United States: New Jersey Board of Public Utilities Receives Comments Regarding Plans to Develop OREC Program

Following the signing of the Offshore Wind and Economic Development Act by New Jersey Governor Chris Christie, the New Jersey Board of Public Utilities (the BPU) has received numerous comments regarding the development of an offshore wind renewable energy certificate (OREC) program. Businesses engaged in the development and production of renewable energy in the region should assess the potential impact of the suggestions received by the BPU.

On August 19, 2010, New Jersey Governor Chris Christie signed the Offshore Wind and Economic Development Act (the Act), directing the New Jersey Board of Public Utilities (the BPU) to develop an offshore wind renewable energy certificate (OREC) program to require that a percentage of electricity sold in New Jersey be from offshore wind energy. The Act set a target of at least 1,100 megawatts (MW) of wind generation from offshore projects. See McDermott's On the Subject, " The Race is On: N.J. Legislature Passes Offshore Wind Incentive Package."

The Act authorizes the BPU to accept applications for qualified offshore wind projects and enumerates baseline criteria for the BPU to use in reviewing the applications. The minimum requirements for a pre-construction application include a complete technical description of the project, detailed financial projections, an operations and maintenance plan, a list of all regulatory approvals required, and a cost-benefit analysis. The Act also specifies the factors the BPU must consider in approving or denying a project: consistency of the project with the state's master energy plan, the outcome of the cost-benefit analysis in the application, the balance of financial risks and rewards between ratepayers and project shareholders, the financial position of the entity proposing the project, the amount of subsidies to be paid by ratepayers, and any other factor that the BPU deems relevant.

The Act also provides financial incentives to generate interest in developing new offshore wind projects in New Jersey. The Act allows the New Jersey Economic Development Authority to provide up to $100 million in tax credits for the development of new offshore wind facilities. Additionally, the Act authorizes the use of revenues received from the auction of greenhouse gas emissions allowances and deposited into the "Global Warming Solutions Fund," to provide financial assistance to qualified offshore wind projects, as well as associated equipment manufacturers and assembling facilities, to promote economic development in the state.

On October 4, 2010, the BPU began the process of developing rules governing the construction and financing of wind powered renewable energy generating facilitates located off the coast of New Jersey. As part of the rule development process, the BPU sought public comments on issues specific to the rulemaking, and suggestions for developing and implementing the offshore wind program. To facilitate a robust public-comment process, the BPU held two stakeholder meetings on October 19, 2010, and October 26, 2010, and allowed stakeholders to file written comments before October 29, 2010.

Several of the comments request the BPU publish a draft rule and allow further opportunity for public comment. It remains unclear how the agency will proceed and whether stakeholders will have another opportunity to comment. Otherwise, the comments fall into two categories: those commenting on the creation of an OREC program, and those commenting on the application and approval process for new offshore wind projects. This On The Subject summarizes the stakeholders' written comments submitted to the BPU.

Several comments touch on the pricing mechanism for ORECs. Areva Renewables, an organization that helps customers generate CO₂-free electricity, believes the BPU should independently price ORECs per project based on the different levels of overall instate economic benefit derived from the project. Garden State Offshore Energy, a joint venture between Public Service Enterprise Group (PSEG) and Deepwater Wind I aimed at helping New Jersey develop new offshore wind resources, suggests OREC prices should be determined based on a balance between risk allocation and return requirements. The Sierra Club advises the BPU to set the price for offshore wind credits sufficiently high to ensure viability of projects and attract private sector investment.

The Retail Energy Supply Association suggests that: (1) the offshore wind renewable energy alternative compliance payments should be set equal to the OREC price; (2) changes to OREC requirements should not impact existing contracts; (3) any OREC Renewable Portfolio Standard (RPS) obligations schedule should be percentage based; and (4) new generators' OREC RPS requirements should become effective no less than three years from the energy year in which they are initially demanded.

With respect to the BPU approval process for offshore wind projects, many comments request clarification of the factors BPU will use for the net benefit test. The New Jersey Division of Rate Counsel, a representative for consumers in utility matters, recommends the BPU set rules that will identify all important and pertinent factors for considering projects. Fisherman's Energy of New Jersey, a collaborative of the New Jersey fishing industry, OffshoreMW LLC, an offshore wind development company, and Mid-Atlantic Renewable Energy Coalition, a nonprofit organization formed to help enhance the opportunities for renewable energy development in the PJM, a regional transmission organization, echoes this comment.

In addition to encouraging further detail on the criteria BPU will use to determine a project's net benefit, some commenters offer specific criteria they would like to see used. Garden State Offshore Energy requests the BPU take into account a broad range of economic and environmental factors to determine the net positive test. The New Jersey Business and Industry Association suggests that the scope of the net economic benefits test be broadened to include commonly used indicators presently being utilized for other state cost-benefit analyses. Areva believes the BPU should consider all benefits of job creation, including those jobs with a direct nexus to the project and jobs created by the project's supply-chain needs. Others suggest that the BPU further define the process and metrics by which the BPU will determine whether a project demonstrates positive economic and environmental net benefits to New Jersey. The New Jersey Division of Rate Counsel also advocates that the BPU set a minimum cost-benefit threshold.

Other comments include the following points:

• The New Jersey Division of Rate Counsel recommends the BPU set rules that will: (1) give parties advance notice to evaluate each project proposal; (2) establish minimum filing requirements; (3) recognize project funding and financing alternatives that have the ability to reduce, or potentially eliminate, confusion and potentially administratively burdensome OREC mechanisms.
• The Atlantic Wind Connection (AWC), a project for an offshore backbone transmission system designed to interconnect offshore wind capacity from New York to Virginia, requests the BPU ensure that an offshore wind energy project is able to connect to the New Jersey transmission grid through a backbone system such as AWC or with an individual project radial transmission line.
• The Fisherman's Energy of New Jersey suggests that the BPU develop the rules in an open, collaborative manner and appropriately address regulatory risk to ensure financing opportunities.
• Garden State Offshore Energy suggests that technical ability, financial capability and project viability be the cornerstone of the BPU's offshore wind development program rules for evaluating developer proposals.
• Bluewater Wind New Jersey Energy LLC, a developer of offshore wind facilities in the northeast and mid-Atlantic regions, suggests that the BPU: (1) draw upon the progress made at last year's offshore wind stakeholder meetings and provide additional opportunity for comment after the draft regulation is released; (2) review and revise the offshore wind components of the Energy Master Plan; (3) offer flexibility in defining requirements to determining eligibility for federal funds and programs; (4) to the maximum extent possible, ensure that the regulations mandate common assumptions or inputs to simplify comparisons of projects' net benefits; and (5) maximize the regulatory certainty provided by OWEDA.
• OffshoreMW LLC suggests that: (1) OREC Orders should be as immutable as possible while maintaining ratepayer equity; (2) multiple projects should be pursued simultaneously; and (3) there should be a comprehensive and uniform approach to the cost-benefit test and price setting.
• The Mid-Atlantic Renewable Energy Coalition requests the BPU provide guidance to manufacturers of equipment associated with offshore wind projects that seek financial assistance to locate their facilities in New Jersey.
• The Sierra Club suggests that BPU: (1) allow for long-term energy contracts; (2) locate projects in areas close to large load centers; and (3) include environmental, health, economic and job benefits as a part of the financial analysis.

*Benjamin Chesson, associate, contributed to this article.

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