allocated shares of the statewide aggregate swine or poultry waste set-aside requirements. In response to arguments by NCEMPA and NCMPA1, the Commission reiterated its earlier holding that the set-aside requirements, as demonstrated by the specificity of their express inclusion in the legislation, have priority over other methods of compliance with the general REPS percentage obligation where the general REPS percentage obligation cannot be met because of the incremental cost cap. • As it had earlier done with regard to the aggregate swine waste set-aside requirement, the Commission approved the joint procurement of RECS from energy produced by poultry waste, the sharing of poultry waste generation bids among electric suppliers, and other collaborative efforts proposed by PEC, Dominion, NCEMC, NCEMPA, NCMPA1, EnergyUnited Electric Membership Corporation, Halifax Electric Membership Corporation, GreenCo Solutions, Inc. and the Fayetteville Public Works Commission as a reasonable means for the State’s electric suppliers to work together to meet the poultry waste set-aside requirement. • The Commission found that the term “allocations made by the Southeastern Power Administration” (SEPA), is used as a term of art in G.S. 62-133.8(c)(2)(c). The Commission, therefore, concluded that a municipal electric power supplier or electric membership corporation (EMC) will be permitted to use the total annual amount of energy supplied by SEPA to that municipality or EMC to comply with its respective REPS requirement, subject to the thirty percent limitation provided in G.S. 62-133.8(c)(2)(c). Since October 1, 2010, the Commission has issued a number of additional orders interpreting various provisions of Senate Bill 3 and seeking additional information to aid the Commission in future interpretations, as described below. 21 Order Denying the Use of Thermal RECs to Satisfy Poultry Waste Set-Aside Requirement, Docket No. E-100, Sub 113 (October 8, 2010) On August 10, 2010, Peregrine Biomass Development Company, LLC (Peregrine), filed a Petition in Docket No. E-100, Sub 113 requesting that the Commission exercise its discretionary authority pursuant to G.S. 62-133.8(i)(2) (the off-ramp) to allow renewable energy certificates (RECs) associated with the thermal energy output of a combined heat and power (CHP) facility which uses poultry waste as a fuel to meet the poultry waste set-aside requirement under G.S. 62-133.8(f). Previously, in Docket No. SP-578, Sub 0, Green Energy Solutions NV, Inc. (GES), the owner of another CHP facility that uses, in part, poultry waste as fuel, filed a Motion for Clarification seeking an interpretation by the Commission that the statute allows the use of both RECs associated with electric power and thermal energy to meet the poultry waste set-aside requirement. In response to the Commission’s June 21, 2010 Order Requesting Comments, the Public Staff argued that thermal RECs may not be used to satisfy the poultry waste set-aside requirement: “under G.S. 62-133.8(f), RECs may satisfy the poultry waste set-aside only if they result from the actual generation of electric power from poultry waste.” The Public Staff further noted that the Commission may be able to determine that it is in the public interest to modify the poultry waste set-aside requirement to include thermal RECs if requested to do so under the off-ramp provision. On July 21, 2010, GES withdrew its Motion. By Order dated August 25, 2010, the Commission requested that the Public Staff and other interested parties file comments and reply comments on the relief requested by Peregrine in its Petition: whether the Commission should invoke the off-ramp provision to allow thermal RECs to be used to satisfy the poultry waste set-aside requirement. In addition, the Commission requested that the Public Staff and other interested parties address in their comments and reply comments the issue initially raised by GES in its Motion for Clarification: whether it is necessary to invoke the off-ramp to allow thermal RECs to be used to satisfy the poultry waste set-aside requirement. Comments and reply comments were filed in September, 2010. On October 8, 2010, the Commission issued an Order denying Peregrine’s request to allow RECs associated with the thermal heat output of a CHP facility that uses poultry waste as fuel to meet the poultry waste set-aside requirement. The Commission compared the language in G.S. 62-133.8(d), the solar set-aside statute, with the language in G.S. 62-133.8(f), the poultry waste set-aside statute. The Commission reasoned that the legislature’s inclusion of the phrases “or an equivalent amount of energy” and “new metered solar thermal energy facilities” in subsection (d), coupled with the lack of similar express language in subsection (f), demonstrated a clear legislative intent to allow solar thermal RECs to meet the solar set-aside requirement, but not to allow thermal 22 RECs to meet the poultry waste set-aside requirement. In addition, the Commission concluded that good cause had not been shown to invoke the Commission’s discretion to modify the poultry waste set-aside provision to delay the requirement, noting that the electric power suppliers had recently issued a joint RFP to acquire poultry waste derived energy and that it would be premature to invoke the REPS modification provision, given that compliance with the poultry waste set-aside provision is not required until 2012. Finally, the Commission suggested that Peregrine and parties supporting Peregrine’s position could seek an amendment to G.S. 62-133.8(f) by the General Assembly.5 Order on Cost Recovery of Swine and Poultry Waste Energy by an Electric Public Utility, Docket No. E-100, Sub 113 (November 23, 2010) On September 14, 2010, PEC, Duke, Dominion, NCEMC, NCEMPA, NCMPA1 and GreenCo Solutions, Inc. (collectively, Movants), filed a joint motion in Docket No. E-100, Sub 113 requesting a declaratory ruling that an electric public utility is entitled to recover through G.S. 62-133.2(a1)(6) the total delivered cost of all megawatt-hours purchased from renewable energy facilities and new renewable energy facilities using swine and poultry waste to generate electricity, regardless of whether the electric public utility purchases the renewable energy certificate (REC) associated with the purchased renewable energy. On September 16, 2010, the Commission issued an Order requesting comments and reply comments. Comments were filed by the Movants and the Public Staff, as well as other parties. On November 23, 2010, the Commission issued an Order holding that an electric public utility can recover through its fuel cost rider the total delivered cost of the purchase of energy generated by a swine or poultry waste-to-energy facility where the RECS associated with the production of the energy are purchased by another North Carolina electric power supplier to comply with the REPS statewide aggregate swine and poultry waste set-aside requirements. The Commission compared the provisions and interplay of G.S. 62-133.2, the fuel and fuel-related cost adjustment statute, with G.S. 62-133.8, the REPS statute. The Commission reasoned that neither of these statutes requires that the purchases of power and the associated RECs be bundled in order to recover the cost of the purchased electricity under G.S. 62-133.2(a1)(6) so long as the RECs were used by another electric power supplier to meet its set-aside requirement. Further, the Commission discussed its previous rulings approving mechanisms by the State’s electric power suppliers to aggregate purchases of swine and poultry energy and RECs in order to meet the set-aside requirements for those 5 As noted above under 2011 Legislation, in Senate Bill 710 the General Assembly amended G.S. 62-133.8(f) by adding the phrase “or an equivalent amount of energy” to allow thermal energy from a CHP facility fueled by poultry waste to now be eligible to meet the poultry waste set-aside requirement. 23 technologies, and the fact that such mechanisms could result in an electric public utility purchasing the electricity but not the RECs associated with swine or poultry waste-to-energy. In that regard, the Commission opined that the General Assembly did not intend for the electric public utility to be denied recovery of the full delivered cost of the purchased electricity under the utility’s fuel cost rider, or to be relegated to recovery of that cost by filing a general rate case. Order Amending Rules R8-64 Through R8-69 and Adopting Final NC-RETS Operating Procedures, Docket No. E-100, Subs 113 and 121 (January 31, 2011) On September 4, 2009, the Commission issued an Order in Docket No. E-100, Sub 113 allowing electric power suppliers and other interested parties an opportunity to propose specific amendments to the Commission’s procedural rules, Rules R8-64 through R8-69, that would streamline the Commission’s administration of G.S. 62-133.8 and 62-133.9. Numerous extensions of time were granted to the parties in an effort to reach consensus on the issues being discussed among the parties. Written comments were filed on March 1, 2010, and reply comments were filed on April 1, 2010. On January 27, 2010, the Commission issued an Order in Docket No. E-100, Subs 113 and 121 requesting comments on proposed amendments to Rule R8-67 regarding the participation of electric power suppliers and renewable energy facilities in the North Carolina Renewable Energy Tracking System (NC-RETS). Written comments were filed by several parties on March 9, 2010. On July 1, 2010, the Commission issued an Order in Docket No. E-100, Sub 121 adopting Interim Operating Procedures for the NC-RETS REC tracking system detailing the circumstances under which the NC-RETS Administrator is authorized to issue RECs. The Commission noted that proposed rule changes regarding implementation of Senate Bill 3 were pending and stated that it anticipated issuing an order regarding those rules and allowing parties to comment as to whether there are any conflicts or inconsistencies between the proposed revised rules and the Interim Operating Procedures for NC-RETS. The Commission further anticipated issuing final Operating Procedures for NC-RETS following receipt of comments on the proposed revised rules. By Order dated August 3, 2010, the Commission proposed amendments to Rules R8-64 through R8-69 based, in part, on the comments received and invited comments on the proposed amendments and the NC-RETS Interim Operating Procedures. In addition, to encourage renewable energy facilities to register promptly with NC-RETS and to have RECs issued as soon as possible following the production of the energy associated with the RECs, the Commission established that, beginning January 1, 2011, renewable energy facilities that participate in NC-RETS are only eligible for historic REC issuances 24 for energy production going back two years. Comments were filed with the Commission by several parties in October and November 2010. On January 31, 2011, the Commission issued an Order amending Rule R8-64 through R8-69, adopting final NC-RETS Operating Procedures and approving an application form for use by owners of renewable energy facilities in obtaining registration of a facility under Rule R8-66. The amendments to Rule R8-64 through R8-69 clarify and streamline the application procedures, registration, record keeping and other requirements for renewable energy facilities. Order Requesting Comments on Measurement and Verification of Reduced Energy Consumption, Docket No. E-100, Sub 113 (August 24, 2010) On August 24, 2010, the Commission issued an Order in Docket No. E-100, Sub 113 expressing concerns that the Commission’s current rules might prove inadequate to ensure the credibility of the reduced energy consumption amounts reported and used for REPS compliance, especially in regard to energy efficiency (EE) and/or demand-side management (DSM) activities of electric membership corporations and municipal power suppliers. The Commission requested comments on the following issues: (1) what kind of measurement and verification (M&V) documentation should be filed and/or made available for audit by each type electric power supplier that uses EE/DSM program achievements toward its general REPS compliance obligation; (2) whether and in what proceeding, if any, the Commission should review such M&V documentation in order to establish the savings from EE/DSM programs that may then be used by each electric power supplier to comply with REPS; (3) the appropriate method for determining the energy savings achieved by a DSM measure or program by an electric membership corporation or municipal power supplier; and (4) whether electric membership corporations should be required to include an M&V reporting plan in their EE/DSM program applications similar to the plans required of electric public utilities. Numerous parties filed comments and reply comments in October and November 2010. Order Convening Working Group on Unmetered Solar Thermal RECs, Docket No. E-100, Sub 113 (August 25, 2010) Pursuant to G.S. 62-133.8(a)(7), a renewable energy facility includes a solar thermal facility. As such, a solar thermal facility is eligible to earn RECs that may be sold to an electric power supplier for REPS compliance. However, pursuant to G.S. 62-133.8(a)(6), a REC is equal to one megawatt-hour of electricity or equivalent energy “supplied by” a renewable energy facility or new renewable energy facility. Therefore, the proper metric for determining the number of RECs earned by a solar thermal facility is the amount of thermal 25 energy actually used in heating water (or other solar thermal process) and not simply the system’s capacity for doing so. On August 25, 2010, the Commission issued an Order in Docket No. E-100, Sub 113 noting that solar industry developers were proposing to use a computer software model to calculate the number of thermal RECs generated by an unmetered solar thermal facility. The Commission expressed concern, however, that the software model may only estimate the capacity of the solar thermal facility to generate thermal energy and potentially overestimate the amount of thermal energy generated by the facility that was actually used in a solar thermal application. The Commission, therefore, requested that the Public Staff convene a working group of technical experts and other interested stakeholders to make recommendations to the Commission within three months regarding the appropriate assumptions and methodology for reasonably estimating the useful thermal energy produced by an unmetered solar thermal facility and the number of RECs earned by that facility. The Public Staff has facilitated several meetings of the working group and filed two reports on the working group’s recommendations. Renewable Energy Facilities Senate Bill 3 defines certain electric generating facilities as renewable energy facilities or new renewable energy facilities. RECs associated with electric or thermal power generated at such facilities may be used by electric power suppliers for compliance with the REPS requirement as provided in G.S. 62-133.8(b) and (c). In its rulemaking proceeding, the Commission adopted rules providing for a report of proposed construction, certification or registration of renewable energy facilities and new renewable energy facilities. Pursuant to G.S. 62-110.1(a), no person, including any electric power supplier, may begin construction of an electric generating facility in North Carolina without first obtaining from the Commission a certificate of public convenience and necessity (CPCN). Two exemptions from this certification requirement are provided in G.S. 62-110.1(g): (1) self-generation, and (2) nonutility-owned renewable generation under 2 megawatts (MW). Any person exempt from the certification requirement must, nevertheless, file a report of proposed construction with the Commission pursuant to Rule R8-65. To ensure that each renewable energy facility from which electric power or RECs are used for REPS compliance meets the particular requirements of Senate Bill 3, the Commission adopted Rule R8-66 to require that the owner, including an electric power supplier, of each renewable energy facility or new renewable energy facility register with the Commission if it intends for RECs it earns to be eligible for use by an electric power supplier for REPS compliance. This registration requirement applies to both in-State and out-of-state facilities. 26 As of July 27, 2011, the Commission has accepted registration statements filed by 337 facilities. As detailed in the 2010 REPS Report, the Commission has issued a number of orders addressing issues related to the registration of a facility, including the definition of “renewable energy resource,” as summarized below. • Accepted registration as a new renewable energy facility a 1.628 MW electric generating facility to be located near Clinton in Sampson County, North Carolina, and fueled by methane gas produced from anaerobic digestion of organic wastes from a Sampson County pork packaging facility and from a local swine farm. • Issued a declaratory ruling that (1) the percentage of refuse-derived fuel (RDF) that is determined by testing to be biomass, and the synthesis gas (Syngas) produced from that RDF is a “renewable energy resource” as defined in G.S. 62-133.8(a)(8); (2) the applicant’s delivery of Syngas from a co-located gasifier to an electric utility boiler would not make the company a “public utility” as defined in G.S. 62-3(23); and (3) the applicant’s construction of a co-located gasifier and the piping connection from the gasifier to an existing electric utility boiler would not require a certificate of public convenience and necessity under G.S. 62-110(a) or under G.S. 62-110.1(a). • Accepted registration as a new renewable energy facility a biomass-fueled 2.4 kW electric generating facility to be located at the applicant’s home in Wake County, North Carolina, and fueled by ethanol derived from 100% renewable organic materials. • Issued an Order amending existing certificates of public convenience and necessity for two electric generating facilities in Southport and Roxboro, North Carolina, that were being converted to burn a fuel mix of coal, wood waste, and tire-derived fuel (TDF). The Commission concluded that the portion of TDF derived from natural rubber, an organic material, meets the definition of biomass, and is eligible to earn RECs, but required the applicant to submit additional information to demonstrate the percentage of TDF that is derived from natural rubber. In addition, the Commission accepted registration of the two facilities as new renewable energy facilities. • Accepted registration as a new renewable energy facility a 1.628 MW combined heat and power (CHP) facility to be located in Darlington County, South Carolina, that will generate electricity using methane gas produced via anaerobic digestion of poultry litter from a chicken farm mixed with other organic, biodegradable materials, and use the waste heat from the electric generators to provide temperature control for the 27 methane-producing anaerobic digester as well as the chicken houses. The Commission concluded that the thermal energy that is used as an input back into the anaerobic digestion process effectively increases the efficiency of the electric production from the facility; is not used to directly produce electricity or useful, measureable thermal or mechanical energy at a retail electric customer’s facility pursuant to G.S. 62-133.8(a)(1); and is not eligible for RECs. However, the thermal energy that is used to heat the chicken houses is eligible to earn RECs. In a prior order, the Commission had clarified that only that portion of the energy generated from the biogas that is derived from poultry waste is eligible to earn RECs that may be used to meet the REPS poultry waste set-aside requirement. • Issued a declaratory ruling that (1) biosolids, the organic material remaining after treatment of domestic sewage and combusted at the applicant’s wastewater treatment plant, are a “renewable energy resource” as defined by G.S. 62-133.8(a)(8); and (2) the applicant, a county water and sewer authority organized in 1992 pursuant to the North Carolina Water and Sewer Authorities Act, is specifically exempt from regulation as a public utility pursuant to G.S. 62-3(23)(d). • Accepted for registration as a new renewable energy facility a solar thermal hot water heating facility located in Mecklenburg County, North Carolina, used to heat two commercial swimming pools. The Commission concluded, however, that as an unmetered solar thermal facility, RECs earned based on the capacity of the solar panels are not eligible to meet the solar set-aside requirement of G.S. 62-133.8(d). However, the Commission allowed the applicant to earn general thermal RECs based upon an engineering analysis of the energy from the unmetered solar thermal system actually required to heat the pools, which was determined to be substantially less than the capacity of the solar thermal panels. Since October 1, 2010, the Commission has issued a number of additional orders interpreting provisions of Senate Bill 3 regarding applications for registration of renewable energy facilities, as described below. Order Accepting Registration of New Renewable Energy Facilities Fueled by Co-Firing Biomass, Including Primary Harvest Whole Trees, Docket No. E-7, Subs 939 and 940 (October 11, 2010) On March 1, 2010, Duke Energy Carolinas, LLC (Duke), filed applications in Docket Nos. E-7, Sub 939 and Sub 940 to register Buck Steam Station, Units 5 and 6, and Lee Steam Station, Units 1, 2 and 3, respectively, as new renewable energy facilities pursuant to G.S. 62-133.8 and Commission Rule R8-66. In its registration applications, Duke stated that biomass co-firing test burns were conducted at each 28 facility using sawdust and/or whole tree wood chips. Several environmental groups intervened and requested that the Commission deny or stay Duke’s registrations, arguing that the whole tree wood biomass Duke sought to register is not wood waste and is not a renewable energy resource under Senate Bill 3. By Order dated April 27, 2010, the Commission consolidated these two dockets and scheduled an evidentiary hearing and oral argument to consider the contested factual and legal issues. The evidentiary hearing and oral arguments convened, as scheduled, on July 14, 2010. Proposed orders and briefs were filed on September 15, 2010. On October 11, 2010, the Commission issued an Order accepting for registration as renewable energy facilities Duke’s Buck and Lee Steam Stations, concluding that primary harvest wood products, including wood chips from whole trees, are “biomass resources” and “renewable energy resources” under G.S. 62-133.8(a)(8). The Commission reasoned that the General Assembly, by including several specific examples of biomass in the statute, did not intend to limit the scope of the term to those examples. Rather, the term “biomass” encompasses a broad category of resources and should not be limited absent express intent to do so. As further support for this interpretation, the Commission noted that the General Assembly expressly excluded peat, a form of biomass, from the definition of “renewable energy resource,” and could have done likewise for whole trees if it had intended that they be excluded from the definition of “renewable energy resource.” Finally, the Commission stated that it was satisfied from Duke’s testimony that Duke will use primary harvest wood products in an economic and sustainable manner. The Environmental Defense Fund and North Carolina Sustainable Energy Association appealed the Commission’s Order to the North Carolina Court of Appeals. On August 2, 2011, the Court of Appeals issued a decision affirming the Commission’s Order. The Court held that the Commission had properly applied the principles of statutory construction in holding that the General Assembly’s inclusion of several examples of biomass in the statute was not intended to limit the scope of the terms “biomass” or “renewable energy resource” to those examples. Order Declaring Yard Waste, Municipal Solid Waste and the Percentage of Syngas Derived from Yard Waste and Municipal Solid Waste to be Renewable Energy Resources, Docket No. SP-100, Sub 28 (April 18, 2011) On March 15, 2011, ReVenture Park Investments