PSC Orders Changes To SOS Procurement

October 27, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The District of Columbia PSC directed Pepco to revise an RFP for a portion of SOS load to be filled by a long-term contract with a renewable energy developer to:

(1) add existing and expanding facilities to the types of facilities that can bid (versus just new facilities previously)

(2) include a pricing collar review (discussed further below)

(3) add offshore wind facilities to the types of facilities that can bid,

(4) lower the threshold of facilities that can bid to five (5) MW (from the prior 10 MW),

(5) include a termination payment, the terms of which should be negotiated and included in the contract between Pepco and the eventual seller.

Concerning the price collar, the PSC adopted a term to provide Pepco with the ability to renegotiate the purchase price if the annual average price falls outside of 15% of the prevailing market price. The inclusion of terms to allow for renegotiation of the purchase price would ensure that the price continues to stay in line with market conditions throughout the duration of the contract, some parties had suggested

"[T]he Commission directs Pepco to include in the RFP and the draft PPA a pricing collar review where every five (5) years, both the seller and Pepco can reopen the contract and renegotiate the purchase price if the price at the time of review falls outside of 15% of the prevailing market price," the PSC said

The PSC retained the following existing terms of the RFP

• retain a contract duration of 15 to 20 years,

• retain the size of the procurement at 5% of the Standard Offer Service (SOS) load

• retain Pepco as the counterparty to the PPA.

Although Pepco previously selected a developer to serve the 5% of SOS load allocated to a long-term renewable agreement, as previously reported, the developer terminated the agreement. Pepco thus suggested changes the RFP to attract more developers

Concerning proposals from some parties to increase the amount of SOS covered by the long-term PPA, the PSC said, "The Commission initially established this PPA as a 'pilot program.' Thus, in keeping with our original vision of this PPA, the Commission believes it is best to keep the target quantity at 5%. As the Commission previously noted, starting small in this manner would help minimize risks to ratepayers since the price risk would be significantly reduced as the impact of procuring 5% of SOS load in this manner on SOS prices is very slight."

The PSC summarized the changes thusly: "Based on the directives in the preceding paragraphs, the Commission directs Pepco to file a revised RFP and a draft PPA within 30 days of the date of this Order. Pepco shall include the following terms in the revised RFP and draft PPA: 1) existing and expanding solar, onshore, or offshore facilities that are five (5) MW or larger; 2) pricing collar review; 3) termination payment; 4) PPA duration of 15 to 20 years; 5) PPA to supply a target quantity of 5% of the SOS load; and 6) retain Pepco as the counterparty to the PPA."

FC 1017

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