The cost to electric customers of setting a Renewable Portfolio Standard (RPS) requiring electric suppliers to have from 10 to 15 percent of their power generated from renewable sources and the definition of what is “renewable” were discussed this week a hearings by both the Senate and House Environmental Resources and Energy Committees.

The Committees also heard about an initiative by PJM Interconnect, the “air traffic controller” that oversees power distribution in the Mid-Atlantic states, Ohio and Illinois, to allow utilities to track and certify where each megawatt of energy is produced so they can trade them in the marketplace to meet renewable portfolio standards.

About 1.4 percent of Pennsylvania’s electricity comes from non-hydro renewable sources, 90 percent comes from coal and nuclear. There are over 200 renewable energy companies in Pennsylvania, including a major presence of wind driven generation. Twelve states, including Delaware and New Jersey, have implemented an RPS or “clean energy” programs.

PUC Chairman Terrance Fitzpatrick noted in his testimony before the House Committee that Pennsylvania already has about 100,000 customers buying green energy thanks to electric deregulation adopted in 1996 and over $20 million has been invested in almost 200 sustainable and renewable energy projects by the sustainable energy funds created at the time of deregulation.

Fitzpatrick said Commission staff estimated electric rates would increase from 1 to 3.5 percent across the state if a 10 percent Renewable Portfolio Standard (RPS) was adopted, if the cost was passed on to consumers. However, as part of deregulation, rate caps are in place that prevent companies from passing along rate increases unless they were necessary to preserve a fair rate of return.

Fitzpatrick recommended either waiting to adopt legislation until the caps expire or including a cost recovery mechanism in the new program. He noted, “it is increasingly important that customers make decisions regarding consumption based upon the true cost of electricity. Failure to reflect this cost in retail prices encourages consumption and is inconsistent with the environmental benefits an RPS is designed to achieve.”

DEP Secretary Kathleen McGinty told the Senate Committee that rising natural gas prices, increases in the demand for oil from China, terrorist incidents and projections we will reach our global petroleum production capacity by 2008 means “geopolitics and geology” are going to change the energy markets in dramatic ways in the near future.

McGinty encouraged the Senate Committee to consider a broader definition of renewable—an “Advanced Energy Portfolio Standard” that encompasses Pennsylvania’s indigenous energy resources like coal bed methane and coal waste.

On cost, McGinty cited a recent study by the Community Foundation for the Alleghenies that said an RPS standard would cost Pennsylvania consumers over $1.23 billion over 20 years, but would yield $2.8 billion in earnings and 85,000 jobs.

Denise Foster, Senior Counsel to PJM Interconnection, gave both committees background on PJM’s Generator Attributes Tracking System (GATS) that is designed to support the advancement of a renewables market and help their member utilities meet state RPS or “clean energy” requirements.

PJM has worked with a variety of stakeholders to design a registry system that will allow generators to create a certificate for each megawatt of power they put into the PJM system showing its attributes-- how it was generated – renewable, nonrenewable -- and the emissions associated to that megawatt.

In turn, other utilities in the system can then see what’s available on the market and purchase the certificates they needs to meet RPS requirements. Certificates can only be transferred once. GATS, itself, isn’t a market, but it facilitates the market for renewables by providing a secure way of assuring the attributes of energy being generated and the documentation utilities need to show compliance with state requirements.

In the Senate, other witnesses included: Jim Seif, PPL, Mike Ewall, Energy Justice Network, David McAnally, US Wind Force, Steven Brame, Rural Electric Association.

Sen. Mary Jo White, Committee chair, said the Committee will have a second hearing on this issue June 23.

In the House, additional comments were provided by J. Michael Love, Energy Association of PA, Penn Future and Dominion. This was the fourth meeting of the House Committee on this issue.

For more information on the GATS system, visit: Overview and view the PowerPoint presentation.

Pending RPS legislation includes Senate Bill 1030 (Erickson-R- Delaware), Senate Bill 962 (Ferlo-D-Allegheny) and House Bill 2250 (Ross-R-Chester).

6/11/2004