I, LLC (ReVenture), filed a request for a declaratory ruling regarding a proposed 20-MW biomass-to-energy facility that it plans to develop on a 667-acre tract along the Catawba River that was an industrial site. ReVenture requested that the Commission declare, among other points, that (1) yard waste, including leaves, brush, grass 29 clippings and tree limbs, is a renewable energy resource; (2) municipal solid waste (MSW) that is not recycled, including certain types of paper, cardboard, packaging materials and small wood items, is a type of refuse-derived fuel (RDF) that is a renewable energy resource; (3) the percentage of synthesis gas (Syngas) produced from yard waste and RDF, but not including that portion produced with certain non-renewable materials, is a renewable energy resource; and (4) the RECS attributable to ReVenture’s biomass generating facility will be entitled to triple credits because ReVenture’s facility qualifies as a cleanfields renewable energy demonstration park under Section 4 of Session Law 2010-195 (Senate Bill 886). On April 18, 2011, the Commission issued an Order declaring, among other things, that yard waste and the percentage of RDF used by ReVenture as fuel are renewable energy resources, and that the percentage of Syngas produced from yard waste and RDF used by ReVenture as fuel is a renewable energy resource. The Commission first noted that it previously rendered such a declaratory ruling with regard to RDF and Syngas in Docket No. SP-100, Sub 23, and could find no reason to reach a different conclusion in this docket. The Commission further opined that yard waste is an organic material having a constantly replenished supply, and is thus a renewable resource under G.S. 62-133.8(a)(8). In addition, the Commission concluded that if ReVenture’s facility is certified as a cleanfields renewable energy demonstration park under Senate Bill 886, then ReVenture will be entitled to triple credit for the RECs associated with the renewable energy produced by the facility. Finally, the Commission made rulings on several details regarding the triple crediting and retirement of RECs by ReVenture with NC-RETS. Order Accepting Registration of a New Renewable Energy Facility Producing Electricity and Steam from Landfill Gas, Docket No. SP-100, Sub 9 (July 5, 2011) On January 7, 2011, Raleigh Steam Producers, LLC (RSP), and Wake Gas Producers, LLC (WGP) (collectively, Petitioners), filed a Petition for Supplemental Declaratory Rulings in Docket No. SP-100, Sub 9. Concurrently, in Docket No. SP-967, Sub 0, RSP filed a report of proposed construction and a registration statement for a new renewable energy facility to be located in northern Wake County. RSP currently operates two boilers providing steam to Covidien-Mallinckrodt (Mallinckrodt) at its industrial plant. The larger of the two boilers is fired primarily by landfill gas collected by WGP at the North Wake County Landfill. WGP sells the landfill gas to RSP. RSP described the new facility as a 2.8-MW landfill gas-fueled new renewable combined heat and power (CHP) facility to be built in two stages. RSP stated that the first phase of construction, consisting of a 750-kW low pressure dual steam generator using steam from an existing boiler to produce electricity and process steam, is expected to become operational in late 2011. Subsequent 30 additions will include a new boiler and 790-kW turbine generator and a 1.6 MW landfill gas-fueled engine/generator set with heat recovery equipment. Both boilers will be fired primarily by approximately 90% landfill gas and 10% natural gas. Petitioners requested a declaratory ruling, among other things, that the facility will not be a “public utility” under G.S. 62-3(23(a), will be eligible for registration as a new CHP facility and will earn RECs for all of the waste steam produced by the turbine generators that is returned to a boiler for use in generating additional electric power. By Order dated July 5, 2011, the Commission accepted registration of the facility as a new renewable CHP facility and concluded that the proposed changes in the Petitioners’ operations will not cause either of them to become a public utility. With regard to the electricity, steam and thermal energy to be produced by the facility, the Commission concluded that the portion of electricity produced by landfill gas will be eligible to earn RECs, and the portion of waste steam produced from the electric turbines that is used as an input for Mallinckrodt’s manufacturing process will be eligible to earn thermal RECs. However, the Commission concluded that steam that bypasses the turbine generators and waste heat being used to pre-heat the feedwater for the boilers will not be used to directly produce electricity or useful, measureable thermal or mechanical energy at a retail electric customer’s facility pursuant to G.S. 62-133.8(a)(1), and, therefore, will not be eligible to earn RECs. Orders Accepting Registrations of New Renewable Energy Facilities Producing Solar Thermal Hot Water, Docket Nos. RET-4, Sub 5 and RET-8, Subs 12, 13 and 14 (August 15, 2011) On July 28, 2010, in Docket No. RET-4, Sub 5, FLS YK Farm, LLC (FLS), filed a registration statement for a new renewable energy facility being installed at the U.S. Marine Corps Camp Lejeune in Jacksonville, North Carolina, consisting of solar thermal hot water heaters on 108 residences. On February 11, 2011, in Docket No. RET-8, Subs 12, 13 and 14, FLS Owner II, LLC (FLS), filed registration statements for new renewable energy facilities being installed at Camp Lejeune, consisting of solar thermal hot water heaters on a total of 1,021 residences. FLS requested that it be allowed to install meters on a representative sample of the homes, rather than on each home, and assign to the unmetered homes the thermal heat measures recorded on the metered homes. On August 15, 2011, the Commission issued Orders accepting registration of residential solar thermal water heating facilities on the 1,129 homes with a representative sample of the homes being metered to determine the number of Btus of thermal energy that will be produced and on which RECs will be earned by the 1,129 systems. 31 North Carolina Renewable Energy Tracking System (NC-RETS) In its February 29, 2008 Order in Docket No. E-100, Sub 113, the Commission concluded that REPS compliance would be determined by tracking RECs associated with renewable energy and energy efficiency. In its Order, the Commission further concluded that a “third-party REC tracking system would be beneficial in assisting the Commission and stakeholders in tracking the creation, retirement and ownership of RECs for compliance with Senate Bill 3” and stated that “[t]he Commission will begin immediately to identify an appropriate REC tracking system for North Carolina.” Pursuant to G.S. 133.8(k), enacted in 2009, the Commission was required to develop, implement, and maintain an online REC tracking system no later than July 1, 2010, in order to verify the compliance of electric power suppliers with the REPS requirements. On September 4, 2008, the Commission issued an Order in Docket No. E-100, Sub 121 initiating a new proceeding to define the requirements for a third-party REC tracking system, or registry, and to select an administrator. The Commission established a stakeholder process to finalize a Requirements Document for the tracking system. After issuing a request for proposals and evaluating the bids received, the Commission signed a Memorandum of Agreement (MOA) with APX, Inc. (APX), on February 2, 2010, to develop and administer the North Carolina Renewable Energy Tracking System, NC-RETS. Pursuant to the MOA, on July 1, 2010, APX successfully launched NC-RETS. By letter dated September 3, 2010, the Commission informed APX that, to the best of its knowledge, NC-RETS has performed in substantial conformance with the MOA and has no material defects. The Commission, therefore, authorized APX to begin billing North Carolina electric power suppliers and other users the fees that were established in the MOA. Funding for NC-RETS is provided directly to APX by the electric power suppliers in North Carolina that are subject to the REPS requirements of Senate Bill 3 and recovered from the suppliers’ customers through the REPS incremental cost rider. Owners of renewable energy facilities and other NC-RETS users do not incur charges to open accounts, register projects, and create and transfer RECs, but will incur nominal fees to export RECs to other tracking systems or to retire RECs other than for REPS compliance. At the end of 2010, each electric power supplier was required to place the solar RECs that it acquired to meet its 2010 REPS solar set-aside obligation into a 2010 compliance account where the RECs are available for audit. When the Commission concludes its review of each electric power suppliers’ 2010 REPS compliance report, the associated RECs will be permanently retired. Since October 1, 2010, the Commission has issued several orders addressing issues pertaining to RECs credits, including the following: 32 • On December 10, 2010, in Docket No. E-100, Subs 113 and 121, the Commission issued an Order extending the deadline for the issuance of historic RECS from January 1, 2011 to June 1, 2011. As in previous orders, the Commission reiterated its purpose to encourage the issuance of RECs as soon as possible following the production of the energy associated with the RECs. The Commission further stated that the extension of the deadline for the issuance of historic RECS was intended to ensure that all renewable energy facilities have an adequate opportunity to obtain credit for eligible energy production that predated the Commission’s registration system and NC-RETS. • On March 25, 2011, in Docket No. EMP-17, Sub 1, the Commission issued an Order approving a request by EnergyUnited Electric Membership Corporation (EnergyUnited) to transfer into NC-RETS from the Electric Reliability Council of Texas, Inc. (ERCOT) REC tracking system 150,000 RECS. The energy associated with the ERCOT RECs was produced by a Texas wind turbine facility in 2009, and the RECs were retired for the benefit of EnergyUnited in June 2009, prior to the operation of NC-RETS. • On June 7, 2011, and July 6, 2011, in Docket Nos. E-100, Sub 130, et al., the Commission issued Orders revoking the registrations of a total of twenty (20) renewable energy facilities for failure to file annual certifications required by Commission Rule R8-66(b). • On August 26, 2011, in Docket No. E-7, Sub 992, the Commission issued an Order approving a request by Duke Energy Carolinas, LLC (Duke), to transfer into NC-RETS from the ERCOT REC tracking system 250,000 RECS. The energy associated with the ERCOT RECs was produced by a Texas wind turbine facility in 2008, and the RECs were retired for the benefit of Duke in 2008, prior to the operation of NC-RETS. Members of the public can access the NC-RETS web site at www.ncrets.org. The site’s “Resources” tab provides extensive information regarding REPS activities and NC-RETS account holders. NC-RETS also provides an electronic bulletin board where RECs can be offered for purchase. As of December 31, 2010: • NC-RETS had issued 4,285,506 renewable energy certificates and 252,607 energy efficiency certificates. These numbers could increase because renewable energy generators are allowed to enter historic production data for up to two years. 33 • 172 organizations, including electric power suppliers and owners of renewable energy facilities, had established accounts in NC-RETS. • Approximately 306 renewable energy facilities had been established as NC-RETS projects, enabling the issuance of RECs based on their energy production data. Pursuant to the MOA, APX has been working with other registries in the United States, such as ERCOT, to establish procedures whereby RECs that were issued in those registries may be transferred to NC-RETS. To date, such arrangements have been established with four (4) such registries. Lastly, the Commission has established an on-going NC-RETS stakeholder group, providing a forum for resolution of issues and discussion of system improvements. Environmental Impacts Pursuant to G.S. 62-133.8(j), the Commission was directed to consult with the North Carolina Department of Environment and Natural Resources (DENR) in preparing its report and to include any public comments received regarding direct, secondary, and cumulative environmental impacts of the implementation of the REPS requirements of Senate Bill 3. The Commission has not identified, nor has it received from the public or DENR, any comments regarding direct, secondary, and cumulative environmental impacts of the implementation of the REPS provision of Senate Bill 3. DENR stated that there continues to be interest in the development of renewable energy resources and the REPS appears to have spurred much of this interest. In addition, DENR specifically noted the development of three biomass projects in North Carolina, two of which involve swine waste. 34 ELECTRIC POWER SUPPLIER COMPLIANCE Pursuant to Senate Bill 3, electric power suppliers are required, beginning in 2012, to meet an increasing percentage of their retail customers’ energy needs by a combination of renewable energy resources and energy reductions from the implementation of energy efficiency and demand-side management measures. In addition, beginning in 2010 each electric power supplier was required to meet 0.02% of its 2009 retail electric sales “by a combination of new solar electric facilities and new metered solar thermal energy facilities that use one or more of the following applications: solar hot water, solar absorption cooling, solar dehumidification, solar thermally driven refrigeration, and solar industrial process heat.” G.S. 62-133.8(d). An electric power supplier is defined as “a public utility, an electric membership corporation, or a municipality that sells electric power to retail electric power customers in the State.” G.S. 62-133.8(a)(3). Described below are the REPS requirements for the various electric power suppliers and, to the extent reported to the Commission, the efforts of each toward REPS compliance. Monitoring of Compliance with REPS Requirement Monitoring of electric power supplier compliance with the REPS requirement of Senate Bill 3 is accomplished through annual filings with the Commission. The rules adopted by the Commission require each electric power supplier to file an annual REPS compliance plan and REPS compliance report to demonstrate reasonable plans for and actual compliance with the REPS requirement. Compliance plan Pursuant to Commission Rule R8-67(b), on or before September 1 of each year, each electric power supplier is required to file with the Commission an REPS compliance plan providing, for at least the current and following two calendar years, specific information regarding its plan for complying with the REPS requirement of Senate Bill 3. The information required to be filed includes, for example, forecasted retail sales, RECs earned or purchased, energy efficiency measures implemented and projected impacts, avoided costs, incremental costs, and a comparison of projected costs to the annual cost caps. Compliance report Pursuant to Commission Rule R8-67(c), each electric power supplier is required to annually file with the Commission an REPS compliance report. While an REPS compliance plan is a forward-looking forecast of an electric power supplier’s REPS requirement and its plan for meeting that requirement, an REPS 35 compliance report is an annual look back at the RECs earned or purchased and energy savings actually realized during the prior calendar year and the electric power supplier’s actual progress toward meeting its REPS requirement. Thus, as part of this annual REPS compliance report, each electric power supplier is required to provide specific information regarding its experience during the prior calendar year, including, for example, RECs actually earned or purchased, retail sales, avoided costs, compliance costs, status of compliance with its REPS requirement, and RECs to be carried forward to future REPS compliance years. An electric power supplier must file with its REPS compliance report any supporting documentation as well as the direct testimony and exhibits of expert witnesses. The Commission will schedule a hearing to consider the REPS compliance report filed by each electric power supplier. For each electric public utility, the Commission will consider the REPS compliance report and determine the extent of compliance with the REPS requirement at the same time as it considers cost recovery pursuant to the REPS incremental cost rider authorized in G.S. 62-133.8(h). Each EMC and municipally-owned electric utility, over which the Commission does not exercise ratemaking authority, is required to file its REPS compliance report on or before September 1 of each year. Cost Recovery Rider G.S. 62-133.8(h) authorizes each electric power supplier to establish an annual rider to recover the incremental costs incurred to comply with the REPS requirement and to fund certain research. The annual rider, however, may not exceed the following per-account annual charges: Customer Class 2008-2011 2012-2014 2015 and thereafter Residential per account $10.00 $12.00 $34.00 Commercial per account $50.00 $150.00 $150.00 Industrial per account $500.00 $1,000.00 $1,000.00 Commission Rule R8-67(e) establishes a procedure under which the Commission will consider approval of an REPS rider for each electric public utility. The REPS rider operates similar to the fuel charge adjustment rider authorized in G.S. 62-133.2. Each electric public utility is required to file its request for an REPS rider at the same time as it files the information required in its annual fuel charge adjustment proceeding, which varies for each utility. The test periods for both the REPS rider and the fuel charge adjustment rider are the same for each utility, as are the deadlines for publication of notice, intervention, and filing of testimony and exhibits. A hearing on the REPS rider will be scheduled to begin as soon as practicable after the hearing held by the Commission for the purpose of determining the utility’s fuel charge adjustment rider. The burden of proof as to whether the REPS costs were reasonable and prudently incurred shall be on the electric public utility. Like the fuel charge 36 adjustment rider, the REPS rider is subject to an annual true-up, with the difference between reasonable and prudently incurred incremental costs and the revenues that were actually realized during the test period under the REPS rider then in effect reflected in an REPS experience modification factor (REPS EMF) rider. Pursuant to G.S. 62-130(e), any over-collection under the REPS rider shall be refunded to a utility’s customers with interest through operation of the REPS EMF rider. Electric Public Utilities There are three electric public utilities operating in North Carolina subject to the jurisdiction of the Commission: Carolina Power & Light Company, doing business as Progress Energy Carolinas, Inc. (PEC); Duke Energy Carolinas, LLC (Duke); and Virginia Electric and Power Company, doing business in North Carolina as Dominion North Carolina Power (Dominion). REPS requirement G.S. 62-133.8(b) provides that each electric public utility in the State – Duke, PEC and Dominion – shall be subject to an REPS according to the following schedule: Calendar Year REPS Requirement 2012 3% of prior year’s North Carolina retail sales 2015 6% of prior year’s North Carolina retail sales 2018 10% of prior year’s North Carolina retail sales 2021 and thereafter 12.5% of prior year’s North Carolina retail sales An electric public utility may meet the REPS requirement by any one or more of the following: • Generate electric power at a new renewable energy facility. • Use a renewable energy resource to generate electric power at a generating facility other than the generation of electric power from waste heat derived from the combustion of fossil fuel. • Reduce energy consumption through the implementation of an energy efficiency measure; provided, however, an electric public utility subject to the provisions of this subsection may meet up to twenty-five percent (25%) of the requirements of this section through savings due to implementation of energy efficiency measures. Beginning in calendar year 2021 and each year thereafter, an electric public utility may meet up to forty percent (40%) of the requirements of this section through savings due to implementation of energy efficiency measures. 37 • Purchase electric power from a new renewable energy facility. Electric power purchased from a new renewable energy facility located outside the geographic boundaries of the State shall meet the requirements of this section if the electric power is delivered to a public utility that provides electric power to retail electric customers in the State; provided, however, the electric public utility shall not sell the renewable energy certificates created pursuant to this paragraph to another electric public utility. • Purchase renewable energy certificates derived from in-State or out-of-state new renewable energy facilities. Certificates derived from out-of-state new renewable energy facilities shall not be used to meet more than twenty-five percent (25%) of the requirements of this section, provided that this limitation shall not apply to Dominion. • Use electric power that is supplied by a new renewable energy facility or saved due to the implementation of an energy efficiency measure that exceeds the requirements of this section for any calendar year as a credit towards the requirements of this section in the following calendar year or sell the associated renewable energy certificates. • Reduce energy consumption through “electricity demand reduction,” which is a voluntary reduction in the demand of a retail customer achieved by two-way communications devices that are under the real time control of the customer and the electric public utility.6 Progress Energy Carolinas On September 1, 2011, PEC filed its 2011 REPS compliance plan in Docket No. E-100, Sub 128 as part of its 2011 Integrated Resource Plan (IRP). In its plan, PEC indicated that its overall compliance strategy is to meet the REPS requirements with the most cost-effective and reliable renewable energy resources available. PEC has agreed to provide REPS compliance services for the following wholesale customers, as allowed under G.S. 62-133.8(c)(2)(e): the towns of Black Creek, Lucama, Sharpsburg, Stantonsburg, and Waynesville. PEC has adopted a competitive bidding process for the purchase of energy or RECs from renewable energy facilities whereby market participants have an opportunity to propose projects on a continuous basis. Through this RFP, PEC has executed fifty (50) contracts for solar, hydro, biomass, landfill gas, and wind RECs. Also, PEC maintains an open RFP for 10 MW or less of non-solar renewable 6 Sec. 1 of Senate Bill 75, amended G.S. 62-133.8(a) by adding a definition of “electricity demand reduction,” and Sec. 2 amended G.S. 62-133.8(b)(2) by adding a new subsection (g) making electricity demand reduction a REPS resource, effective April 28, 2011. 