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CMP, BHE Propose Selling Output from Long-Term Contracts in Wholesale Market, Applying Impact to All Customers

July 25, 2011
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Central Maine Power and Bangor Hydro-Electric have both recommended selling the energy associated with new long-term contracts with renewable energy facilities into the wholesale market, with any costs or benefits applicable to all customers (Docket 2011-222).

As only noted in Matters (6/30), the PUC directed the utilities to file proposals for the disposition of energy, capacity, and RECs from various new long-term contracts between the utilities and renewable generation.

For the energy from the facilities, both CMP and Bangor Hydro-Electric recommended a sale into the wholesale market, rather than using the energy for Standard Offer load. Regarding the allocation of any costs/benefits, both utilities recommended making the net impact nonbypassable, though under different mechanisms.

Specifically, CMP proposed that energy (as well and capacity and RECs) arising from long-term contracts be auctioned in a manner similar to the process used under Chapter 307 for the utilities' undivested generation assets.

If the PUC found the bids resulting from such auctions to be inadequate, the Commission could instead order the sale of such resources through bilateral sales or sales into the ISO-NE spot market (where applicable), CMP recommended.

For energy, BHE recommended that output be sold into the ISO-NE spot market, noting that PUC Staff have previously stated that the existing Chapter 307 auction process for undivested generation might not produce the best price for the intermittent generation at issue.

BHE did not offer a proposal for disposition of capacity or RECs, but, regarding RECs, BHE expressed concern regarding bilateral REC sales. Due to FERC's Standards of Conduct, BHE said that it is concerned that the bilateral sale of RECs would be categorized as a "marketing" function, and thus require a separate marketing organization within the utility to comply with various FERC compliance guidelines.

A marketing group which conforms to FERC's Standards of Conduct does not exist within BHE's current structure (having no need for one under its current operations), and BHE expressed concern about the costs of creating such a unit solely to sell RECs.

BHE does not believe this issue will apply to the aforementioned energy sales, as BHE is seeking a waiver from FERC's Standards of Conduct for such energy sales on the basis that the sales will be solely as a price taker in the ISO-NE market. However, as the nature of REC sales is bilateral, BHE does not believe FERC would grant a waiver from the Standards of Conduct with respect to REC sales.

As to the costs (or benefits) of the contracts, CMP proposed including such costs in distribution rates. BHE instead recommended using the existing stranded cost mechanism for cost recovery of the contracts, which would still apply the net impact of costs and revenues under the contracts to all customers on a nonbypassable basis.

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