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Proposed Rule Change for Out-of-State Class II Resource Recovery Facilities

Presentation to the Renewable Energy Committee of the New Jersey Board of Public Utilities proposing a solution to streamline certification processes for out-of-state resource recovery facilities for Class II RECs.

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Proposed Rule Change for Out-of-State Class II Resource Recovery Facilities

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  1. Proposed Rule ChangeforOut-of-State Class IIResource Recovery Facilities A Presentation to the Renewable Energy Committee of the New Jersey Board of Public Utilities Trenton, New Jersey 2015 Mar 10 Michel A. (Mitch) King Old Mill Power Company Voice: 1-856-310-WATT(9288)

  2. Old Mill Power Company • Renewable Energy Certificate Dealer • Satellite Office in Barrington (Camden County) New Jersey • Annual REC sales > $1M • Headquartered in Virginia • Virginia-licensed Retail Electricity Provider

  3. The Status Quo • Out-of-State Resource Recovery Facility (OOS RRF) Applicant applies to Staff for certification as a Class II facility • Staff forwards application to NJDEP for a (presumptive) environmental compliance determination

  4. The Status Quo If: • NJDEP determines that the facility is capable of meeting NJ environmental (air emissions and recycling rate) requirements; and • Staff determines that the facility meets other NJAC 14:8-2.6 (Class II) requirements Then: • Staff issues a certification number to Applicant

  5. The Status Quo (cont’d.) • Applicant then submits certification number to GATS Administrator as proof of NJ certification • GATS Administrator then issues Class II RECs monthly throughout Energy Year as Class II renewable energy is produced As soon as such RECs are recorded in the GATS: • OOS RRFs can (and do) start selling such RECs as “NJ Class II” (same as In-State RRFs) • Buyers, including suppliers/providers can (and do) start buying such RECs as “NJ Class II” RECs

  6. The Status Quo (cont’d.) However, current rules also: • Require an “electricity supplier/provider” relying on Class II RECs from an OOS RRF to demonstrate compliance with the RPS to annually provide the Board with an affidavit of environmental compliance [NJAC 4:18-2.6 (g) 2 (iii)]; and • Require such affidavit to be provided: a) “by October 1 of each year”; and b) to apply to the generating facility’s environmental performance “for the preceding reporting year” [NJAC 4:18-2.11 (a)]

  7. The Problem In effect, these rules create two kinds of Class II RECs that are recorded in the GATS as if they were the same: • “Non-contingent Class II RECs” (Class II RECs eligible for demonstrating compliance with the RPS without any further action by the facility operator or a supplier/provider); and • “Contingent Class II RECs”: (Class II RECs whose eligibility for demonstrating compliance with the RPS is contingent upon the Board’s receipt of an affidavit of environmental compliance after the close of each Energy Year

  8. The Problem (cont’d.) • Because of that contingency: • Eligibility of Class II RECs from OOS RRFs cannot be conclusively established until at least 11 months after the first such contingent REC has been listed in the GATS (and becomes available for sale)! ; and • Well after an Energy Year and its associated true-up period have ended, a supplier/provider may learn that the Class II RECs it was relying upon to demonstrate performance with the RPS are ineligible for that purpose [See the Board’s June 18, 2014 Clean Energy Order, Docket No. QO131009088 (Petition of Covanta Fairfax, etc.)]

  9. The Problem (cont’d.) Prior to that Covanta Fairfax case: • More than 50% of the Class II RECs listed in the GATS were “Contingent Class II RECs” Now: • The percentage is lower…but still significant And in any case: • It’s poor public policy to have rules that allow RECs to be listed in the GATS as Class II-eligible when, in fact, they may not be so-eligible unless certain, additional requirements are met

  10. The Proposed Solution The Board should adopt a policy whereby—absent fraud or administrative error—all RECs listed in the GATS as Class II-eligible remain so-eligible throughout an Energy Year and its associated true-up period without any further certification being required by the facility operator or suppliers and providers

  11. How to Implement the Solution For RRFs that were in operation for an entire Calendar Year prior to a given Energy Year (“existing facilities”): • Use the Calendar Year preceding a given Energy Year as the “Test Year” for determining whether the GATS should issue Class II RECs for that facility during that Energy Year

  12. How to Implement the Solution (cont’d.) For “existing” facilities (cont’d.): • An existing facility that met its environmental requirements during the Test Year gets its RECs recorded in the GATS as Class II-eligible during the corresponding Energy Year • An existing facility that did not meet its environmental requirements during the Test year does not get its RECs recorded in the GATS as Class II-eligible during the corresponding Energy Year

  13. How to Implement the Solution (cont’d.) For RRFs that were not in operation for an entire Calendar Year prior to a given Energy Year: • Do as Staff and the NJDEP implicitly do now…which is to review the Applicant’s documentation and make a prospective determination as to whether it is likely that the facility will meet New Jersey’s environmental requirements in the upcoming (or current) Energy Year

  14. How to Implement the Solution (cont’d.) Requires changes to: • NJAC 14:8-2.6 (g) 2 (iii); and • NJAC 14:8-2.11 (a) (Specific wording can be drafted if/when there’s consensus on the policy)

  15. Benefits of the Proposed Solution • All RECs listed in the GATS as Class II-eligible would be equally eligible for demonstrating compliance with the RPS (and therefore would have equal market value) • No supplier or provider runs the risk of learning--months after the close of an Energy Year--that RECs that it paid-for-and-received months ago cannot be used for demonstrating compliance with the RPS; and • There’s no incremental harm to the environment

  16. Benefits of the Proposed Solution (cont’d.) • Only the facility operator would need to provide the Board with an affidavit attesting to the facility’s environmental performance during the Test Year, reducing the paperwork burden on suppliers/providers (as well as on Staff, if we assume that Staff has been reviewing affidavits of environmental compliance submitted annually by each supplier/provider)

  17. Questions? • Contact Info: Mitch King Old Mill Power Company 208 Shreve Avenue Barrington, NJ 08007-1508 Voice: 1-856-310-WATT(9288) Email: mitchking@oldmillpower.com

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