38 resources. In June 2011 PEC issued solar and wind-specific RFPs. PEC stated that it does not currently own or operate new renewable energy facilities. A decision to engage in future direct or partial ownership will be based on cost-effectiveness and portfolio requirements. PEC engages in ongoing research regarding the use of alternative fuels meeting the definition of renewable energy resources at its existing generation facilities. However, introducing alternative fuels in traditional power plants must be proven technically feasible, reliable, and cost-effective prior to implementation. To the extent PEC determines the use of alternative fuels is appropriate and fits within the framework of Senate Bill 3, these measures would be included in future compliance plan filings. To meet the initial 0.02% solar set-aside requirement in 2010, PEC prioritized solar bids within its November 2007 renewable RFP and subsequent planning periods. ln addition to the renewable RFP, PEC has maintained a commercial solar photovoltaic (PV) program since July 2009 with a target of adding 5 MW of grid-tied solar PV per year and a standard offer to purchase commercial solar hot water RECs to promote development of this technology. On July 1, 2010, In Docket No. E-2, Sub 979, PEC filed for Commission approval of its Residential Service SunSense Solar Rebate Rider SSR-1 (SunSense). SunSense is an experimental solar PV rebate program aimed at adding 1 MW per year of distributed solar generation. Residential customers who install rooftop solar PV generating systems will receive a one-time participation payment of $1,000 per kW of installed capacity and monthly bill credits based on the RECs produced by their system. The solar RECs will be the property of PEC. SunSense is limited to 1,000 kW of installed capacity in a calendar year and will be available through December 2015. On November 15, 2010, the Commission issued an Order approving SunSense and granting the participants waivers from several reporting requirements of Commission Rule R8-66 to allow PEC to be the aggregator for information gathering and reporting to the Commission and NC-RETS. PEC initiated SunSense on January 1, 2011. In its 2011 REPS compliance plan, PEC stated that it is committed to taking all actions necessary to comply with the swine waste set-aside requirements. The state’s electric power suppliers issued a joint RFP for swine waste generation on February 15, 2010, and have engaged in negotiations with multiple parties in a joint effort to procure swine waste resources in the state. As a result of the RFP, PEC and other participants in the collaborative have executed two contracts for approximately 20,000 RECs per year once the facilities are fully operative. Although the collaborative continues to negotiate with other potential suppliers, PEC stated that it is doubtful that there will be sufficient energy derived from swine waste within the state to enable PEC to meet the 2012 swine waste set-aside requirement. 39 PEC is also participating in collective efforts to procure poultry waste derived energy. In April 2011, PEC executed a contract to purchase RECs and energy from a 36 MW poultry waste-to-energy facility. However, PEC cautions that issues similar to those stated for producing sufficient energy derived from swine waste make it uncertain whether PEC will be able to meet the 2012 poultry waste set-aside obligation. In particular, it is uncertain whether there will be sufficient poultry waste facilities in operation to enable PEC to meet the 2012 obligation. PEC also intends to comply with a portion of the REPS requirement by energy savings from PEC’s EE measures. PEC has received approval for a number of EE programs and has begun implementation. PEC forecasts that, with the allowed banking, its EE savings will exceed the limitation imposed in each year for REPS compliance under G.S. 62-133.8(b)(2)(c). Based on its current contracts, energy efficiency programs and banked RECs, PEC believes that it has procured sufficient resources to meet its general REPS obligation through 2013. On May 18, 2010, in Docket No. E-2, Sub 974, PEC filed its annual REPS compliance report for the calendar year 2009. On June 4, 2010, PEC filed an application in the same docket for approval of an REPS rider effective December 1, 2010. On November 17, 2010, the Commission issued an Order approving an REPS charge of $0.58 per month for residential customers, $2.90 per month for commercial customers, and $28.93 per month for industrial customers, each of which is below the incremental cost cap established in G.S. 62-133.8(h). These charges are effective December 1, 2010 through November 30, 2011. In addition, the Commission approved PEC’s 2009 REPS compliance report, with a brief discussion noting that the 24,930 EE RECs reported therein are subject to measurement and verification (M&V) based on the submission of further M&V data and the resolution of M&V issues pending in Docket No. E-100, Sub 113 with regard to reduced energy consumption. On June 3, 2011, PEC filed its 2010 REPS compliance report in Docket No. E-2, Sub 1000. Also on June 3, 2011, PEC filed an application in the same docket seeking to increase its REPS rider to $0.63 per month for residential customers, $7.61 per month for commercial customers, and $51.54 per month for industrial customers. In its 2010 REPS compliance report, PEC indicated that it acquired sufficient solar RECs to meet the 2010 requirement of 0.02% of its 2009 retail sales. In addition, PEC stated that counting banked RECs, EE projections, contracted future purchases, and the ability to use 25% out-of-state RECs each year, it expects to have sufficient RECs to achieve REPS compliance through 2014. A hearing was held on PEC’s 2010 REPS compliance report and 2011 REPS cost recovery rider on September 27, 2011. A final decision is pending before the Commission. 40 Duke Energy Carolinas On September 1, 2011, Duke filed its 2011 REPS compliance plan in Docket No. E-100, Sub 128 as part of its 2011 IRP. In its plan, Duke stated that it is pursuing REPS compliance by building a diverse portfolio of cost-effective renewable energy and energy efficiency resources. The key components of Duke’s plan include: (1) direct investment in renewable energy resources at existing or new Duke-owned assets; (2) partnership with third-party renewable resource suppliers through power purchase agreements; (3) purchases of unbundled RECs from both in-state and out-of-state suppliers; and (4) utilization of cost-effective EE savings. Duke believes that the implementation of these strategies will yield a balanced and prudent portfolio of qualifying resources and a flexible mechanism for REPS compliance. Duke has agreed to provide REPS compliance services for the following wholesale customers, as allowed under G.S. 62-133.8(c)(2)(e): Rutherford EMC; Blue Ridge EMC; the cities of Concord, Highlands, and Kings Mountain; and the towns of Dallas and Forest City. Duke stated that it is confident that it will meet its solar set-aside requirement under its 2011 REPS obligation, including for those wholesale customers for which it provides REPS compliance services. Duke has elected to pursue the following courses of action to acquire solar resources for compliance: (1) Duke-owned solar photovoltaic distributed generation program; (2) power purchase agreements for solar generation; and (3) purchase of in-state and out-of- state unbundled solar RECs, including RECs from solar thermal facilities. With respect to utility-owned solar resources, Duke received approval from the Commission in 2009 to build, own and operate up to 10 MW of solar photovoltaic projects on customer sites and/or utility-owned property. Duke began construction in the fourth quarter of 2009 and the program was fully implemented in the first quarter of 2011, with the exception of 50 kW. However, a fire at one of the rooftop installations in April 2011 caused Duke to shut down all the facilities in the program. Duke believes that it has determined the cause of the fire and will be able to institute safeguards to prevent such occurrences. Thus, it anticipates placing the facilities back into operation by the fourth quarter of 2011. ln 2008, Duke signed a twenty-year power purchase agreement with SunEdison for the purchase of all electricity generated from a 15.5 MW (AC) solar farm in Davidson County, North Carolina, which is fully operational. Duke has also entered into long-term agreements with FLS Energy and Vanir Energy to purchase solar RECs from water heating installations. As a result of this agreement, FLS and Vanir have installed solar water heating systems at residences, hotels, universities, and commercial sites across North Carolina. Lastly, having found out-of-state solar RECs to be cost-effective when compared to in-state resources, Duke has entered into agreements to procure out-of-state solar RECs up to the 25% out-of-state limitation of this resource. Based on all of its solar resources, Duke is confident that it will meet its solar set-aside obligation through 2013. 41 Duke’s primary strategy for compliance with the swine waste set-aside requirement is to jointly procure energy derived from swine waste resources with PEC and other electric power suppliers. Duke has entered into four long-term REC purchase agreements with developers of swine waste facilities in North Carolina. However, the production dates and projected production estimates for the facilities have materially changed and Duke now believes that compliance with the 2012 swine waste set-aside requirement is unlikely. Duke also has partnered with Duke University to fund a pilot-scale, on-farm, swine waste-to-energy development at Loyd Ray Farm in Booneville, North Carolina. This project is operational and could serve as a model for other hog farms seeking to manage waste while also developing on-farm renewable generation. Duke will receive all of the RECs generated from this project for a period of ten years. Duke noted that several regulatory and legislative developments during the last two years have materially impacted its efforts to meet the 2012 poultry set-aside requirement. In response, Duke issued an RFP in July 2011 to capitalize on the expanded definition of poultry resources, and has received many compelling proposals. In addition, Duke continues pursuing the purchase of poultry waste derived energy and/or unbundled RECs. To that end, Duke has continued to meet with potential suppliers; reviewed proposals from third-party developers; identified, contacted, and encouraged animal waste-to-energy developers in other states to develop projects in North Carolina; and initiated negotiation with all known, suppliers of resources that qualify for the poultry waste set-aside requirement. While Duke has not reached agreement with any particular supplier of resources that meet the energy derived from poultry waste requirement, it stated that it will continue to make all reasonable efforts to meet the poultry set-aside requirement in 2012. Aside from the solar, swine waste, and poultry waste set-aside requirements, Duke intends to meet the general REPS requirement beginning in 2012 with EE savings, hydroelectric power, biomass resources, and out-of-state wind RECs. Duke projects that, in concert with its customers, it will achieve more EE savings than can be utilized under REPS for the foreseeable future. Duke plans to use hydroelectric power from three sources to meet the general REPS requirement: (1) small Duke-owned hydroelectric stations; (2) wholesale customers’ SEPA allocation; and (3) small hydroelectric facilities that are not owned by Duke. Duke has purchased RECs from twenty-two (22) small hydroelectric power facilities in North and South Carolina which qualify as new renewable energy facilities. Duke stated that it is evaluating a variety of biomass proposals, including landfill gas, wood biomass combustion, biomass gasification, and biomass anaerobic digestion. As noted previously in this Report, the Commission issued an Order on October 11, 2010, in Docket No. E-7, Subs 339 and 340 accepting registration of Duke’s Buck and Lee Steam Stations as renewable energy facilities, and concluding that primary harvest wood products, including wood chips from whole 42 trees, are “biomass resources” and “renewable energy resources” under G.S. 62-133.8(a)(8). Thus, Duke also intends to self-supply a portion of its biomass portfolio through the co-firing and/or re-powering of Buck and Lee, and perhaps other existing coal stations, with renewable fuel. Lastly, Duke stated that it continues to investigate the procurement of wind resources for use in meeting the general REPS requirement, including out-of-state wind RECs, delivery of bundled land-based wind energy to its control area, and development of off-shore wind. Based on its current contracts, self-owned generation, EE programs and banked RECs, Duke stated that it has procured sufficient resources to meet its general REPS obligation through 2013. On March 10, 2011, in Docket No. E-7, Sub 984, Duke filed its 2010 REPS compliance report and an application for approval of an REPS rider to be effective September 1, 2011. A hearing was held on June 8, 2011, and on August 23, 2011 the Commission issued an Order approving an REPS charge of $0.49 per month for residential customers, $2.44 per month for commercial customers, and $26.97 per month for industrial customers, each of which is below the incremental cost cap established in G.S. 62-133.8(h). In addition, the Commission approved Duke’s 2010 REPS compliance report, including a finding that Duke acquired sufficient solar RECs to meet the 2010 requirement of 0.02% of its 2009 retail sales. Dominion North Carolina Power On July 9, 2010, Dominion filed its 2009 REPs compliance report. The report stated that Dominion had not produced or purchased any RECs in 2009, but intended to use unbundled solar RECs to meet its 2010 and 2011 solar set-aside requirements. On June 22, 2011, the Commission issued an Order requesting that the Public Staff file comments on Dominion’s 2009 compliance report by September 1, 2011. In particular, the Commission requested the Public Staff to assess whether Dominion is likely to meet its future REPS obligations without exceeding the cost caps established under G.S. 62-133.8(h). On August 30, 2011, the Public Staff filed comments concluding that Dominion will be able to meet its REPS obligations for the foreseeable future without exceeding the costs caps and that Dominion’s 2009 REPS compliance report should be approved by the Commission. On August 25, 2011, in Docket No. E-22, Sub 475, Dominion filed its 2010 REPS compliance report. Dominion has agreed to provide REPS compliance services for the Town of Windsor, as allowed under G.S. 62-133.8(c)(2)(e). Dominion stated that it met its 2010 REPS solar set-aside obligation by purchasing unbundled out-of-state solar RECs. For the Town of Windsor’s 43 obligation, at least 75% of the RECs purchased were in-state RECs, as required by G.S. 62-133.8(b)(2)(e). On September 1, 2010, in Docket No. E-22, Subs 463, 467, 468, and 469, Dominion filed four EE programs for approval by the Commission. Dominion projects EE savings of 4,720 MWh in 2011 and 6,119 MWh in 2012 from these programs. On February 22, 2011, the Commission issued Orders approving the four EE programs. On September 1, 2011, in Docket No. E-100, Sub 128, Dominion filed its 2011 REPS compliance plan as part of its 2011 IRP. In its plan, Dominion stated that it intends to meet its REPS requirements through the use of new renewable energy, EE, and unbundled RECs. Dominion plans to use unbundled solar RECs to meet its 2011 and beyond solar requirements and has entered into contracts to purchase sufficient RECs through 2013. As determined in the Commission’s September 22, 2009 Order, Dominion is exempt from the 25% limit on the use of out-of-state RECs for REPS compliance found in G.S. 62-133.8(b)(2)(e). Dominion stated that it had purchased solar RECs for REPS compliance from out-of-state to minimize compliance costs. In addition, Dominion is participating with other electric power suppliers to evaluate proposals from swine and poultry waste energy suppliers to meet the swine and poultry waste set-aside requirements. Dominion has entered into long term contracts with five companies for the purchase of swine waste-to-energy RECs. Dominion again elected not to file an application for an REPS rider in 2011. Electric Membership Corporations and Municipally-Owned Electric Utilities There are thirty-one (31) electric membership corporations (EMCs) serving customers in North Carolina, including twenty-six (26) that are headquartered in the state. Twenty-five of the EMCs are members of North Carolina Electric Membership Corporation (NCEMC), a generation and transmission (G&T) services cooperative that provides wholesale power and other services to its members. In addition, there are seventy-four (74) municipal and university-owned electric distribution systems serving customers in North Carolina. These systems are members of ElectriCities of North Carolina, Inc. (ElectriCities), an umbrella service organization. ElectriCities is a non-profit organization that provides many of the technical, administrative, and management services required by its municipally-owned electric utility members in North Carolina, South Carolina, and Virginia. ElectriCities is a service organization for its members, not a power supplier. Fifty-one of the North Carolina municipalities are participants in either NCEMPA or NCMPA1, municipal power agencies that provide wholesale power to their members. The remaining municipally-owned electric utilities generate 44 their own electric power or purchase electric power from wholesale electric suppliers. By Orders issued August 27, 2008, the Commission allowed twenty-three (23) EMCs to file their REPS compliance plans on an aggregated basis through GreenCo Solutions, Inc. (GreenCo),7 REPS requirement and the fifty-one (51) municipal members of the power agencies to file through NCEMPA and NCMPA1. On September 7, 2010, the Commission similarly allowed Tennessee Valley Authority to file annual REPS compliance plans and reports on behalf of its four wholesale customers that provide retail service to customers in North Carolina. G.S. 62-133.8(c) provides that each EMC or municipality that sells electric power to retail electric power customers in the State shall be subject to an REPS according to the following schedule: Calendar Year REPS Requirement 2012 3% of prior year’s North Carolina retail sales 2015 6% of prior year’s North Carolina retail sales 2018 and thereafter 10% of prior year’s North Carolina retail sales Compliance with the REPS requirement is slightly different for an EMC or municipality than for an electric public utility. An EMC or municipality may meet the REPS requirement by any one or more of the following: • Generate electric power at a new renewable energy facility. • Reduce energy consumption through the implementation of demand-side management or energy efficiency measures. • Purchase electric power from a renewable energy facility or a hydroelectric power facility, provided that no more than thirty percent (30%) of the requirements of this section may be met with hydroelectric power, including allocations made by the Southeastern Power Administration. • Purchase renewable energy certificates derived from in-State or out-of-state renewable energy facilities. An electric power supplier subject to the requirements of this subsection may use certificates derived from out-of-state renewable energy facilities to meet no more than twenty-five percent (25%) of the requirements of this section. 7 Effective May 1, 2010, Blue Ridge Electric Membership Corporation is no longer a member of GreenCo. 45 • Acquire all or part of its electric power through a wholesale purchase power agreement with a wholesale supplier of electric power whose portfolio of supply and demand options meet the requirements of this section. • Use electric power that is supplied by a new renewable energy facility or saved due to the implementation of demand-side management or energy efficiency measures that exceeds the requirements of this section for any calendar year as a credit towards the requirements of this section in the following calendar year or sell the associated renewable energy certificates. • Reduce energy consumption through “electricity demand reduction,” which is a voluntary reduction in the demand of a retail customer achieved by two-way communications devices that are under the real time control of the customer and electric power supplier.8 Electric membership corporations GreenCo On September 1, 2009, in Docket No. E -100, Sub 124, GreenCo filed its 2008 REPS compliance report for the twenty-three (23) EMC members that GreenCo served during 2008.9 8 Sec. 1 of Senate Bill 75, amended G.S. 62-133.8(a) by adding a definition of “electricity demand reduction,” and Sec. 2 amended G.S. 62-133.8(c)(2) by adding a new subsection (g) making electricity demand reduction a REPS resource, effective April 28, 2011. On May 11, 2010, the Commission established Docket No. EC-83, Sub 1 and issued an Order scheduling a hearing on GreenCo’s 2008 REPS report and directed GreenCo to file a copy of its 2008 REPS compliance report. The Commission held a hearing on August 24, 2010 and allowed the parties to file briefs and proposed orders by October 21, 2010. On May 3, 2011, the Commission issued an Order approving GreenCo’s 2008 REPs compliance report, with a brief discussion noting that the EE RECs reported therein are subject to measurement and verification (M&V) based on the submission of further M&V data and the resolution of M&V issues pending in Docket No. E-100, Sub 113 with regard to reduced energy consumption. 9 The following EMCs are members of GreenCo: Albemarle EMC, Brunswick EMC, Cape Hatteras EMC, Carteret-Craven EMC, Central EMC, Edgecombe-Martin County EMC, Four County EMC, French Broad EMC, Haywood EMC, Jones-Onslow EMC, Lumbee River EMC, Pee Dee EMC, Piedmont EMC, Pitt & Greene EMC
Object Description
Description
Title | Annual report of the North Carolina Utilities Commission to the Governor of North Carolina, the Environmental Review Commission and the Joint Legislative Utility Review Committee, regarding renewable energy and energy |
Other Title | Renewable energy and energy efficiency portfolio standard in North Carolina |
Date | 2011-09 |
Description | September 2011 |
Digital Characteristics-A | 2261 KB; 382 p. |
Digital Format | application/pdf |
Pres File Name-M | pubs_serial_arrenewableenergyefficiencyportfolio201109.pdf |
Pres Local File Path-M | \Preservation_content\StatePubs\pubs_borndigital\images_master\ |
