Rates and Regulatory Developments – Winter 2015

The ScottMadden Energy Industry Update | February 2015

In this section, we examine growing interest in renewable tariffs by some customer segments and EPA’s long-awaited coal combustion residuals rule.

Key highlights include:

  • Renewable Energy Tariffs: Utilities explore alternative rate structures
  • EPA Finalized Coal Combustion Residuals Rule

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RENEWABLE ENERGY TARIFFS:

UTILITIES EXPLORE ALTERNATIVE RATE STRUCTURES

RENEWABLE ENERGY TARIFFS CAN PROVIDE AN ADDITIONAL RENEWABLE ENERGY OPTION TO KEY ACCOUNT CUSTOMERS (I.E., CUSTOMERS WITH THE HIGHEST ENERGY USE)


PROGRAM DESIGNS OFTEN INCLUDE THE FOLLOWING FEATURES:

  • Flexibility:Tariffs can be attractive to customers unable to build on-site generation or those interested in an option with low risks and transactions costs
  • Targeted Costs:Designs typically ensure all generation and administrative costs are incurred by participating customers; tariff does not impact the rates of non-participating customers
  • Cost Savings: The development of larger, utility-scale projects should result in economies of scale and lower costs to participating key account customers
  • Additionality: Tariffs can support new projects outside of policy mandates, an attractive feature to many key account customers

Renewable Energy Tariffs for Large Customers: Existing Tariffs and Selected Recent Activity

  • Oregon: HB 4126 requires the Public Utilities Commission to study the impact of allowing utilities to offer voluntary renewable energy tariffs to non-residential customers
  • California: California Public Utilities Commission is implementing SB 43, which requires utilities with at least 100,000 customers to offer a renewable energy tariff option
  • Nevada: Sierra Pacific Power’s Northern NV Green Energy Rider is open to all customers, but commercial customers may contract with the utility to build a power plant to offset their specific use. Apple plans to construct a 20-MW PV solar facility at Sierra’s Ft. Churchill Generating Station. Apple would initially own the plant, with NV Energy (Sierra’s parent company) leasing, operating, and maintaining the facility. NV Energy has the option to purchase the plant after five years
  • Oklahoma: Google is lobbying the Public Service Commission to offer a renewable energy tariff for large customers
  • North Carolina: Duke Energy’s Green Source Rider began in 2014. This pilot program allows qualifying, energy- intensive customers to offset new load with renewable energy generation; the program’s cap is set at 1,000 GWh or three years. Duke Energy provides renewable power through power purchase agreements or utility-owned generation. Participating customers pay an application fee, monthly administration charge, and premium over retail electricity price

EPA FINALIZES COAL COMBUSTION RESIDUALS RULE

AFTER MORE THAN FOUR YEARS OF CONSIDERATION, AND MISSED DEADLINES, EPA ISSUED A FINAL RULE REGULATING COAL COMBUSTION RESIDUALS (CCRs) AS SOLID RATHER THAN HAZARDOUS WASTE

Nearly half of coal combustion residuals are beneficially used in other products such as cement and wallboard.

The rule:

  • Regulates ash as a solid waste under subtitle D of the Resource Conservation & Recovery Act (RCRA), rather than more restrictive hazardous waste under subtitle C of RCRA
  • Will leave facilities open to civil suits
  • Applies also to sites with plants no longer in operation
  • Partially delegates enforcement of the rule’s requirements to the states

The rule’s compliance requirements incorporate more stringent handling and disposal requirements calling for the following:

  • Regular inspections of coal ash sites for structural integrity
  • Closure of coal ash sites that fail to meet new engineering and structural standards
  • Mandatory monitoring of groundwater around coal ash waste sites
  • Controls to stop fugitive dust
  • Liners for coal ash sites for new units
  • New rules for proper closure of coal ponds and for coal ash at landfills

IMPLICATIONS OF THE NEW RULE

  • Power producers (the largest producers of CCRs) now have some degree of certainty in treatment of CCRs
  • The new rule applies more restrictive standards to legacy sites, which will require utilities to evaluate their CCR disposal and containment strategies
  • States will drive oversight and enforcement, under federal minimum standards, but there may still be differences in degree and manner of enforcement under different state regimes
  • Potential exists for nuisance civil suits against CCR producers; it is unclear that compliance with state requirements will provide a legal shield

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