United States: Massachusetts Legislature Enacts Significant Energy Bill In Support Of Offshore Wind And Hydro Procurement, Storage And Transmission

Last Updated: August 4 2016
Article by Adam Wade

Late last night, the Massachusetts legislature enacted House Bill 4568, an act to promote energy diversity (the "Act"). Overall, the Act marks a compromise between the House's original procurement-only legislation and the Senate's more comprehensive "omnibus" bill. It is expected Massachusetts Governor Charlie Baker will sign the legislation shortly. After that, regulations will be required to be implemented and other regulatory actions will need to be taken by Massachusetts' Department of Public Utilities, the Department of Energy Resources, the electric distribution companies and other agencies.

Here are some of the highlights of the Act and selected differences compared to the House and Senate's prior standalone bills:

  • Offshore Wind: Distribution companies must jointly conduct competitive solicitations for the procurement of and enter into suitable long term contracts (with terms of between 15 and 20 years) for a nameplate capacity of approximately 1,600 MW by June 30, 2027 from eligible offshore wind power projects.
    • The Act splits the difference between the Senate's offshore wind requirement of approximately 2,000 MW and the House's vision for no less than 1,200MW.
    • The Act retains the House bill's requirement that offshore wind facilities operate in a designated wind energy area under a federal lease, but added a requirement that such a lease must have been entered into as a result of a competitive process after January 1, 2012.
    • A first solicitation must occur not later than June 30, 2017; each solicitation must be for a minimum of 400 MW and each subsequent solicitation must occur within 24 months of the previous solicitation.
  • Hydro and Class I Renewables: Distribution companies must jointly conduct competitive solicitations and enter into suitable contracts for the procurement of 9,450,000 MWH of "clean energy generation" by December 31, 2022 from hydroelectric and new RPS eligible Class I renewable generation.
    • The Act largely blends the House and Senate definitions of "clean energy generation," which is defined to permit participation by firm hydroelectric generation alone, Class I RPS eligible resources on their own, or Class I RPS eligible resources firmed with hydro.
    • The Act adopts the House's lower MHW level for clean energy generation on a longer time frame compared to the Senate's initial proposal for 12,450,000 MWH by December 31, 2018.
    • At least an initial solicitation under a staggered procurement schedule must occur prior to April 1, 2017.
  • Utility Remuneration: In the compromise, the legislature will provide an opportunity for distribution companies to receive "remuneration" of up to 2.75 percent of the annual payments under long term contracts for offshore wind energy and clean energy generation.

In addition to its headline procurement provisions, the Act implements other significant changes favoring energy storage projects, transmission, small scale hydroelectric generation, property-assessed clean energy bonds for commercial buildings (C-PACE), as well as utility ownership of transmission and energy storage assets, including the following:

  • Energy Storage: The Act includes significant provisions for energy storage.
    • Distribution companies will be permitted to own energy storage systems.
    • DPU regulations implementing the competitive procurement programs are required to allow offshore wind energy generation resources and clean energy generation "to be paired with energy storage systems."
    • DOER is tasked with determining whether to establish targets for the procurement of energy storage resources by distribution companies.
    • DOER would determine the need for such a program prior to December 31, 2016 and would be required to adopt such targets by July 1, 2017.
    • Initial procurement targets would need to be met by January 1, 2020 and would be reevaluated not less than once every three years.
  • Transmission Costs: The Act adopts the Senate bill's directive that the Department of Public Utilities (DPU) promulgate regulations requiring transmission costs to be included into bid proposals with the possibility of such costs being recovered under federal rates. The House's version had merely permitted inclusion of such costs.
  • Small Hydro: Small hydro projects (with a nameplate capacity of 2 MW or less) will be permitted to participate in the state's net metering program and to receive remuneration based on the "default" service rate under a "small hydro tariff."
    • No more than 60MW of nameplate capacity may participate in the small hydro tariff under net metering for small hydro.
  • C-PACE: The Act adopts the House bill's authorization for the Massachusetts Development Finance Agency (aka Mass Development) to implement a commercial property-assessed clean energy (C-PACE) financing mechanism and to issue PACE bonds.
    • The program will be open to any commercial or industrial property owned by any person other than a municipality or other governmental entity that meets applicable guidelines.

Several other provisions in the Senate bill were dropped or modified in the final Act:

  • The Act does not include a program from the Senate bill under which DOER would have been required to adopt an energy rating system for residential dwellings in which a home's rating, along with its energy audit reports, would be disclosed prior to a sale.
  • The Act removes the Senate bill's proposed doubling from one to two percent of the amount of renewable energy utilities must purchase under the RPS for compliance years after 2016.
  • The Act does not include the Senate bill's proposals for creation of energy efficiency and renewable energy finance task forces or a requirement for DOER's study of grid modernization.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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