Full Text | ANNUAL REPORT REGARDING RENEWABLE ENERGY AND ENERGY EFFICIENCY PORTFOLIO STANDARD IN NORTH CAROLINA REQUIRED PURSUANT TO G.S. 62-133.8(j) DATE DUE: OCTOBER 1, 2011 SUBMITTED: SEPTEMBER 30, 2011 RECEIVED BY THE GOVERNOR OF NORTH CAROLINA THE ENVIRONMENTAL REVIEW COMMISSION AND THE JOINT LEGISLATIVE COMMISSION ON GOVERNMENTAL OPERATIONS SUBMITTED BY THE NORTH CAROLINA UTILITIES COMMISSION i TABLE OF CONTENTS EXECUTIVE SUMMARY...................................................................................... 1 BACKGROUND.................................................................................................. 16 2011 LEGISLATION........................................................................................... 17 COMMISSION IMPLEMENTATION ................................................................... 18 Rulemaking Proceeding ............................................................................. 18 Renewable Energy Facilities ...................................................................... 25 North Carolina Renewable Energy Tracking System (NC-RETS) .............. 31 Environmental Impacts ............................................................................... 33 ELECTRIC POWER SUPPLIER COMPLIANCE................................................ 34 Monitoring of Compliance with REPS Requirement ................................... 34 Cost Recovery Rider .................................................................................. 35 Electric Public Utilities ................................................................................ 36 Electric Membership Corporations and Municipally-Owned Electric Utilities......... 43 RECOMMENDATIONS ...................................................................................... 55 CONCLUSIONS ................................................................................................. 55 ii APPENDICES 1. Docket No. E-100, Sub 113, In the Matter of Rulemaking Proceeding to Implement Session Law 2007-397 - Letter from Chairman Edward S. Finley, Jr., North Carolina Utilities Commission, to Secretary Dee Freeman, North Carolina Department of Environment and Natural Resources (June 1, 2011) - Letter from Robin W. Smith, Assistant Secretary for Environment, North Carolina Department of Environment and Natural Resources, to Chairman Edward S. Finley, Jr., North Carolina Utilities Commission (August 22, 2011) - Order Denying the Use of Thermal RECs to Satisfy Poultry Waste Set-Aside Requirement (October 8, 2010) - Order on Cost Recovery of Swine and Poultry Waste Energy by an Electric Public Utility (November 23, 2010) - Order Amending Rules R8-64 Through R8-69 and Adopting Final NC -RETS Operating Procedures (January 31, 2011) 2. Renewable Energy Facility Registrations - Order Accepting Registration of New Renewable Energy Facilities Fueled by Co-Firing Biomass, Including Primary Harvest Whole Trees, Docket No. E-7, Subs 939 and 940 (October 11, 2010) - Order Declaring Yard Waste, Municipal Solid Waste and the Percentage of Syngas Derived from Yard Waste and Municipal Solid Waste to be Renewable Energy Resources, Docket No. SP-100, Sub 28 (April 18, 2011) - Order Accepting Registration of a New Renewable Energy Facility Producing Electricity and Steam from Landfill Gas, Docket No. SP-100, Sub 9 (July 5, 2011) - Orders Accepting Registrations of New Renewable Energy Facilities Producing Solar Thermal Hot Water, Docket Nos. RET-4, Sub 5 and RET-8, Subs 12, 13 and 14 (August 15, 2011) iii 3. Miscellaneous Dockets - Order Extending Deadline for the Issuance of Historic RECS, Docket No. E-100, Subs 113 and 121 (December 10, 2010) - Order Granting Request to Transfer Renewable Energy Certificates, Docket No. EMP-17, Sub 1 (March 25, 2011) - Order Revoking Registrations of New Renewable Energy Facilities, Docket No. E-100, Sub 130 et al. (June 7, 2011 and July 6, 2011) - Order Granting Request to Transfer Renewable Energy Certificates, Docket No. E-7, Sub 992 (August 26, 2011) - Order Approving REPS and REPS EMF Riders, Docket No. E-2, Sub 974 (November 17, 2010) - Order Approving REPS and REPS EMF Riders, Docket No. E-7, Sub 984 (August 23, 2011) 1 EXECUTIVE SUMMARY In August 2007, North Carolina enacted comprehensive energy legislation, Session Law 2007-397 (Senate Bill 3), which, among other things, established a Renewable Energy and Energy Efficiency Portfolio Standard (REPS), the first renewable energy portfolio standard in the Southeast. Under the REPS, all electric power suppliers in North Carolina must meet an increasing amount of their retail customers’ energy needs by a combination of renewable energy resources (such as solar, wind, hydropower, geothermal and biomass) and reduced energy consumption. Pursuant to G.S. 62-133.8(j), the Commission is required to report by October 1 of each year to the Governor, the Environmental Review Commission, and the Joint Legislative Commission on Governmental Operations on the activities taken by the Commission to implement, and by electric power suppliers to comply with, the REPS requirement. 2011 Legislation During the 2011 Session of the General Assembly, the legislature enacted two amendments to Senate Bill 3. First, Session Law 2011-55 (Senate Bill 75) amended G.S. 62-133.8(a) by adding a new subdivision (3a) defining “electricity demand reduction” and adding G.S. 62-133.8(b)(2)(g) and (c)(2)(g) to include electricity demand reduction as a means by which an electric power supplier can meet its REPS obligation. Second, Session Law 2011-309 (Senate Bill 710) amended G.S. 62-133.8(f) by adding language that allows electric power suppliers to use renewable energy certificates (RECs) derived from the thermal energy of a combined heat and power facility that uses poultry waste as a fuel to meet the REPS poultry waste set-aside requirement. Commission Implementation Rulemaking proceeding Immediately after Senate Bill 3 was signed into law, the Commission initiated a proceeding in Docket No. E-100, Sub 113 to adopt rules to implement the REPS and other provisions of the new law. On February 29, 2008, the Commission issued an Order adopting final rules implementing Senate Bill 3. Since issuing this Order, the Commission has issued a number of orders interpreting various REPS provisions, including the following orders issued and other actions taken since October 1, 2010: 2 • On November 23, 2010, in Docket No. E-100, Sub 113, in response to a Joint Motion by numerous electric power suppliers, the Commission issued a Declaratory Order on cost recovery for the purchase of renewable energy by electric public utilities when the purchase of energy does not include the renewable energy certificates (RECS) associated with the production of the energy. The Commission held that an electric public utility can recover through its fuel cost rider the total delivered cost of the purchase of energy generated by a swine or poultry waste-to-energy facility where the RECS associated with the production of the energy are purchased by another North Carolina electric power supplier to comply with the REPS statewide swine and poultry waste set-aside requirements. • On January 31, 2011, in Docket No. E-100, Sub 113, the Commission issued an Order amending Commission Rule R8-64 through R8-69, and approving final Operating Procedures for the North Carolina Renewable Energy Tracking System (NC-RETS). In addition, on August 24, 2010, in Docket No. E-100, Sub 113, the Commission issued an Order requesting comments on measurement and verification (M&V) of the amounts of reduced energy consumption reported and used for REPS compliance, especially with regard to energy efficiency and demand-side management activities of electric membership corporations and municipal power suppliers. Numerous parties filed comments and reply comments. Also, on August 25, 2010, in Docket No. E-100, Sub 113, the Commission issued an Order requesting that the Public Staff convene a working group of technical experts and other interested stakeholders and make recommendations to the Commission regarding the appropriate assumptions and methodology for reasonably estimating the useful thermal energy produced by an unmetered solar thermal facility and the number of RECs earned by that facility. The Public Staff has facilitated several meetings of the working group and filed two reports on the working group’s recommendations. Renewable energy facilities Senate Bill 3 defines certain electric generating facilities as “renewable energy facilities” or “new renewable energy facilities.” RECs associated with electric or thermal power generated at such facilities may be used by electric power suppliers to comply with the REPS requirement as provided in G.S. 62-133.8(b) and (c). In its rulemaking proceeding, the Commission adopted rules providing for certification or report of proposed construction and registration of renewable energy facilities and new renewable energy facilities. As of July 27, 2011, the 3 Commission has accepted registration statements filed by 337 facilities. A list of these facilities may be found on the Commission’s website at www.ncuc.net. The Commission has issued a number of orders since October 1, 2010 addressing issues related to the registration of a facility, such as the definition of “renewable energy resource,” including the following: • On October 8, 2010, in Docket No. E-100, Sub 113, the Commission issued an order denying a request by Peregrine Biomass Development Company, LLC, to allow thermal RECs to be used to meet the swine and poultry waste set-aside requirements. • On October 11, 2010, in Docket Nos. E-7, Subs 939 and 940, the Commission accepted for registration as renewable energy facilities Duke Energy Carolinas’ Buck and Lee Steam Stations, and concluded that primary harvest wood products, including wood chips from whole trees, are “biomass resources” and “renewable energy resources” under G.S. 62-133.8(a)(8). • On April 18, 2011, in Docket No. SP-100, Sub 28, the Commission issued an Order on Request for Declaratory Ruling concluding that yard waste and the percentage of refuse-derived fuel (RDF) used by ReVenture Park Investments I, LLC (ReVenture), as fuel are renewable energy resources and that the percentage of synthesis gas (Syngas) produced from yard waste and RDF used by ReVenture as fuel is a renewable energy resource. • On July 5, 2011, in Docket Nos. SP-100, Sub 9 and SP-967, Sub 0, the Commission issued an Order accepting as a new renewable energy facility the planned addition by Raleigh Steam Producers, LLC, and Wake Gas Producers, LLC, of three electric generators to produce combined heat and power from landfill gas. • On August 15, 2011, in Docket Nos. RET-4, Sub 5 and RET-8, Subs 12, 13 and 14, the Commission issued Orders accepting registration of residential solar thermal water heating facilities on 1,129 homes at the U.S. Marine Corps Camp Lejeune in Jacksonville, North Carolina, allowing a representative sample of the homes to be metered to determine the number of Btus of thermal energy and metered solar thermal RECs that will be produced by the 1,129 systems. North Carolina Renewable Energy Tracking System (NC-RETS) Pursuant to G.S. 62-133.8(k), enacted in 2009, the Commission was required to develop, implement, and maintain an online REC tracking system no 4 later than July 1, 2010, in order to verify the compliance of electric power suppliers with the REPS requirements. On February 2, 2010, after evaluating the bids received in response to a request for proposals, the Commission signed a Memorandum of Agreement (MOA) with APX, Inc. (APX), to develop and administer an online REC tracking system for North Carolina, the North Carolina Renewable Energy Tracking System (NC-RETS). APX successfully launched NC-RETS on July 1, 2010, and by letter dated September 3, 2010, the Commission accepted the system and authorized APX to begin billing users pursuant to the MOA. RECS have been successfully created by and imported into NC-RETS, and the electric power suppliers have used the system to demonstrate compliance with the 2010 REPS solar set-aside requirement. Environmental impacts The Commission has not identified, nor has it received from the public or the North Carolina Department of Environment and Natural Resources (DENR), any comments regarding direct, secondary, and cumulative environmental impacts of the implementation of the REPS provisions of Senate Bill 3. DENR noted that there continues to be interest in the development of renewable energy resources and the REPS appears to have spurred much of this interest. Electric Power Supplier Compliance Pursuant to Senate Bill 3, electric power suppliers are required, beginning in 2012, to meet an increasing percentage of their retail customers’ energy needs by a combination of renewable energy resources and energy reductions from the implementation of energy efficiency and demand-side management measures. In addition, as of 2010, each electric power supplier must meet a certain percentage of its retail electric sales with solar RECs from certain solar facilities. Monitoring compliance with REPS requirement Monitoring by the Commission of compliance with the REPS requirement of Senate Bill 3 is accomplished through the annual filing by each electric power supplier of an REPS compliance plan and an REPS compliance report. Pursuant to Commission Rule R8-67(b), on or before September 1 of each year, each electric power supplier is required to file with the Commission an REPS compliance plan providing specific information regarding its plan for complying with the REPS requirement of Senate Bill 3. Pursuant to Commission Rule R8-67(c), each electric power supplier is required to annually file with the Commission an REPS compliance report. While an REPS compliance plan is a forward-looking forecast of an electric power supplier’s REPS requirement and its plan for meeting that requirement, an REPS compliance report is an annual look back at the RECs earned or purchased and energy savings actually realized 5 during the prior calendar year and the electric power supplier’s compliance in meeting its REPS requirement. Cost recovery rider G.S. 62-133.8(h) authorizes each electric power supplier to establish an annual rider up to an annual cap to recover the incremental costs incurred to comply with the REPS requirement and to fund certain research. Commission Rule R8-67(e) establishes a procedure under which the Commission will consider approval of an REPS rider for each electric public utility. The REPS rider operates in a manner similar to that employed in connection with the fuel charge adjustment rider authorized in G.S. 62-133.2 and is subject to an annual true-up. Electric public utilities Progress Energy Carolinas, Inc. In its 2011 REPS compliance plan, PEC stated that its overall compliance strategy is to meet the REPS requirement with the most cost-effective and reliable renewable energy resources available. PEC has adopted a competitive bidding process for the purchase of energy or RECs from renewable energy facilities whereby market participants have an opportunity to propose projects on a continuous basis. Through this RFP, PEC has executed fifty (50) contracts for solar, hydro, biomass, landfill gas, and wind RECs. In addition, PEC and other participants in a state-wide collaborative have executed two contracts for swine waste-to-energy RECs and continue to negotiate with other potential suppliers, PEC stated that it is committed to taking all actions necessary to comply with the swine and poultry waste set-aside requirements. However, PEC stated that it is doubtful that there will be sufficient energy derived from swine waste within the state to enable PEC to meet the 2012 swine waste set-aside requirement. Similarly, although PEC has executed one contract for poultry waste RECs, PEC cautions that it uncertain whether there will be sufficient poultry waste facilities in operation to enable PEC to meet the 2012 obligation. In its 2010 REPS compliance report, filed on June 3, 2011, in Docket No. E-2, Sub 1000, PEC indicated that it acquired sufficient solar RECs to meet the 2010 requirement of 0.02% of its 2009 retail sales. Further, PEC stated that counting banked RECs, energy efficiency projections, contracted future purchases, and the ability to use 25% out-of-state RECs each year, it expects to have sufficient RECs to achieve REPS compliance through 2014. On November 15, 2010, the Commission issued an Order approving PEC’s Residential Service SunSense Solar Rebate Rider SSR-1 (SunSense). SunSense is an experimental solar photovoltaic (PV) rebate program under which residential customers who install rooftop solar PV generating systems will receive a one-time participation payment of $1,000 per kW of installed capacity and monthly bill credits based on the RECs produced by their system. The solar 6 RECs will be the property of PEC. The Commission previously approved a similar SunSense PV program for commercial customers. PEC implemented the commercial PV program in July 2009 with a target of adding 5 MW of grid-tied solar PV per year and a standard offer to purchase commercial solar hot water RECs to promote development of this technology. On November 17, 2010, the Commission issued an Order in Docket No. E-2, Sub 974 approving an REPS charge of $0.58 per month for residential customers, $2.90 per month for commercial customers, and $28.93 per month for industrial customers, each of which is below the incremental cost cap established in G.S. 62-133.8(h). In addition, the Commission approved PEC’s 2009 REPS compliance report. A hearing was held on PEC’s 2010 REPS compliance report and 2011 REPS cost recovery rider on September 27, 2011. A final decision is pending before the Commission. Duke Energy Carolinas, LLC In its 2011 REPS compliance plan, Duke stated that it is building a diverse portfolio of cost-effective renewable energy and energy efficiency resources. Specifically, the key components of Duke’s plan include: (1) direct investment in renewable energy resources at existing or new Duke-owned facilities; (2) partnerships with third-party renewable resource suppliers through power purchase agreements; (3) purchases of unbundled RECs from both in-state and out-of-state suppliers; and (4) utilization of cost-effective energy efficiency savings. Duke believes that implementation of these strategies will yield a balanced and prudent portfolio of qualifying resources and a flexible mechanism for REPS compliance. Further, Duke stated that it is confident that it will meet its solar set-aside requirement under its 2011 REPS obligation by pursuing a number of strategies, including: (1) Duke-owned solar photovoltaic distributed generation program; (2) power purchase agreements for solar generation; and (3) purchase of in-state and out-of-state unbundled solar RECs, including RECs from solar thermal facilities. With regard to the swine and poultry waste set-aside requirement, Duke’s primary strategy is to jointly procure swine waste-to-energy resources with PEC and other electric power suppliers. Duke has entered into four long-term REC purchase agreements with developers of swine waste-to-energy facilities in North Carolina. However, the production dates and projected production estimates for the facilities have materially changed and Duke now believes that compliance with the 2012 swine waste set-aside requirement is unlikely. On March 10, 2011, in Docket No. E-7, Sub 984, Duke filed its 2010 REPS compliance report and an application for approval of an REPS rider. On August 23, 2011, the Commission issued an Order approving an REPS charge of $0.49 per month for residential customers, $2.44 per month for commercial customers, and $26.97 per month for industrial customers, each of which is below the incremental cost cap established in G.S. 62-133.8(h). In addition, the Commission approved Duke’s 2010 REPS compliance report, including a finding 7 that Duke acquired sufficient solar RECs to meet the 2010 requirement of 0.02% of its 2009 retail sales. Dominion North Carolina Power In its 2011 REPS compliance plan, Dominion stated that it intends to meet its REPS requirement through the use of new renewable energy, energy efficiency, and unbundled RECs. Dominion plans to use unbundled solar RECs to meet its 2011 and beyond solar requirements and has entered into contracts to purchase sufficient RECs through 2013. As determined in the Commission’s September 22, 2009 Order, Dominion is exempt from the 25% limit on the use of out-of-state RECs for REPS compliance found in G.S. 62-133.8(b)(2)(e). Dominion stated that it has purchased solar RECs for REPS compliance from out-of-state to minimize compliance costs. In addition, Dominion has entered into long term contracts with five companies for the purchase of swine waste-to-energy RECs. Dominion further noted that on February 22, 2011, the Commission issued Orders approving four Dominion energy efficiency programs. On July 9, 2010, Dominion filed its 2009 REPS compliance report. On June 22, 2011, the Commission issued an Order requesting that the Public Staff file comments on Dominion’s 2009 compliance report by September 1, 2011. In particular, the Commission requested the Public Staff to assess whether Dominion is likely to meet its future REPS obligations without exceeding the cost caps established under G.S. 62-133.8(h). On August 30, 2011, the Public Staff filed comments concluding that Dominion will be able to meet its REPS obligation for the foreseeable future without exceeding the cost caps and that Dominion’s 2009 REPS compliance report should be approved by the Commission. On August 25, 2011, Dominion filed its 2010 REPS compliance report. Dominion stated that it met its 2010 REPS solar set-aside obligation by purchasing unbundled out-of-state solar RECs. Dominion again elected not to file an application for an REPS rider in 2011. EMCs and municipally-owned electric utilities There are thirty-one (31) electric membership corporations (EMCs) serving customers in North Carolina, including twenty-six (26) that are headquartered in the state. Twenty-five of the EMCs are members of North Carolina Electric Membership Corporation (NCEMC), a generation and transmission (G&T) services cooperative that provides wholesale power and other services to its members. In addition, there are seventy-four (74) municipal and university-owned electric distribution systems serving customers in North Carolina. Fifty-one of the North Carolina municipalities are participants in either North Carolina Eastern Municipal Power Agency (NCEMPA), or North Carolina Municipal Power Agency Number 1 (NCMPA1), municipal power agencies that 8 provide wholesale power to their members. The remaining municipally-owned electric utilities purchase their electric power from wholesale electric suppliers. By Orders issued August 27, 2008, the Commission allowed twenty-three (23) EMCs to file their REPS compliance plans on an aggregated basis through GreenCo Solutions, Inc. (GreenCo),1 GreenCo and the fifty-one (51) municipal members of the power agencies to file through NCEMPA and NCMPA1. On May 3, 2011, the Commission issued an Order approving GreenCo’s 2008 REPs compliance report, with a brief discussion noting that the energy efficiency RECs reported therein are subject to measurement and verification (M&V) based on the submission of further M&V data and the resolution of M&V issues pending in Docket No. E-100, Sub 113 with regard to reduced energy consumption. On September 1, 2010, GreenCo filed its 2009 REPS compliance report stating that it had secured adequate resources to meet its members’ solar set-aside obligation for 2010. On January 24, 2011, the Commission held a public hearing on the 2010 Integrated Resource Plans (IRP) and REPS compliance reports filed by the public utilities and cooperatives. On August 30, 2011, the Public Staff filed comments on GreenCo’s 2009 REPS compliance report stating that it found no violations of the REPS statute or Commission’s rules in the report or the compliance efforts of GreenCo and recommending that the Commission approve the GreenCo report. On September 19, 2011, in Docket No. E-100, Sub 128, GreenCo filed its 2011 REPS compliance plan and 2010 REPS compliance report with the Commission on behalf of its member EMCs, as well as Mecklenburg Electric Cooperative and Broad River Electric Cooperative. GreenCo stated that it intends to use its members’ allocations from SEPA, RECs purchased from both in-State and out-of-state renewable energy facilities, and energy efficiency savings from eleven recently approved energy efficiency programs to meet its members’ REPS obligations. In addition, GreenCo is continuing to work with the collaborative of other electric power suppliers to meet the swine and poultry set-aside requirements. In its 2010 REPS compliance report, GreenCo stated that it secured adequate resources to meet the solar set-aside obligation for 2010, as well as the 2012 and 2013 solar requirement. Lastly, for 2010, the REPS incremental costs incurred by GreenCo’s members were significantly less than the costs allowed under the per-account cost cap in G.S. 62-133.8(h). 1 Effective May 1, 2010, Blue Ridge Electric Membership Corporation is no longer a member of GreenCo. 9 EnergyUnited Electric Membership Corporation On August 27, 2010, in response to an Order by the Commission, EnergyUnited Electric Membership Corporation (EnergyUnited) filed revised 2008 and 2009 REPS compliance reports together with its 2010 IRP. On August 30, 2011, the Public Staff filed comments on EnergyUnited’s 2008 and 2009 REPS compliance reports stating that it found no violations of the REPS statute or Commission’s rules in the reports or the compliance efforts of EnergyUnited and recommending that the Commission approve EnergyUnited’s reports. On August 30, 2011, EnergyUnited filed its 2011 IRP and REPS compliance plan and 2010 REPS compliance report. In its report, EnergyUnited stated that it met its 2010 solar set-aside requirement by purchasing solar RECs. In its 2011 compliance plan, EnergyUnited stated that it has purchased enough solar RECs to meet its 2011 obligation. Over the next two years, EnergyUnited plans to begin evaluating options to fulfill the remainder of its solar needs. In addition, EnergyUnited plans to use landfill gas generation along with RECs from SEPA and others to begin to meet its general REPS obligation in 2012 and beyond. Tennessee Valley Authority On November 12, 2010, Tennessee Valley Authority (TVA) filed an aggregated 2010 REPS compliance plan and 2009 REPS compliance report on behalf of its four wholesale customers serving retail customers in North Carolina: Blue Ridge Mountain Electric Membership Corporation, Mountain Electric Coop, Inc., Tri-State Electric Membership Corporation, and Murphy Power Board. TVA stated that its 2010 solar set-aside requirement was 116 MWh and its plan for meeting the requirement was to purchase solar RECs. For 2011, the solar set-aside requirement is projected to be 117 MWh and TVA’s plan for meeting the requirement is to generate the energy at its facilities and/or purchase solar RECs. For the general 2012 REPS goal of 3%, TVA projected its cooperatives’ requirement to be 18,000 MWh. In addition to the swine and solar set-aside portion, this requirement will be met by a combination of wind RECs, hydro generation, demand-side management and energy efficiency. On August 30, 2011, the Public Staff filed comments on TVA’s 2009 REPS compliance report. The Public Staff stated that TVA did not obtain any RECs for the four cooperatives to whom TVA sells electricity and did not impose any incremental costs on the cooperatives. The Public Staff recommended that the Commission approve TVA’s report. On August 31, 2011, TVA filed its 2011 REPS compliance plan and 2010 compliance report. TVA reiterated that it plans to meet its cooperatives’ solar set-aside obligation by generating solar energy at its facilities and facilities owned by 10 others, and/or purchasing solar RECs. For the general 2012 REPS goal of 3%, TVA will meet this requirement by a combination of wind RECs, hydro generation, demand-side management and energy efficiency. TVA met its cooperatives’ 2010 solar set-aside requirement by purchasing solar RECs. Halifax Electric Membership Corporation On October 15, 2010, Halifax Electric Membership Corporation (Halifax) filed its 2010 REPS compliance plan and 2009 REPS compliance report. Halifax’s 2010 REPS compliance plan stated that its 2010 solar set-aside requirement was 38,740 kWh and its plan for meeting the requirement was to purchase solar RECs. For 2011, Halifax’s solar set-aside requirement is projected to be 39,097 kWh, and Halifax’s plan for meeting the requirement is to generate the energy at its 98.56 kW solar PV facility to be completed in the later part of 2010 and/or purchase solar RECs. For the general 2012 REPS goal of 3%, Halifax projected its requirement to be 5.9 MWh. In addition to the swine and solar set-aside portion, this requirement will be met by a combination of SEPA energy entitlements, wind RECs, and energy efficiency. On May 3, 2011, the Commission issued an Order concluding that Halifax’s 2008 REPS compliance report did not comply with the requirements of G.S. 62-133.8 and Commission Rule R8-67, mainly because Halifax had allocated the costs of demand-side management (DSM) and energy efficiency (EE) programs that pre-dated Senate Bill 3 as incremental REPS compliance costs. The Commission held, among other things, that energy savings from existing EE programs can be counted toward the REPS requirement, but the costs of existing programs are not incremental costs under G.S. 62-133.8(h). The Commission ordered Halifax to file revised 2008 and 2009 REPS compliance reports consistent with the Commission’s Order by September 1, 2011. On August 29, 2011, Halifax filed updates to its 2008 and 2009 REPS compliance reports. Halifax’s revised reports included, among other information, adjustments to the cost of some energy efficiency programs and REC balances. On September 1, 2011, Halifax filed its 2011 REPS compliance plan and 2010 REPS compliance report. Halifax stated that it intends to meet its REPS requirement with a combination of SEPA energy entitlements, EE programs, solar energy production, solar and wind RECs and additional resources to be determined on an ongoing basis. Further, Halifax noted that it is a participant in the collaborative effort of electric power suppliers to meet the swine and poultry waste set-aside requirements. With regard to its 2010 solar set-aside obligation, Halifax met that requirement by generating solar energy on its 98.56 kW solar PV system and purchasing solar RECs. 11 North Carolina Eastern Municipal Power Agency On May 3, 2011, the Commission issued an Order concluding that NCEMPA’s 2008 REPS compliance report did not comply with the requirements of G.S. 62-133.8 and Commission Rule R8-67 for several reasons, including: (1) NCEMPA allocated the costs of DSM and EE programs that pre-dated Senate Bill 3 as incremental REPS compliance costs; (2) NCEMPA included net lost revenues as a cost of REPS compliance; and (3) NCEMPA relied on its wholesale power provider’s REPS compliance to satisfy a portion of NCEMPA’s REPS obligation. The Commission ordered NCEMPA to file revised 2008 and 2009 REPS compliance reports consistent with the Commission’s Order by September 1, 2011. On August 31, 2011, the Commission received the 2011 REPS compliance plan and 2010 REPS compliance report filed by NCEMPA on behalf of its members, along with revised 2008 and 2009 REPS compliance reports. In its 2011 REPS compliance plan, NCEMPA stated that its members will meet their REPS requirements by purchasing RECs, as well as utilizing SEPA allocations and EE and DSM savings. NCEMPA identified a number of demand-side management and energy efficiency programs that its members may implement to produce energy savings for REPS compliance. NCEMPA stated that it has entered into contracts to purchase various types of RECs and will continue to investigate the market for unbundled RECs as a cost-effective means of REPS compliance. NCEMPA reiterated that it is prohibited from purchasing power to meet the REPS set-aside requirement, including its solar set-aside requirement. However, it met its 2010 solar set-aside requirement by purchasing solar RECs. In addition, NCEMPA has executed contracts to purchase sufficient solar RECs to meet its requirements through 2013. In addition, NCEMPA is participating jointly with other electric power suppliers to meet the aggregate swine and poultry waste set-aside requirements beginning in 2012. Finally, NCEMPA estimates that its incremental costs for REPS compliance will be less than its per-account cost cap in 2011 through 2013. North Carolina Municipal Power Agency No. 1 On May 3, 2011, the Commission issued an Order concluding that NCMPA1’s 2008 REPS compliance report did not comply with the requirements of G.S. 62-133.8 and Commission Rule R8-67, mainly because NCMPA1 did not allocate the costs of acquiring RECs in 2008 to NCMPA1’s 2008 REPS costs. Rather, NCMPA1 asserted that it had no REPS obligation in 2008 and, therefore, should defer its allocation of the RECs costs until the RECs are retired for compliance with G.S. 62-133.8. The Commission disagreed, holding that NCMPA1’s obligation to meet the general 3% REPS target beginning in 2012 necessitated that NCMPA1 plan for compliance with its REPS obligation by purchasing and banking REPS in 2008 through 2011, and the cost of those 2008 RECs should be allocated in 2008. The Commission ordered NCMPA1 to file 12 revised 2008 and 2009 REPS compliance reports consistent with the Commission’s Order by September 1, 2011. On August 31, 2011, the Commission received the 2011 REPS compliance plan and 2010 REPS compliance report filed by NCMPA1 on behalf of its members, along with revised 2008 and 2009 REPS compliance reports. In its 2011 compliance plan, NCMPA1 stated that, in addition to the implementation of demand-side management and energy efficiency programs by its members, NCMPA1 intends to investigate and develop new renewable energy facilities; review proposals for renewable resources, including biomass, hydro, solar and wind; and negotiate and execute agreements for cost-effective resources. NCMPA1 intends to continue to investigate local, regional, and national markets for cost-effective RECs and may consider issuing an RFP for RECs. NCMPA1 and its members do not anticipate entering into any wholesale power purchase agreements that would meet the requirements of G.S. 62-133.8(c)(2)(e). NCMPA1 met its 2010 REPS solar set-aside requirement by a combination of purchases of energy from solar facilities and purchases of solar RECs. In addition, it has contracts for the acquisition of sufficient solar RECs to meet its requirements through 2012 and issued an RFP for additional solar resources in July 2011. Further, NCMPA1 intends to identify development opportunities for additional solar facilities to be located within its members’ service areas or at municipal customer locations and investigate various other regional supply-side options. NCMPA1 is participating jointly with other electric power suppliers to meet the swine and poultry waste set-aside requirement beginning in 2012. NCMPA1 has entered into agreements for the purchase of both in-state and out-of-state unbundled swine RECs sufficient to meet its REPS obligation in 2013 through 2017. However, because of delays in development of the swine waste-to-energy facilities the 2012 goal will not be met. NCMPA1 has entered into agreements to purchase combination biomass and poultry waste in-state RECs and poultry out-of-state RECs sufficient to meet the 2012 poultry set-aside requirement. NCMPA1 is pursuing the procurement of other poultry RECs to meet its 2013 requirement. Finally, NCMPA1 estimates that its incremental costs for REPS compliance will be less than its per-account cost cap in 2011 through 2013. Fayetteville Public Works Commission, Winterville and Oak City On October 15, 2010, Fayetteville Public Works Commission (FPWC) filed its 2009 REPS compliance report. The report stated that FPWC has engaged in several activities that resulted in FPWC’s receipt of RECs to be carried forward for use in complying with FPWC’s REPS obligations in 2010 and beyond. Examples discussed in the report include the distribution of free compact fluorescent light bulbs (CFLs) to FPWC’s customers in 2008 and 2009, the $martWorks pilot program that has yielded reductions in energy use by 100 customers, and FPWC’s 2009 Southeastern Power Administration (SEPA) allocation. In addition, FPWC noted that it completed work on its LEED-certified 13 customer service center in late November 2009, and anticipates that the energy savings at this facility will be significant in 2010 and later years. On October 13, 2010, the towns of Winterville and Oak City filed their 2009 REPS compliance reports. Winterville stated that in 2009 it earned a total of 33 RECs by operation of the town’s CFL and energy savings kit programs. These RECs will be carried forward for use in meeting Winterville’s future REPS obligations. Oak City’s report stated that the town did not purchase or produce any RECs in 2009. In a corresponding 2010 REPS compliance plan filed on October 13, 2010, Oak City stated that it is studying various REPS compliance strategies and expects that the town’s primary strategy will involve energy efficiency programs. On August 30, 2011, the Public Staff filed comments on the 2009 REPS compliance reports of Winterville, Oak City and FPWC. The Public Staff recommended that the Commission approve the Winterville and Oak City reports as filed. With regard to FPWC’s report, the Public Staff noted FPWC’s request to rely on REPS compliance by its wholesale power supplier, Progress Energy Carolinas, and FPWC’s inclusion of lost retail sales in its REPS costs were inconsistent with Commission decisions, noting that after FPWC filed its 2009 report the Commission decided in Docket E-48, Sub 6 that as a general rule neither a cooperative or municipal electric supplier can rely on its wholesale provider’s REPS compliance, and that it is not acceptable for a cooperative or municipal supplier to include lost retail revenues as a cost of REPS compliance. After noting two additional exceptions, the Public Staff recommended that the Commission approve FPWC’s 2009 compliance report. On August 31, 2011, Winterville filed its 2011 REPS compliance plan and 2010 REPS compliance report. Winterville stated that it continues to implement existing energy efficiency programs and investigate the potential for implementing new programs. In addition, the town plans to purchase solar RECs to meet its 2011 through 2013 solar set-aside requirement. Winterville’s 2010 REPS compliance report stated that it met its 2010 solar set-aside obligation by purchasing solar RECs. On September 1, FPWC and Winterville filed their 2011 REPS compliance plans and 2010 REPS compliance reports. FPWC’s 2011 compliance plan stated it has continued several efforts resulting in FPWC’s receipt of RECs to be carried forward for use in complying with FPWC’s REPS obligations in 2011 and beyond. Examples include the $martWorks pilot program that has yielded reductions in energy use by customers, and FPWC’s SEPA allocations. In addition, FPWC noted the energy savings produced by its LEED-certified customer service center, as well as plans to implement building modification programs expected to yield energy efficiency RECs in 2011 and later years. FPWC is participating 14 jointly with other electric power suppliers to meet the aggregate swine and poultry waste set-aside requirements beginning in 2012. In addition, FPWC plans to purchase sufficient solar RECs to meet its requirements through 2012. For 2013, FPWC intends to facilitate the development of a solar facility that will provide a portion of its RECs and purchase the remaining portion on the open market. In its 2010 REPS compliance report, FPWC stated that it met its 2010 solar set-aside requirement by purchasing solar RECs. In its 2011 REPS compliance plan, Winterville stated that it continues to implement existing energy efficiency programs and investigate the potential for implementing new programs. Winterville stated that it has earned RECs by operation of the town’s energy savings programs and these will be carried forward for use in meeting Winterville’s future REPS obligations. In addition, the town plans to purchase solar RECs to meet its 2011 through 2013 solar set-aside requirement. Winterville’s compliance report stated that it met its 2010 solar set-aside obligation by purchasing solar RECs. On September 2, 2011, Oak City filed its 2011 REPS compliance plan and 2010 REPS compliance report. Oak City’s compliance plan stated that it will continue to consider energy efficiency options, but will need to purchase RECs to meet its requirements during the next few years. Oak City’s compliance report stated that it acquired one REC to meet the 2010 solar set-aside requirement. Town of Fountain The Town of Fountain did not file a REPS compliance report for 2008 or 2009 or a REPS compliance plan in 2008, 2009 or 2010. On June 22, 2011, the Commission issued an Order requiring Fountain to file its 2008, 2009 and 2010 REPS compliance reports, as well as its 2010 and 2011 REPS compliance plans by September 1, 2011. On September 20, 2011, the Commission received a letter from Fountain’s attorney stating that the Town had assumed that REPS reports on its behalf were being filed by the Town’s electric supplier, Pitt-Greene EMC. However, the Town recently learned that this was not the case. The letter stated that the Town is working on the REPS reports and will submit them no later than December 31, 2011. Wholesale Providers Meeting REPS Requirements PEC, as the wholesale provider, has agreed to meet the REPS requirements for the towns of Black Creek, Lucama, Stantonsburg, and Waynesville. Similarly, Duke has agreed to meet the REPS requirements for Blue Ridge EMC, Rutherford EMC, the towns of Dallas and Forest City, and the cities of Concord, Highlands and Kings Mountain, and Dominion has agreed to meet the REPS requirements for the Town of Windsor. The towns of Macclesfield, Pinetops, and Walstonburg have previously filed letters stating that the City of Wilson, as their wholesale provider, has agreed to include their loads with its own 15 for reporting to NCEMPA for REPS compliance. Halifax has agreed to meet the REPS requirement for the Town of Enfield. Recommendation The Commission recommends that G.S. 62-300 be amended to add a $25.00 filing fee for applications for registration of renewable energy facilities. The Commission has received more than 1,300 reports of proposed construction and registration applications since the implementation of Senate Bill 3. A reasonable fee for registration applications will help defray the cost of processing the applications and issuing orders of registration. Conclusions All of the electric power suppliers except for the Town of Fountain appear to have met the 2010 solar set-aside requirement of Senate Bill 3. However, as stated in the 2010 Report and as highlighted again in this report, numerous issues continue to arise in the implementation of Senate Bill 3 that have required interpretation by the Commission of the statutory language: e.g., the definition of biomass, the electric power suppliers’ obligations under the set-aside provisions, the eligibility of renewable energy facilities and resources to meet the set-aside provisions, etc. If the plain language of the statute was ambiguous, the Commission attempted to discern the intent of the General Assembly in reaching its decision on the proper interpretation of the statute. 16 BACKGROUND In August 2007, North Carolina enacted comprehensive energy legislation, Session Law 2007-397 (Senate Bill 3), which, among other things, established a Renewable Energy and Energy Efficiency Portfolio Standard (REPS), the first renewable energy portfolio standard in the Southeast. Under the REPS, all electric power suppliers in North Carolina must meet an increasing amount of their retail customers’ energy needs by a combination of renewable energy resources (such as solar, wind, hydropower, geothermal and biomass) and reduced energy consumption. Beginning at 3% of retail electricity sales in 2012, the REPS requirement ultimately increases to 10% of retail sales beginning in 2018 for the State’s electric membership corporations and municipally-owned electric providers and 12.5% of retail sales beginning in 2021 for the State’s electric public utilities. In G.S. 62-133.8(j), the General Assembly required the Commission to make the following annual report: No later than October 1 of each year, the Commission shall submit a report on the activities taken by the Commission to implement, and by electric power suppliers to comply with, the requirements of this section to the Governor, the Environmental Review Commission, and the Joint Legislative Commission on Governmental Operations. The report shall include any public comments received regarding direct, secondary, and cumulative environmental impacts of the implementation of the requirements of this section. In developing the report, the Commission shall consult with the Department of Environment and Natural Resources.2 On October 1, 2008, the Commission made its first annual report pursuant to G.S. 62-133.8(j),3 and last year, on October 1, 2010, the Commission made its third annual report.4 2 G.S. 62-133.8(j) was amended by Session Law 2011-291 to require that the annual REPS Report be submitted to the Joint Legislative Commission on Governmental Operations, rather than the Joint Legislative Utility Review Committee. The remaining sections of this report detail, as required by the General Assembly, developments related to Senate Bill 3, activities undertaken by the Commission during the past year to implement Senate Bill 3, and actions by the electric power suppliers to comply with G.S. 62-133.8, the REPS provisions of Senate Bill 3. 3 Annual Report of the North Carolina Utilities Commission to the Governor of North Carolina, the Environmental Review Commission and the Joint Legislative Utility Review Committee Regarding Energy and Energy Efficiency Portfolio Standard, October 1, 2008 (2008 REPS Report). 4 Annual Report of the North Carolina Utilities Commission to the Governor of North Carolina, the Environmental Review Commission and the Joint Legislative Utility Review Committee Regarding Energy and Energy Efficiency Portfolio Standard, October 1, 2010 (2010 REPS Report). 17 2011 LEGISLATION During the 2011 Session of the General Assembly, the legislature enacted two amendments to Senate Bill 3. First, Session Law 2011-55 (Senate Bill 75) was ratified by the General Assembly on April 21, 2011, and signed by the Governor on April 28, 2011. It was effective on April 28, 2011. In Sec. 1, Senate Bill 75 amended G.S. 62-133.8(a) by adding a new subdivision (3a), which states: “Electricity demand reduction” means a measurable reduction in the electricity demand of a retail electric customer that is voluntary, under the real-time control of both the electric power supplier and the retail electric customer, and measured in real time, using two-way communications devices that communicate on the basis of standards. In Secs. 2 and 3, Senate Bill 75 amended G.S. 62-133.8(b)(2) and (c)(2), respectively, by adding new subdivisions (g) to state that electricity demand reduction is a means by which electric public utilities, electric membership corporations and municipalities can meet their REPS requirements. Second, Session Law 2011-309 (Senate Bill 710) was ratified by the General Assembly on June 18, 2011, and signed by the Governor on June 27, 2011. It was effective on June 27, 2011. Section 1 of Senate Bill 710 made several findings regarding the need to allow the use of renewable energy certificates (RECs) derived from the thermal energy of a combined heat and power facility that uses poultry waste as a fuel to meet the REPS poultry waste set-aside requirement. Among the reasons cited in Sec. 1 are the difficulty that electric power suppliers have experienced in procuring electricity derived from poultry waste at a reasonable cost, the benefit of diversifying the State’s viable options for generating electricity from renewable energy resources, and the benefits derived by improving the State’s air quality. Section 2 of Senate Bill 710 amended G.S. 62-133.8(f) by adding the phrase “or an equivalent amount of energy,” as follows (in pertinent part): For calendar year 2014 and for each calendar year thereafter, at least 900,000 megawatt hours of the total electric power sold to retail electric customers in the State or an equivalent amount of energy shall be supplied, or contracted for supply in each year, by poultry waste combined with wood shavings, straw, rice hulls, or other bedding material. This amendment to G.S. 62-133.8(f) was in response to the Commission’s decision in Docket No. E-100, Sub 113, as more fully discussed below, that thermal RECs could not be used to meet the poultry set-aside requirement. 18 COMMISSION IMPLEMENTATION Rulemaking Proceeding As detailed in the Commission’s 2008 REPS Report, after Senate Bill 3 was signed into law the Commission initiated a proceeding in Docket No. E-100, Sub 113 to adopt rules to implement the REPS and other provisions of the new law. On February 29, 2008, the Commission issued an Order adopting final rules implementing Senate Bill 3. The rules, in part, require each electric power supplier to file an annual REPS compliance plan and an annual REPS compliance report to demonstrate, respectively, reasonable plans for and actual compliance with the REPS requirement. In its 2010 REPS Report, the Commission noted that it had issued a number of orders interpreting various provisions of Senate Bill 3, in which it made the following conclusions: • Tennessee Valley Authority’s (TVA) distributors making retail sales in North Carolina and electric membership corporations (EMCs) headquartered outside of North Carolina that serve retail electric customers within the State must comply with the REPS requirement of Senate Bill 3, but that the university-owned electric suppliers, Western Carolina University and New River Light & Power Company, are not subject to the REPS requirement. • Each electric power supplier’s REPS obligation, both the set-aside requirements and the overall REPS requirements, should be based on its prior year’s actual North Carolina retail sales. • An electric public utility cannot use existing utility-owned hydroelectric generation for REPS compliance, but may use power generated from new small (10 MW or less) increments of utility-owned hydroelectric generating capacity. • The solar, swine waste, and poultry waste set-aside requirements should have priority over the general REPS requirement where both cannot be met without exceeding the per-account cost cap established in G.S. 62-133.8(h). • The set-aside requirements may be met through the generation of power, purchase of power, or purchase of unbundled RECs. 19 • The 25% limitation on the use of out-of-state RECs applies to the general REPS obligation and each of the individual set-aside provisions. • The electric power suppliers are charged with collectively meeting the aggregate swine and poultry waste set-aside requirements and may agree among themselves how to collectively satisfy those requirements. • RECs associated with the electric power generated at a biomass-fueled combined heat and power facility located in South Carolina and purchased by an electric public utility in North Carolina would be considered as in-State pursuant to G.S. 62-133.8(b)(2)(d), but that RECs associated with out-of-state renewable generation not delivered to and purchased by an electric public utility in North Carolina and RECs associated with out-of-state thermal energy would not be considered to be “in-State” RECs pursuant to G.S. 62-133.8(b)(2)(d). • Consistent with prior Commission decisions, only RECs associated with the percentage of electric generation that results from methane gas that was actually produced by poultry or swine waste may be credited toward meeting the poultry and swine waste set-aside requirements. Thus, not all of the methane gas produced by the anaerobic digestion of swine or poultry waste, as well as “other organic biodegradable material,” would qualify toward the set-aside requirements because the other material described as mixed with the poultry or swine waste is responsible for some percentage of the resulting methane gas. • In response to a joint motion filed by Progress Energy Carolinas, Inc. (PEC), Duke Energy Carolinas, LLC (Duke), Dominion North Carolina Power (Dominion), North Carolina Electric Membership Corporation (NCEMC), North Carolina Eastern Municipal Power Agency (NCEMPA), and North Carolina Municipal Power Agency Number 1 (NCMPA1) (jointly, the Electric Suppliers), in Docket No. E-100, Sub 113, the Commission concluded that issuance of a joint request for proposals (RFP) by the Electric Suppliers is a reasonable means for the Electric Suppliers to work together collectively to meet the swine waste resource set-aside requirement. • In response to a motion filed in Docket No. E-100, Sub 113 by PEC on behalf of Dominion, Duke, NCEMC, GreenCo Solutions, Inc., North Carolina Sustainable Energy Association, North Carolina Pork Council, Fibrowatt LLC, Green Energy Solutions NV, Inc., Attorney General and Public Staff, the Commission approved a Pro Rata Mechanism (PRM) as a reasonable and appropriate means for the State’s electric power 20 suppliers to meet the aggregate swine and poultry waste set-aside obligations of G.S. 62-133.8(e) and (f). The PRM provides that (1) the statewide aggregate swine and poultry waste set-aside requirements should be allocated among all of the electric power suppliers based upon the ratio of each electric power supplier’s prior year’s retail sales to the State’s total retail sales; (2) an electric power supplier shall be deemed to be in compliance with the swine or poultry waste set-aside requirement once it has satisfied its allocated share of the statewide aggregate requirement or has reached its incremental cost cap pursuant to G.S. 62-133.8(h); (3) no electric power supplier shall be obligated to satisfy more than its allocated share of the statewide aggregate swine or poultry waste set-aside requirement; and (4) electric power suppliers may jointly procure renewable energy resources in order to satisfy their individual allocated shares of the statewide aggregate swine or poultry waste set-aside requirements. In response to arguments by NCEMPA and NCMPA1, the Commission reiterated its earlier holding that the set-aside requirements, as demonstrated by the specificity of their express inclusion in the legislation, have priority over other methods of compliance with the general REPS percentage obligation where the general REPS percentage obligation cannot be met because of the incremental cost cap. • As it had earlier done with regard to the aggregate swine waste set-aside requirement, the Commission approved the joint procurement of RECS from energy produced by poultry waste, the sharing of poultry waste generation bids among electric suppliers, and other collaborative efforts proposed by PEC, Dominion, NCEMC, NCEMPA, NCMPA1, EnergyUnited Electric Membership Corporation, Halifax Electric Membership Corporation, GreenCo Solutions, Inc. and the Fayetteville Public Works Commission as a reasonable means for the State’s electric suppliers to work together to meet the poultry waste set-aside requirement. • The Commission found that the term “allocations made by the Southeastern Power Administration” (SEPA), is used as a term of art in G.S. 62-133.8(c)(2)(c). The Commission, therefore, concluded that a municipal electric power supplier or electric membership corporation (EMC) will be permitted to use the total annual amount of energy supplied by SEPA to that municipality or EMC to comply with its respective REPS requirement, subject to the thirty percent limitation provided in G.S. 62-133.8(c)(2)(c). Since October 1, 2010, the Commission has issued a number of additional orders interpreting various provisions of Senate Bill 3 and seeking additional information to aid the Commission in future interpretations, as described below. 21 Order Denying the Use of Thermal RECs to Satisfy Poultry Waste Set-Aside Requirement, Docket No. E-100, Sub 113 (October 8, 2010) On August 10, 2010, Peregrine Biomass Development Company, LLC (Peregrine), filed a Petition in Docket No. E-100, Sub 113 requesting that the Commission exercise its discretionary authority pursuant to G.S. 62-133.8(i)(2) (the off-ramp) to allow renewable energy certificates (RECs) associated with the thermal energy output of a combined heat and power (CHP) facility which uses poultry waste as a fuel to meet the poultry waste set-aside requirement under G.S. 62-133.8(f). Previously, in Docket No. SP-578, Sub 0, Green Energy Solutions NV, Inc. (GES), the owner of another CHP facility that uses, in part, poultry waste as fuel, filed a Motion for Clarification seeking an interpretation by the Commission that the statute allows the use of both RECs associated with electric power and thermal energy to meet the poultry waste set-aside requirement. In response to the Commission’s June 21, 2010 Order Requesting Comments, the Public Staff argued that thermal RECs may not be used to satisfy the poultry waste set-aside requirement: “under G.S. 62-133.8(f), RECs may satisfy the poultry waste set-aside only if they result from the actual generation of electric power from poultry waste.” The Public Staff further noted that the Commission may be able to determine that it is in the public interest to modify the poultry waste set-aside requirement to include thermal RECs if requested to do so under the off-ramp provision. On July 21, 2010, GES withdrew its Motion. By Order dated August 25, 2010, the Commission requested that the Public Staff and other interested parties file comments and reply comments on the relief requested by Peregrine in its Petition: whether the Commission should invoke the off-ramp provision to allow thermal RECs to be used to satisfy the poultry waste set-aside requirement. In addition, the Commission requested that the Public Staff and other interested parties address in their comments and reply comments the issue initially raised by GES in its Motion for Clarification: whether it is necessary to invoke the off-ramp to allow thermal RECs to be used to satisfy the poultry waste set-aside requirement. Comments and reply comments were filed in September, 2010. On October 8, 2010, the Commission issued an Order denying Peregrine’s request to allow RECs associated with the thermal heat output of a CHP facility that uses poultry waste as fuel to meet the poultry waste set-aside requirement. The Commission compared the language in G.S. 62-133.8(d), the solar set-aside statute, with the language in G.S. 62-133.8(f), the poultry waste set-aside statute. The Commission reasoned that the legislature’s inclusion of the phrases “or an equivalent amount of energy” and “new metered solar thermal energy facilities” in subsection (d), coupled with the lack of similar express language in subsection (f), demonstrated a clear legislative intent to allow solar thermal RECs to meet the solar set-aside requirement, but not to allow thermal 22 RECs to meet the poultry waste set-aside requirement. In addition, the Commission concluded that good cause had not been shown to invoke the Commission’s discretion to modify the poultry waste set-aside provision to delay the requirement, noting that the electric power suppliers had recently issued a joint RFP to acquire poultry waste derived energy and that it would be premature to invoke the REPS modification provision, given that compliance with the poultry waste set-aside provision is not required until 2012. Finally, the Commission suggested that Peregrine and parties supporting Peregrine’s position could seek an amendment to G.S. 62-133.8(f) by the General Assembly.5 Order on Cost Recovery of Swine and Poultry Waste Energy by an Electric Public Utility, Docket No. E-100, Sub 113 (November 23, 2010) On September 14, 2010, PEC, Duke, Dominion, NCEMC, NCEMPA, NCMPA1 and GreenCo Solutions, Inc. (collectively, Movants), filed a joint motion in Docket No. E-100, Sub 113 requesting a declaratory ruling that an electric public utility is entitled to recover through G.S. 62-133.2(a1)(6) the total delivered cost of all megawatt-hours purchased from renewable energy facilities and new renewable energy facilities using swine and poultry waste to generate electricity, regardless of whether the electric public utility purchases the renewable energy certificate (REC) associated with the purchased renewable energy. On September 16, 2010, the Commission issued an Order requesting comments and reply comments. Comments were filed by the Movants and the Public Staff, as well as other parties. On November 23, 2010, the Commission issued an Order holding that an electric public utility can recover through its fuel cost rider the total delivered cost of the purchase of energy generated by a swine or poultry waste-to-energy facility where the RECS associated with the production of the energy are purchased by another North Carolina electric power supplier to comply with the REPS statewide aggregate swine and poultry waste set-aside requirements. The Commission compared the provisions and interplay of G.S. 62-133.2, the fuel and fuel-related cost adjustment statute, with G.S. 62-133.8, the REPS statute. The Commission reasoned that neither of these statutes requires that the purchases of power and the associated RECs be bundled in order to recover the cost of the purchased electricity under G.S. 62-133.2(a1)(6) so long as the RECs were used by another electric power supplier to meet its set-aside requirement. Further, the Commission discussed its previous rulings approving mechanisms by the State’s electric power suppliers to aggregate purchases of swine and poultry energy and RECs in order to meet the set-aside requirements for those 5 As noted above under 2011 Legislation, in Senate Bill 710 the General Assembly amended G.S. 62-133.8(f) by adding the phrase “or an equivalent amount of energy” to allow thermal energy from a CHP facility fueled by poultry waste to now be eligible to meet the poultry waste set-aside requirement. 23 technologies, and the fact that such mechanisms could result in an electric public utility purchasing the electricity but not the RECs associated with swine or poultry waste-to-energy. In that regard, the Commission opined that the General Assembly did not intend for the electric public utility to be denied recovery of the full delivered cost of the purchased electricity under the utility’s fuel cost rider, or to be relegated to recovery of that cost by filing a general rate case. Order Amending Rules R8-64 Through R8-69 and Adopting Final NC-RETS Operating Procedures, Docket No. E-100, Subs 113 and 121 (January 31, 2011) On September 4, 2009, the Commission issued an Order in Docket No. E-100, Sub 113 allowing electric power suppliers and other interested parties an opportunity to propose specific amendments to the Commission’s procedural rules, Rules R8-64 through R8-69, that would streamline the Commission’s administration of G.S. 62-133.8 and 62-133.9. Numerous extensions of time were granted to the parties in an effort to reach consensus on the issues being discussed among the parties. Written comments were filed on March 1, 2010, and reply comments were filed on April 1, 2010. On January 27, 2010, the Commission issued an Order in Docket No. E-100, Subs 113 and 121 requesting comments on proposed amendments to Rule R8-67 regarding the participation of electric power suppliers and renewable energy facilities in the North Carolina Renewable Energy Tracking System (NC-RETS). Written comments were filed by several parties on March 9, 2010. On July 1, 2010, the Commission issued an Order in Docket No. E-100, Sub 121 adopting Interim Operating Procedures for the NC-RETS REC tracking system detailing the circumstances under which the NC-RETS Administrator is authorized to issue RECs. The Commission noted that proposed rule changes regarding implementation of Senate Bill 3 were pending and stated that it anticipated issuing an order regarding those rules and allowing parties to comment as to whether there are any conflicts or inconsistencies between the proposed revised rules and the Interim Operating Procedures for NC-RETS. The Commission further anticipated issuing final Operating Procedures for NC-RETS following receipt of comments on the proposed revised rules. By Order dated August 3, 2010, the Commission proposed amendments to Rules R8-64 through R8-69 based, in part, on the comments received and invited comments on the proposed amendments and the NC-RETS Interim Operating Procedures. In addition, to encourage renewable energy facilities to register promptly with NC-RETS and to have RECs issued as soon as possible following the production of the energy associated with the RECs, the Commission established that, beginning January 1, 2011, renewable energy facilities that participate in NC-RETS are only eligible for historic REC issuances 24 for energy production going back two years. Comments were filed with the Commission by several parties in October and November 2010. On January 31, 2011, the Commission issued an Order amending Rule R8-64 through R8-69, adopting final NC-RETS Operating Procedures and approving an application form for use by owners of renewable energy facilities in obtaining registration of a facility under Rule R8-66. The amendments to Rule R8-64 through R8-69 clarify and streamline the application procedures, registration, record keeping and other requirements for renewable energy facilities. Order Requesting Comments on Measurement and Verification of Reduced Energy Consumption, Docket No. E-100, Sub 113 (August 24, 2010) On August 24, 2010, the Commission issued an Order in Docket No. E-100, Sub 113 expressing concerns that the Commission’s current rules might prove inadequate to ensure the credibility of the reduced energy consumption amounts reported and used for REPS compliance, especially in regard to energy efficiency (EE) and/or demand-side management (DSM) activities of electric membership corporations and municipal power suppliers. The Commission requested comments on the following issues: (1) what kind of measurement and verification (M&V) documentation should be filed and/or made available for audit by each type electric power supplier that uses EE/DSM program achievements toward its general REPS compliance obligation; (2) whether and in what proceeding, if any, the Commission should review such M&V documentation in order to establish the savings from EE/DSM programs that may then be used by each electric power supplier to comply with REPS; (3) the appropriate method for determining the energy savings achieved by a DSM measure or program by an electric membership corporation or municipal power supplier; and (4) whether electric membership corporations should be required to include an M&V reporting plan in their EE/DSM program applications similar to the plans required of electric public utilities. Numerous parties filed comments and reply comments in October and November 2010. Order Convening Working Group on Unmetered Solar Thermal RECs, Docket No. E-100, Sub 113 (August 25, 2010) Pursuant to G.S. 62-133.8(a)(7), a renewable energy facility includes a solar thermal facility. As such, a solar thermal facility is eligible to earn RECs that may be sold to an electric power supplier for REPS compliance. However, pursuant to G.S. 62-133.8(a)(6), a REC is equal to one megawatt-hour of electricity or equivalent energy “supplied by” a renewable energy facility or new renewable energy facility. Therefore, the proper metric for determining the number of RECs earned by a solar thermal facility is the amount of thermal 25 energy actually used in heating water (or other solar thermal process) and not simply the system’s capacity for doing so. On August 25, 2010, the Commission issued an Order in Docket No. E-100, Sub 113 noting that solar industry developers were proposing to use a computer software model to calculate the number of thermal RECs generated by an unmetered solar thermal facility. The Commission expressed concern, however, that the software model may only estimate the capacity of the solar thermal facility to generate thermal energy and potentially overestimate the amount of thermal energy generated by the facility that was actually used in a solar thermal application. The Commission, therefore, requested that the Public Staff convene a working group of technical experts and other interested stakeholders to make recommendations to the Commission within three months regarding the appropriate assumptions and methodology for reasonably estimating the useful thermal energy produced by an unmetered solar thermal facility and the number of RECs earned by that facility. The Public Staff has facilitated several meetings of the working group and filed two reports on the working group’s recommendations. Renewable Energy Facilities Senate Bill 3 defines certain electric generating facilities as renewable energy facilities or new renewable energy facilities. RECs associated with electric or thermal power generated at such facilities may be used by electric power suppliers for compliance with the REPS requirement as provided in G.S. 62-133.8(b) and (c). In its rulemaking proceeding, the Commission adopted rules providing for a report of proposed construction, certification or registration of renewable energy facilities and new renewable energy facilities. Pursuant to G.S. 62-110.1(a), no person, including any electric power supplier, may begin construction of an electric generating facility in North Carolina without first obtaining from the Commission a certificate of public convenience and necessity (CPCN). Two exemptions from this certification requirement are provided in G.S. 62-110.1(g): (1) self-generation, and (2) nonutility-owned renewable generation under 2 megawatts (MW). Any person exempt from the certification requirement must, nevertheless, file a report of proposed construction with the Commission pursuant to Rule R8-65. To ensure that each renewable energy facility from which electric power or RECs are used for REPS compliance meets the particular requirements of Senate Bill 3, the Commission adopted Rule R8-66 to require that the owner, including an electric power supplier, of each renewable energy facility or new renewable energy facility register with the Commission if it intends for RECs it earns to be eligible for use by an electric power supplier for REPS compliance. This registration requirement applies to both in-State and out-of-state facilities. 26 As of July 27, 2011, the Commission has accepted registration statements filed by 337 facilities. As detailed in the 2010 REPS Report, the Commission has issued a number of orders addressing issues related to the registration of a facility, including the definition of “renewable energy resource,” as summarized below. • Accepted registration as a new renewable energy facility a 1.628 MW electric generating facility to be located near Clinton in Sampson County, North Carolina, and fueled by methane gas produced from anaerobic digestion of organic wastes from a Sampson County pork packaging facility and from a local swine farm. • Issued a declaratory ruling that (1) the percentage of refuse-derived fuel (RDF) that is determined by testing to be biomass, and the synthesis gas (Syngas) produced from that RDF is a “renewable energy resource” as defined in G.S. 62-133.8(a)(8); (2) the applicant’s delivery of Syngas from a co-located gasifier to an electric utility boiler would not make the company a “public utility” as defined in G.S. 62-3(23); and (3) the applicant’s construction of a co-located gasifier and the piping connection from the gasifier to an existing electric utility boiler would not require a certificate of public convenience and necessity under G.S. 62-110(a) or under G.S. 62-110.1(a). • Accepted registration as a new renewable energy facility a biomass-fueled 2.4 kW electric generating facility to be located at the applicant’s home in Wake County, North Carolina, and fueled by ethanol derived from 100% renewable organic materials. • Issued an Order amending existing certificates of public convenience and necessity for two electric generating facilities in Southport and Roxboro, North Carolina, that were being converted to burn a fuel mix of coal, wood waste, and tire-derived fuel (TDF). The Commission concluded that the portion of TDF derived from natural rubber, an organic material, meets the definition of biomass, and is eligible to earn RECs, but required the applicant to submit additional information to demonstrate the percentage of TDF that is derived from natural rubber. In addition, the Commission accepted registration of the two facilities as new renewable energy facilities. • Accepted registration as a new renewable energy facility a 1.628 MW combined heat and power (CHP) facility to be located in Darlington County, South Carolina, that will generate electricity using methane gas produced via anaerobic digestion of poultry litter from a chicken farm mixed with other organic, biodegradable materials, and use the waste heat from the electric generators to provide temperature control for the 27 methane-producing anaerobic digester as well as the chicken houses. The Commission concluded that the thermal energy that is used as an input back into the anaerobic digestion process effectively increases the efficiency of the electric production from the facility; is not used to directly produce electricity or useful, measureable thermal or mechanical energy at a retail electric customer’s facility pursuant to G.S. 62-133.8(a)(1); and is not eligible for RECs. However, the thermal energy that is used to heat the chicken houses is eligible to earn RECs. In a prior order, the Commission had clarified that only that portion of the energy generated from the biogas that is derived from poultry waste is eligible to earn RECs that may be used to meet the REPS poultry waste set-aside requirement. • Issued a declaratory ruling that (1) biosolids, the organic material remaining after treatment of domestic sewage and combusted at the applicant’s wastewater treatment plant, are a “renewable energy resource” as defined by G.S. 62-133.8(a)(8); and (2) the applicant, a county water and sewer authority organized in 1992 pursuant to the North Carolina Water and Sewer Authorities Act, is specifically exempt from regulation as a public utility pursuant to G.S. 62-3(23)(d). • Accepted for registration as a new renewable energy facility a solar thermal hot water heating facility located in Mecklenburg County, North Carolina, used to heat two commercial swimming pools. The Commission concluded, however, that as an unmetered solar thermal facility, RECs earned based on the capacity of the solar panels are not eligible to meet the solar set-aside requirement of G.S. 62-133.8(d). However, the Commission allowed the applicant to earn general thermal RECs based upon an engineering analysis of the energy from the unmetered solar thermal system actually required to heat the pools, which was determined to be substantially less than the capacity of the solar thermal panels. Since October 1, 2010, the Commission has issued a number of additional orders interpreting provisions of Senate Bill 3 regarding applications for registration of renewable energy facilities, as described below. Order Accepting Registration of New Renewable Energy Facilities Fueled by Co-Firing Biomass, Including Primary Harvest Whole Trees, Docket No. E-7, Subs 939 and 940 (October 11, 2010) On March 1, 2010, Duke Energy Carolinas, LLC (Duke), filed applications in Docket Nos. E-7, Sub 939 and Sub 940 to register Buck Steam Station, Units 5 and 6, and Lee Steam Station, Units 1, 2 and 3, respectively, as new renewable energy facilities pursuant to G.S. 62-133.8 and Commission Rule R8-66. In its registration applications, Duke stated that biomass co-firing test burns were conducted at each 28 facility using sawdust and/or whole tree wood chips. Several environmental groups intervened and requested that the Commission deny or stay Duke’s registrations, arguing that the whole tree wood biomass Duke sought to register is not wood waste and is not a renewable energy resource under Senate Bill 3. By Order dated April 27, 2010, the Commission consolidated these two dockets and scheduled an evidentiary hearing and oral argument to consider the contested factual and legal issues. The evidentiary hearing and oral arguments convened, as scheduled, on July 14, 2010. Proposed orders and briefs were filed on September 15, 2010. On October 11, 2010, the Commission issued an Order accepting for registration as renewable energy facilities Duke’s Buck and Lee Steam Stations, concluding that primary harvest wood products, including wood chips from whole trees, are “biomass resources” and “renewable energy resources” under G.S. 62-133.8(a)(8). The Commission reasoned that the General Assembly, by including several specific examples of biomass in the statute, did not intend to limit the scope of the term to those examples. Rather, the term “biomass” encompasses a broad category of resources and should not be limited absent express intent to do so. As further support for this interpretation, the Commission noted that the General Assembly expressly excluded peat, a form of biomass, from the definition of “renewable energy resource,” and could have done likewise for whole trees if it had intended that they be excluded from the definition of “renewable energy resource.” Finally, the Commission stated that it was satisfied from Duke’s testimony that Duke will use primary harvest wood products in an economic and sustainable manner. The Environmental Defense Fund and North Carolina Sustainable Energy Association appealed the Commission’s Order to the North Carolina Court of Appeals. On August 2, 2011, the Court of Appeals issued a decision affirming the Commission’s Order. The Court held that the Commission had properly applied the principles of statutory construction in holding that the General Assembly’s inclusion of several examples of biomass in the statute was not intended to limit the scope of the terms “biomass” or “renewable energy resource” to those examples. Order Declaring Yard Waste, Municipal Solid Waste and the Percentage of Syngas Derived from Yard Waste and Municipal Solid Waste to be Renewable Energy Resources, Docket No. SP-100, Sub 28 (April 18, 2011) On March 15, 2011, ReVenture Park Investments I, LLC (ReVenture), filed a request for a declaratory ruling regarding a proposed 20-MW biomass-to-energy facility that it plans to develop on a 667-acre tract along the Catawba River that was an industrial site. ReVenture requested that the Commission declare, among other points, that (1) yard waste, including leaves, brush, grass 29 clippings and tree limbs, is a renewable energy resource; (2) municipal solid waste (MSW) that is not recycled, including certain types of paper, cardboard, packaging materials and small wood items, is a type of refuse-derived fuel (RDF) that is a renewable energy resource; (3) the percentage of synthesis gas (Syngas) produced from yard waste and RDF, but not including that portion produced with certain non-renewable materials, is a renewable energy resource; and (4) the RECS attributable to ReVenture’s biomass generating facility will be entitled to triple credits because ReVenture’s facility qualifies as a cleanfields renewable energy demonstration park under Section 4 of Session Law 2010-195 (Senate Bill 886). On April 18, 2011, the Commission issued an Order declaring, among other things, that yard waste and the percentage of RDF used by ReVenture as fuel are renewable energy resources, and that the percentage of Syngas produced from yard waste and RDF used by ReVenture as fuel is a renewable energy resource. The Commission first noted that it previously rendered such a declaratory ruling with regard to RDF and Syngas in Docket No. SP-100, Sub 23, and could find no reason to reach a different conclusion in this docket. The Commission further opined that yard waste is an organic material having a constantly replenished supply, and is thus a renewable resource under G.S. 62-133.8(a)(8). In addition, the Commission concluded that if ReVenture’s facility is certified as a cleanfields renewable energy demonstration park under Senate Bill 886, then ReVenture will be entitled to triple credit for the RECs associated with the renewable energy produced by the facility. Finally, the Commission made rulings on several details regarding the triple crediting and retirement of RECs by ReVenture with NC-RETS. Order Accepting Registration of a New Renewable Energy Facility Producing Electricity and Steam from Landfill Gas, Docket No. SP-100, Sub 9 (July 5, 2011) On January 7, 2011, Raleigh Steam Producers, LLC (RSP), and Wake Gas Producers, LLC (WGP) (collectively, Petitioners), filed a Petition for Supplemental Declaratory Rulings in Docket No. SP-100, Sub 9. Concurrently, in Docket No. SP-967, Sub 0, RSP filed a report of proposed construction and a registration statement for a new renewable energy facility to be located in northern Wake County. RSP currently operates two boilers providing steam to Covidien-Mallinckrodt (Mallinckrodt) at its industrial plant. The larger of the two boilers is fired primarily by landfill gas collected by WGP at the North Wake County Landfill. WGP sells the landfill gas to RSP. RSP described the new facility as a 2.8-MW landfill gas-fueled new renewable combined heat and power (CHP) facility to be built in two stages. RSP stated that the first phase of construction, consisting of a 750-kW low pressure dual steam generator using steam from an existing boiler to produce electricity and process steam, is expected to become operational in late 2011. Subsequent 30 additions will include a new boiler and 790-kW turbine generator and a 1.6 MW landfill gas-fueled engine/generator set with heat recovery equipment. Both boilers will be fired primarily by approximately 90% landfill gas and 10% natural gas. Petitioners requested a declaratory ruling, among other things, that the facility will not be a “public utility” under G.S. 62-3(23(a), will be eligible for registration as a new CHP facility and will earn RECs for all of the waste steam produced by the turbine generators that is returned to a boiler for use in generating additional electric power. By Order dated July 5, 2011, the Commission accepted registration of the facility as a new renewable CHP facility and concluded that the proposed changes in the Petitioners’ operations will not cause either of them to become a public utility. With regard to the electricity, steam and thermal energy to be produced by the facility, the Commission concluded that the portion of electricity produced by landfill gas will be eligible to earn RECs, and the portion of waste steam produced from the electric turbines that is used as an input for Mallinckrodt’s manufacturing process will be eligible to earn thermal RECs. However, the Commission concluded that steam that bypasses the turbine generators and waste heat being used to pre-heat the feedwater for the boilers will not be used to directly produce electricity or useful, measureable thermal or mechanical energy at a retail electric customer’s facility pursuant to G.S. 62-133.8(a)(1), and, therefore, will not be eligible to earn RECs. Orders Accepting Registrations of New Renewable Energy Facilities Producing Solar Thermal Hot Water, Docket Nos. RET-4, Sub 5 and RET-8, Subs 12, 13 and 14 (August 15, 2011) On July 28, 2010, in Docket No. RET-4, Sub 5, FLS YK Farm, LLC (FLS), filed a registration statement for a new renewable energy facility being installed at the U.S. Marine Corps Camp Lejeune in Jacksonville, North Carolina, consisting of solar thermal hot water heaters on 108 residences. On February 11, 2011, in Docket No. RET-8, Subs 12, 13 and 14, FLS Owner II, LLC (FLS), filed registration statements for new renewable energy facilities being installed at Camp Lejeune, consisting of solar thermal hot water heaters on a total of 1,021 residences. FLS requested that it be allowed to install meters on a representative sample of the homes, rather than on each home, and assign to the unmetered homes the thermal heat measures recorded on the metered homes. On August 15, 2011, the Commission issued Orders accepting registration of residential solar thermal water heating facilities on the 1,129 homes with a representative sample of the homes being metered to determine the number of Btus of thermal energy that will be produced and on which RECs will be earned by the 1,129 systems. 31 North Carolina Renewable Energy Tracking System (NC-RETS) In its February 29, 2008 Order in Docket No. E-100, Sub 113, the Commission concluded that REPS compliance would be determined by tracking RECs associated with renewable energy and energy efficiency. In its Order, the Commission further concluded that a “third-party REC tracking system would be beneficial in assisting the Commission and stakeholders in tracking the creation, retirement and ownership of RECs for compliance with Senate Bill 3” and stated that “[t]he Commission will begin immediately to identify an appropriate REC tracking system for North Carolina.” Pursuant to G.S. 133.8(k), enacted in 2009, the Commission was required to develop, implement, and maintain an online REC tracking system no later than July 1, 2010, in order to verify the compliance of electric power suppliers with the REPS requirements. On September 4, 2008, the Commission issued an Order in Docket No. E-100, Sub 121 initiating a new proceeding to define the requirements for a third-party REC tracking system, or registry, and to select an administrator. The Commission established a stakeholder process to finalize a Requirements Document for the tracking system. After issuing a request for proposals and evaluating the bids received, the Commission signed a Memorandum of Agreement (MOA) with APX, Inc. (APX), on February 2, 2010, to develop and administer the North Carolina Renewable Energy Tracking System, NC-RETS. Pursuant to the MOA, on July 1, 2010, APX successfully launched NC-RETS. By letter dated September 3, 2010, the Commission informed APX that, to the best of its knowledge, NC-RETS has performed in substantial conformance with the MOA and has no material defects. The Commission, therefore, authorized APX to begin billing North Carolina electric power suppliers and other users the fees that were established in the MOA. Funding for NC-RETS is provided directly to APX by the electric power suppliers in North Carolina that are subject to the REPS requirements of Senate Bill 3 and recovered from the suppliers’ customers through the REPS incremental cost rider. Owners of renewable energy facilities and other NC-RETS users do not incur charges to open accounts, register projects, and create and transfer RECs, but will incur nominal fees to export RECs to other tracking systems or to retire RECs other than for REPS compliance. At the end of 2010, each electric power supplier was required to place the solar RECs that it acquired to meet its 2010 REPS solar set-aside obligation into a 2010 compliance account where the RECs are available for audit. When the Commission concludes its review of each electric power suppliers’ 2010 REPS compliance report, the associated RECs will be permanently retired. Since October 1, 2010, the Commission has issued several orders addressing issues pertaining to RECs credits, including the following: 32 • On December 10, 2010, in Docket No. E-100, Subs 113 and 121, the Commission issued an Order extending the deadline for the issuance of historic RECS from January 1, 2011 to June 1, 2011. As in previous orders, the Commission reiterated its purpose to encourage the issuance of RECs as soon as possible following the production of the energy associated with the RECs. The Commission further stated that the extension of the deadline for the issuance of historic RECS was intended to ensure that all renewable energy facilities have an adequate opportunity to obtain credit for eligible energy production that predated the Commission’s registration system and NC-RETS. • On March 25, 2011, in Docket No. EMP-17, Sub 1, the Commission issued an Order approving a request by EnergyUnited Electric Membership Corporation (EnergyUnited) to transfer into NC-RETS from the Electric Reliability Council of Texas, Inc. (ERCOT) REC tracking system 150,000 RECS. The energy associated with the ERCOT RECs was produced by a Texas wind turbine facility in 2009, and the RECs were retired for the benefit of EnergyUnited in June 2009, prior to the operation of NC-RETS. • On June 7, 2011, and July 6, 2011, in Docket Nos. E-100, Sub 130, et al., the Commission issued Orders revoking the registrations of a total of twenty (20) renewable energy facilities for failure to file annual certifications required by Commission Rule R8-66(b). • On August 26, 2011, in Docket No. E-7, Sub 992, the Commission issued an Order approving a request by Duke Energy Carolinas, LLC (Duke), to transfer into NC-RETS from the ERCOT REC tracking system 250,000 RECS. The energy associated with the ERCOT RECs was produced by a Texas wind turbine facility in 2008, and the RECs were retired for the benefit of Duke in 2008, prior to the operation of NC-RETS. Members of the public can access the NC-RETS web site at www.ncrets.org. The site’s “Resources” tab provides extensive information regarding REPS activities and NC-RETS account holders. NC-RETS also provides an electronic bulletin board where RECs can be offered for purchase. As of December 31, 2010: • NC-RETS had issued 4,285,506 renewable energy certificates and 252,607 energy efficiency certificates. These numbers could increase because renewable energy generators are allowed to enter historic production data for up to two years. 33 • 172 organizations, including electric power suppliers and owners of renewable energy facilities, had established accounts in NC-RETS. • Approximately 306 renewable energy facilities had been established as NC-RETS projects, enabling the issuance of RECs based on their energy production data. Pursuant to the MOA, APX has been working with other registries in the United States, such as ERCOT, to establish procedures whereby RECs that were issued in those registries may be transferred to NC-RETS. To date, such arrangements have been established with four (4) such registries. Lastly, the Commission has established an on-going NC-RETS stakeholder group, providing a forum for resolution of issues and discussion of system improvements. Environmental Impacts Pursuant to G.S. 62-133.8(j), the Commission was directed to consult with the North Carolina Department of Environment and Natural Resources (DENR) in preparing its report and to include any public comments received regarding direct, secondary, and cumulative environmental impacts of the implementation of the REPS requirements of Senate Bill 3. The Commission has not identified, nor has it received from the public or DENR, any comments regarding direct, secondary, and cumulative environmental impacts of the implementation of the REPS provision of Senate Bill 3. DENR stated that there continues to be interest in the development of renewable energy resources and the REPS appears to have spurred much of this interest. In addition, DENR specifically noted the development of three biomass projects in North Carolina, two of which involve swine waste. 34 ELECTRIC POWER SUPPLIER COMPLIANCE Pursuant to Senate Bill 3, electric power suppliers are required, beginning in 2012, to meet an increasing percentage of their retail customers’ energy needs by a combination of renewable energy resources and energy reductions from the implementation of energy efficiency and demand-side management measures. In addition, beginning in 2010 each electric power supplier was required to meet 0.02% of its 2009 retail electric sales “by a combination of new solar electric facilities and new metered solar thermal energy facilities that use one or more of the following applications: solar hot water, solar absorption cooling, solar dehumidification, solar thermally driven refrigeration, and solar industrial process heat.” G.S. 62-133.8(d). An electric power supplier is defined as “a public utility, an electric membership corporation, or a municipality that sells electric power to retail electric power customers in the State.” G.S. 62-133.8(a)(3). Described below are the REPS requirements for the various electric power suppliers and, to the extent reported to the Commission, the efforts of each toward REPS compliance. Monitoring of Compliance with REPS Requirement Monitoring of electric power supplier compliance with the REPS requirement of Senate Bill 3 is accomplished through annual filings with the Commission. The rules adopted by the Commission require each electric power supplier to file an annual REPS compliance plan and REPS compliance report to demonstrate reasonable plans for and actual compliance with the REPS requirement. Compliance plan Pursuant to Commission Rule R8-67(b), on or before September 1 of each year, each electric power supplier is required to file with the Commission an REPS compliance plan providing, for at least the current and following two calendar years, specific information regarding its plan for complying with the REPS requirement of Senate Bill 3. The information required to be filed includes, for example, forecasted retail sales, RECs earned or purchased, energy efficiency measures implemented and projected impacts, avoided costs, incremental costs, and a comparison of projected costs to the annual cost caps. Compliance report Pursuant to Commission Rule R8-67(c), each electric power supplier is required to annually file with the Commission an REPS compliance report. While an REPS compliance plan is a forward-looking forecast of an electric power supplier’s REPS requirement and its plan for meeting that requirement, an REPS 35 compliance report is an annual look back at the RECs earned or purchased and energy savings actually realized during the prior calendar year and the electric power supplier’s actual progress toward meeting its REPS requirement. Thus, as part of this annual REPS compliance report, each electric power supplier is required to provide specific information regarding its experience during the prior calendar year, including, for example, RECs actually earned or purchased, retail sales, avoided costs, compliance costs, status of compliance with its REPS requirement, and RECs to be carried forward to future REPS compliance years. An electric power supplier must file with its REPS compliance report any supporting documentation as well as the direct testimony and exhibits of expert witnesses. The Commission will schedule a hearing to consider the REPS compliance report filed by each electric power supplier. For each electric public utility, the Commission will consider the REPS compliance report and determine the extent of compliance with the REPS requirement at the same time as it considers cost recovery pursuant to the REPS incremental cost rider authorized in G.S. 62-133.8(h). Each EMC and municipally-owned electric utility, over which the Commission does not exercise ratemaking authority, is required to file its REPS compliance report on or before September 1 of each year. Cost Recovery Rider G.S. 62-133.8(h) authorizes each electric power supplier to establish an annual rider to recover the incremental costs incurred to comply with the REPS requirement and to fund certain research. The annual rider, however, may not exceed the following per-account annual charges: Customer Class 2008-2011 2012-2014 2015 and thereafter Residential per account $10.00 $12.00 $34.00 Commercial per account $50.00 $150.00 $150.00 Industrial per account $500.00 $1,000.00 $1,000.00 Commission Rule R8-67(e) establishes a procedure under which the Commission will consider approval of an REPS rider for each electric public utility. The REPS rider operates similar to the fuel charge adjustment rider authorized in G.S. 62-133.2. Each electric public utility is required to file its request for an REPS rider at the same time as it files the information required in its annual fuel charge adjustment proceeding, which varies for each utility. The test periods for both the REPS rider and the fuel charge adjustment rider are the same for each utility, as are the deadlines for publication of notice, intervention, and filing of testimony and exhibits. A hearing on the REPS rider will be scheduled to begin as soon as practicable after the hearing held by the Commission for the purpose of determining the utility’s fuel charge adjustment rider. The burden of proof as to whether the REPS costs were reasonable and prudently incurred shall be on the electric public utility. Like the fuel charge 36 adjustment rider, the REPS rider is subject to an annual true-up, with the difference between reasonable and prudently incurred incremental costs and the revenues that were actually realized during the test period under the REPS rider then in effect reflected in an REPS experience modification factor (REPS EMF) rider. Pursuant to G.S. 62-130(e), any over-collection under the REPS rider shall be refunded to a utility’s customers with interest through operation of the REPS EMF rider. Electric Public Utilities There are three electric public utilities operating in North Carolina subject to the jurisdiction of the Commission: Carolina Power & Light Company, doing business as Progress Energy Carolinas, Inc. (PEC); Duke Energy Carolinas, LLC (Duke); and Virginia Electric and Power Company, doing business in North Carolina as Dominion North Carolina Power (Dominion). REPS requirement G.S. 62-133.8(b) provides that each electric public utility in the State – Duke, PEC and Dominion – shall be subject to an REPS according to the following schedule: Calendar Year REPS Requirement 2012 3% of prior year’s North Carolina retail sales 2015 6% of prior year’s North Carolina retail sales 2018 10% of prior year’s North Carolina retail sales 2021 and thereafter 12.5% of prior year’s North Carolina retail sales An electric public utility may meet the REPS requirement by any one or more of the following: • Generate electric power at a new renewable energy facility. • Use a renewable energy resource to generate electric power at a generating facility other than the generation of electric power from waste heat derived from the combustion of fossil fuel. • Reduce energy consumption through the implementation of an energy efficiency measure; provided, however, an electric public utility subject to the provisions of this subsection may meet up to twenty-five percent (25%) of the requirements of this section through savings due to implementation of energy efficiency measures. Beginning in calendar year 2021 and each year thereafter, an electric public utility may meet up to forty percent (40%) of the requirements of this section through savings due to implementation of energy efficiency measures. 37 • Purchase electric power from a new renewable energy facility. Electric power purchased from a new renewable energy facility located outside the geographic boundaries of the State shall meet the requirements of this section if the electric power is delivered to a public utility that provides electric power to retail electric customers in the State; provided, however, the electric public utility shall not sell the renewable energy certificates created pursuant to this paragraph to another electric public utility. • Purchase renewable energy certificates derived from in-State or out-of-state new renewable energy facilities. Certificates derived from out-of-state new renewable energy facilities shall not be used to meet more than twenty-five percent (25%) of the requirements of this section, provided that this limitation shall not apply to Dominion. • Use electric power that is supplied by a new renewable energy facility or saved due to the implementation of an energy efficiency measure that exceeds the requirements of this section for any calendar year as a credit towards the requirements of this section in the following calendar year or sell the associated renewable energy certificates. • Reduce energy consumption through “electricity demand reduction,” which is a voluntary reduction in the demand of a retail customer achieved by two-way communications devices that are under the real time control of the customer and the electric public utility.6 Progress Energy Carolinas On September 1, 2011, PEC filed its 2011 REPS compliance plan in Docket No. E-100, Sub 128 as part of its 2011 Integrated Resource Plan (IRP). In its plan, PEC indicated that its overall compliance strategy is to meet the REPS requirements with the most cost-effective and reliable renewable energy resources available. PEC has agreed to provide REPS compliance services for the following wholesale customers, as allowed under G.S. 62-133.8(c)(2)(e): the towns of Black Creek, Lucama, Sharpsburg, Stantonsburg, and Waynesville. PEC has adopted a competitive bidding process for the purchase of energy or RECs from renewable energy facilities whereby market participants have an opportunity to propose projects on a continuous basis. Through this RFP, PEC has executed fifty (50) contracts for solar, hydro, biomass, landfill gas, and wind RECs. Also, PEC maintains an open RFP for 10 MW or less of non-solar renewable 6 Sec. 1 of Senate Bill 75, amended G.S. 62-133.8(a) by adding a definition of “electricity demand reduction,” and Sec. 2 amended G.S. 62-133.8(b)(2) by adding a new subsection (g) making electricity demand reduction a REPS resource, effective April 28, 2011. 38 resources. In June 2011 PEC issued solar and wind-specific RFPs. PEC stated that it does not currently own or operate new renewable energy facilities. A decision to engage in future direct or partial ownership will be based on cost-effectiveness and portfolio requirements. PEC engages in ongoing research regarding the use of alternative fuels meeting the definition of renewable energy resources at its existing generation facilities. However, introducing alternative fuels in traditional power plants must be proven technically feasible, reliable, and cost-effective prior to implementation. To the extent PEC determines the use of alternative fuels is appropriate and fits within the framework of Senate Bill 3, these measures would be included in future compliance plan filings. To meet the initial 0.02% solar set-aside requirement in 2010, PEC prioritized solar bids within its November 2007 renewable RFP and subsequent planning periods. ln addition to the renewable RFP, PEC has maintained a commercial solar photovoltaic (PV) program since July 2009 with a target of adding 5 MW of grid-tied solar PV per year and a standard offer to purchase commercial solar hot water RECs to promote development of this technology. On July 1, 2010, In Docket No. E-2, Sub 979, PEC filed for Commission approval of its Residential Service SunSense Solar Rebate Rider SSR-1 (SunSense). SunSense is an experimental solar PV rebate program aimed at adding 1 MW per year of distributed solar generation. Residential customers who install rooftop solar PV generating systems will receive a one-time participation payment of $1,000 per kW of installed capacity and monthly bill credits based on the RECs produced by their system. The solar RECs will be the property of PEC. SunSense is limited to 1,000 kW of installed capacity in a calendar year and will be available through December 2015. On November 15, 2010, the Commission issued an Order approving SunSense and granting the participants waivers from several reporting requirements of Commission Rule R8-66 to allow PEC to be the aggregator for information gathering and reporting to the Commission and NC-RETS. PEC initiated SunSense on January 1, 2011. In its 2011 REPS compliance plan, PEC stated that it is committed to taking all actions necessary to comply with the swine waste set-aside requirements. The state’s electric power suppliers issued a joint RFP for swine waste generation on February 15, 2010, and have engaged in negotiations with multiple parties in a joint effort to procure swine waste resources in the state. As a result of the RFP, PEC and other participants in the collaborative have executed two contracts for approximately 20,000 RECs per year once the facilities are fully operative. Although the collaborative continues to negotiate with other potential suppliers, PEC stated that it is doubtful that there will be sufficient energy derived from swine waste within the state to enable PEC to meet the 2012 swine waste set-aside requirement. 39 PEC is also participating in collective efforts to procure poultry waste derived energy. In April 2011, PEC executed a contract to purchase RECs and energy from a 36 MW poultry waste-to-energy facility. However, PEC cautions that issues similar to those stated for producing sufficient energy derived from swine waste make it uncertain whether PEC will be able to meet the 2012 poultry waste set-aside obligation. In particular, it is uncertain whether there will be sufficient poultry waste facilities in operation to enable PEC to meet the 2012 obligation. PEC also intends to comply with a portion of the REPS requirement by energy savings from PEC’s EE measures. PEC has received approval for a number of EE programs and has begun implementation. PEC forecasts that, with the allowed banking, its EE savings will exceed the limitation imposed in each year for REPS compliance under G.S. 62-133.8(b)(2)(c). Based on its current contracts, energy efficiency programs and banked RECs, PEC believes that it has procured sufficient resources to meet its general REPS obligation through 2013. On May 18, 2010, in Docket No. E-2, Sub 974, PEC filed its annual REPS compliance report for the calendar year 2009. On June 4, 2010, PEC filed an application in the same docket for approval of an REPS rider effective December 1, 2010. On November 17, 2010, the Commission issued an Order approving an REPS charge of $0.58 per month for residential customers, $2.90 per month for commercial customers, and $28.93 per month for industrial customers, each of which is below the incremental cost cap established in G.S. 62-133.8(h). These charges are effective December 1, 2010 through November 30, 2011. In addition, the Commission approved PEC’s 2009 REPS compliance report, with a brief discussion noting that the 24,930 EE RECs reported therein are subject to measurement and verification (M&V) based on the submission of further M&V data and the resolution of M&V issues pending in Docket No. E-100, Sub 113 with regard to reduced energy consumption. On June 3, 2011, PEC filed its 2010 REPS compliance report in Docket No. E-2, Sub 1000. Also on June 3, 2011, PEC filed an application in the same docket seeking to increase its REPS rider to $0.63 per month for residential customers, $7.61 per month for commercial customers, and $51.54 per month for industrial customers. In its 2010 REPS compliance report, PEC indicated that it acquired sufficient solar RECs to meet the 2010 requirement of 0.02% of its 2009 retail sales. In addition, PEC stated that counting banked RECs, EE projections, contracted future purchases, and the ability to use 25% out-of-state RECs each year, it expects to have sufficient RECs to achieve REPS compliance through 2014. A hearing was held on PEC’s 2010 REPS compliance report and 2011 REPS cost recovery rider on September 27, 2011. A final decision is pending before the Commission. 40 Duke Energy Carolinas On September 1, 2011, Duke filed its 2011 REPS compliance plan in Docket No. E-100, Sub 128 as part of its 2011 IRP. In its plan, Duke stated that it is pursuing REPS compliance by building a diverse portfolio of cost-effective renewable energy and energy efficiency resources. The key components of Duke’s plan include: (1) direct investment in renewable energy resources at existing or new Duke-owned assets; (2) partnership with third-party renewable resource suppliers through power purchase agreements; (3) purchases of unbundled RECs from both in-state and out-of-state suppliers; and (4) utilization of cost-effective EE savings. Duke believes that the implementation of these strategies will yield a balanced and prudent portfolio of qualifying resources and a flexible mechanism for REPS compliance. Duke has agreed to provide REPS compliance services for the following wholesale customers, as allowed under G.S. 62-133.8(c)(2)(e): Rutherford EMC; Blue Ridge EMC; the cities of Concord, Highlands, and Kings Mountain; and the towns of Dallas and Forest City. Duke stated that it is confident that it will meet its solar set-aside requirement under its 2011 REPS obligation, including for those wholesale customers for which it provides REPS compliance services. Duke has elected to pursue the following courses of action to acquire solar resources for compliance: (1) Duke-owned solar photovoltaic distributed generation program; (2) power purchase agreements for solar generation; and (3) purchase of in-state and out-of- state unbundled solar RECs, including RECs from solar thermal facilities. With respect to utility-owned solar resources, Duke received approval from the Commission in 2009 to build, own and operate up to 10 MW of solar photovoltaic projects on customer sites and/or utility-owned property. Duke began construction in the fourth quarter of 2009 and the program was fully implemented in the first quarter of 2011, with the exception of 50 kW. However, a fire at one of the rooftop installations in April 2011 caused Duke to shut down all the facilities in the program. Duke believes that it has determined the cause of the fire and will be able to institute safeguards to prevent such occurrences. Thus, it anticipates placing the facilities back into operation by the fourth quarter of 2011. ln 2008, Duke signed a twenty-year power purchase agreement with SunEdison for the purchase of all electricity generated from a 15.5 MW (AC) solar farm in Davidson County, North Carolina, which is fully operational. Duke has also entered into long-term agreements with FLS Energy and Vanir Energy to purchase solar RECs from water heating installations. As a result of this agreement, FLS and Vanir have installed solar water heating systems at residences, hotels, universities, and commercial sites across North Carolina. Lastly, having found out-of-state solar RECs to be cost-effective when compared to in-state resources, Duke has entered into agreements to procure out-of-state solar RECs up to the 25% out-of-state limitation of this resource. Based on all of its solar resources, Duke is confident that it will meet its solar set-aside obligation through 2013. 41 Duke’s primary strategy for compliance with the swine waste set-aside requirement is to jointly procure energy derived from swine waste resources with PEC and other electric power suppliers. Duke has entered into four long-term REC purchase agreements with developers of swine waste facilities in North Carolina. However, the production dates and projected production estimates for the facilities have materially changed and Duke now believes that compliance with the 2012 swine waste set-aside requirement is unlikely. Duke also has partnered with Duke University to fund a pilot-scale, on-farm, swine waste-to-energy development at Loyd Ray Farm in Booneville, North Carolina. This project is operational and could serve as a model for other hog farms seeking to manage waste while also developing on-farm renewable generation. Duke will receive all of the RECs generated from this project for a period of ten years. Duke noted that several regulatory and legislative developments during the last two years have materially impacted its efforts to meet the 2012 poultry set-aside requirement. In response, Duke issued an RFP in July 2011 to capitalize on the expanded definition of poultry resources, and has received many compelling proposals. In addition, Duke continues pursuing the purchase of poultry waste derived energy and/or unbundled RECs. To that end, Duke has continued to meet with potential suppliers; reviewed proposals from third-party developers; identified, contacted, and encouraged animal waste-to-energy developers in other states to develop projects in North Carolina; and initiated negotiation with all known, suppliers of resources that qualify for the poultry waste set-aside requirement. While Duke has not reached agreement with any particular supplier of resources that meet the energy derived from poultry waste requirement, it stated that it will continue to make all reasonable efforts to meet the poultry set-aside requirement in 2012. Aside from the solar, swine waste, and poultry waste set-aside requirements, Duke intends to meet the general REPS requirement beginning in 2012 with EE savings, hydroelectric power, biomass resources, and out-of-state wind RECs. Duke projects that, in concert with its customers, it will achieve more EE savings than can be utilized under REPS for the foreseeable future. Duke plans to use hydroelectric power from three sources to meet the general REPS requirement: (1) small Duke-owned hydroelectric stations; (2) wholesale customers’ SEPA allocation; and (3) small hydroelectric facilities that are not owned by Duke. Duke has purchased RECs from twenty-two (22) small hydroelectric power facilities in North and South Carolina which qualify as new renewable energy facilities. Duke stated that it is evaluating a variety of biomass proposals, including landfill gas, wood biomass combustion, biomass gasification, and biomass anaerobic digestion. As noted previously in this Report, the Commission issued an Order on October 11, 2010, in Docket No. E-7, Subs 339 and 340 accepting registration of Duke’s Buck and Lee Steam Stations as renewable energy facilities, and concluding that primary harvest wood products, including wood chips from whole 42 trees, are “biomass resources” and “renewable energy resources” under G.S. 62-133.8(a)(8). Thus, Duke also intends to self-supply a portion of its biomass portfolio through the co-firing and/or re-powering of Buck and Lee, and perhaps other existing coal stations, with renewable fuel. Lastly, Duke stated that it continues to investigate the procurement of wind resources for use in meeting the general REPS requirement, including out-of-state wind RECs, delivery of bundled land-based wind energy to its control area, and development of off-shore wind. Based on its current contracts, self-owned generation, EE programs and banked RECs, Duke stated that it has procured sufficient resources to meet its general REPS obligation through 2013. On March 10, 2011, in Docket No. E-7, Sub 984, Duke filed its 2010 REPS compliance report and an application for approval of an REPS rider to be effective September 1, 2011. A hearing was held on June 8, 2011, and on August 23, 2011 the Commission issued an Order approving an REPS charge of $0.49 per month for residential customers, $2.44 per month for commercial customers, and $26.97 per month for industrial customers, each of which is below the incremental cost cap established in G.S. 62-133.8(h). In addition, the Commission approved Duke’s 2010 REPS compliance report, including a finding that Duke acquired sufficient solar RECs to meet the 2010 requirement of 0.02% of its 2009 retail sales. Dominion North Carolina Power On July 9, 2010, Dominion filed its 2009 REPs compliance report. The report stated that Dominion had not produced or purchased any RECs in 2009, but intended to use unbundled solar RECs to meet its 2010 and 2011 solar set-aside requirements. On June 22, 2011, the Commission issued an Order requesting that the Public Staff file comments on Dominion’s 2009 compliance report by September 1, 2011. In particular, the Commission requested the Public Staff to assess whether Dominion is likely to meet its future REPS obligations without exceeding the cost caps established under G.S. 62-133.8(h). On August 30, 2011, the Public Staff filed comments concluding that Dominion will be able to meet its REPS obligations for the foreseeable future without exceeding the costs caps and that Dominion’s 2009 REPS compliance report should be approved by the Commission. On August 25, 2011, in Docket No. E-22, Sub 475, Dominion filed its 2010 REPS compliance report. Dominion has agreed to provide REPS compliance services for the Town of Windsor, as allowed under G.S. 62-133.8(c)(2)(e). Dominion stated that it met its 2010 REPS solar set-aside obligation by purchasing unbundled out-of-state solar RECs. For the Town of Windsor’s 43 obligation, at least 75% of the RECs purchased were in-state RECs, as required by G.S. 62-133.8(b)(2)(e). On September 1, 2010, in Docket No. E-22, Subs 463, 467, 468, and 469, Dominion filed four EE programs for approval by the Commission. Dominion projects EE savings of 4,720 MWh in 2011 and 6,119 MWh in 2012 from these programs. On February 22, 2011, the Commission issued Orders approving the four EE programs. On September 1, 2011, in Docket No. E-100, Sub 128, Dominion filed its 2011 REPS compliance plan as part of its 2011 IRP. In its plan, Dominion stated that it intends to meet its REPS requirements through the use of new renewable energy, EE, and unbundled RECs. Dominion plans to use unbundled solar RECs to meet its 2011 and beyond solar requirements and has entered into contracts to purchase sufficient RECs through 2013. As determined in the Commission’s September 22, 2009 Order, Dominion is exempt from the 25% limit on the use of out-of-state RECs for REPS compliance found in G.S. 62-133.8(b)(2)(e). Dominion stated that it had purchased solar RECs for REPS compliance from out-of-state to minimize compliance costs. In addition, Dominion is participating with other electric power suppliers to evaluate proposals from swine and poultry waste energy suppliers to meet the swine and poultry waste set-aside requirements. Dominion has entered into long term contracts with five companies for the purchase of swine waste-to-energy RECs. Dominion again elected not to file an application for an REPS rider in 2011. Electric Membership Corporations and Municipally-Owned Electric Utilities There are thirty-one (31) electric membership corporations (EMCs) serving customers in North Carolina, including twenty-six (26) that are headquartered in the state. Twenty-five of the EMCs are members of North Carolina Electric Membership Corporation (NCEMC), a generation and transmission (G&T) services cooperative that provides wholesale power and other services to its members. In addition, there are seventy-four (74) municipal and university-owned electric distribution systems serving customers in North Carolina. These systems are members of ElectriCities of North Carolina, Inc. (ElectriCities), an umbrella service organization. ElectriCities is a non-profit organization that provides many of the technical, administrative, and management services required by its municipally-owned electric utility members in North Carolina, South Carolina, and Virginia. ElectriCities is a service organization for its members, not a power supplier. Fifty-one of the North Carolina municipalities are participants in either NCEMPA or NCMPA1, municipal power agencies that provide wholesale power to their members. The remaining municipally-owned electric utilities generate 44 their own electric power or purchase electric power from wholesale electric suppliers. By Orders issued August 27, 2008, the Commission allowed twenty-three (23) EMCs to file their REPS compliance plans on an aggregated basis through GreenCo Solutions, Inc. (GreenCo),7 REPS requirement and the fifty-one (51) municipal members of the power agencies to file through NCEMPA and NCMPA1. On September 7, 2010, the Commission similarly allowed Tennessee Valley Authority to file annual REPS compliance plans and reports on behalf of its four wholesale customers that provide retail service to customers in North Carolina. G.S. 62-133.8(c) provides that each EMC or municipality that sells electric power to retail electric power customers in the State shall be subject to an REPS according to the following schedule: Calendar Year REPS Requirement 2012 3% of prior year’s North Carolina retail sales 2015 6% of prior year’s North Carolina retail sales 2018 and thereafter 10% of prior year’s North Carolina retail sales Compliance with the REPS requirement is slightly different for an EMC or municipality than for an electric public utility. An EMC or municipality may meet the REPS requirement by any one or more of the following: • Generate electric power at a new renewable energy facility. • Reduce energy consumption through the implementation of demand-side management or energy efficiency measures. • Purchase electric power from a renewable energy facility or a hydroelectric power facility, provided that no more than thirty percent (30%) of the requirements of this section may be met with hydroelectric power, including allocations made by the Southeastern Power Administration. • Purchase renewable energy certificates derived from in-State or out-of-state renewable energy facilities. An electric power supplier subject to the requirements of this subsection may use certificates derived from out-of-state renewable energy facilities to meet no more than twenty-five percent (25%) of the requirements of this section. 7 Effective May 1, 2010, Blue Ridge Electric Membership Corporation is no longer a member of GreenCo. 45 • Acquire all or part of its electric power through a wholesale purchase power agreement with a wholesale supplier of electric power whose portfolio of supply and demand options meet the requirements of this section. • Use electric power that is supplied by a new renewable energy facility or saved due to the implementation of demand-side management or energy efficiency measures that exceeds the requirements of this section for any calendar year as a credit towards the requirements of this section in the following calendar year or sell the associated renewable energy certificates. • Reduce energy consumption through “electricity demand reduction,” which is a voluntary reduction in the demand of a retail customer achieved by two-way communications devices that are under the real time control of the customer and electric power supplier.8 Electric membership corporations GreenCo On September 1, 2009, in Docket No. E -100, Sub 124, GreenCo filed its 2008 REPS compliance report for the twenty-three (23) EMC members that GreenCo served during 2008.9 8 Sec. 1 of Senate Bill 75, amended G.S. 62-133.8(a) by adding a definition of “electricity demand reduction,” and Sec. 2 amended G.S. 62-133.8(c)(2) by adding a new subsection (g) making electricity demand reduction a REPS resource, effective April 28, 2011. On May 11, 2010, the Commission established Docket No. EC-83, Sub 1 and issued an Order scheduling a hearing on GreenCo’s 2008 REPS report and directed GreenCo to file a copy of its 2008 REPS compliance report. The Commission held a hearing on August 24, 2010 and allowed the parties to file briefs and proposed orders by October 21, 2010. On May 3, 2011, the Commission issued an Order approving GreenCo’s 2008 REPs compliance report, with a brief discussion noting that the EE RECs reported therein are subject to measurement and verification (M&V) based on the submission of further M&V data and the resolution of M&V issues pending in Docket No. E-100, Sub 113 with regard to reduced energy consumption. 9 The following EMCs are members of GreenCo: Albemarle EMC, Brunswick EMC, Cape Hatteras EMC, Carteret-Craven EMC, Central EMC, Edgecombe-Martin County EMC, Four County EMC, French Broad EMC, Haywood EMC, Jones-Onslow EMC, Lumbee River EMC, Pee Dee EMC, Piedmont EMC, Pitt & Greene EMC |
OCLC number | 457755251 |