The Senate passedan energy bill last week that would require utility companies to buy almost half of the electricity used in Massachusetts from renewable generation sources. AIM remains encouraged by some elements and concerned about others.
The Senate measure (S. 2372, An Act Relative to Energy Diversity) would commit the commonwealth to purchasing 2,000 megawatts of electricity generated by offshore wind and about 1,400 MW from other sources, such as large hydropower and onshore wind. Other sections add requirements for energy labelling on buildings and mandatory energy audits.
AIM’s response to the Senate proposal is the same as its reaction to an earlier bill passed by the House - employers support the concept of buying electricity from clean-energy resources, provided the following guidelines are followed:
- Any contract must be cost-effective for Massachusetts ratepayers (i.e. the benefits of any contract to the ratepayer must be greater than its costs);
- The procurement process must be competitive and decision-makers must have an ability to refuse any bids that do not meet standards (i.e. no carve-outs for favored technologies);
- Any above-market or below-markets costs of the contract must be allocated fairly among all customers;
- The clean energy procured must qualify to be used for compliance with the state’s Global Warming Solutions Act (GWSA), which requires a 25 percent reduction in statewide greenhouse gas emissions by 2020 and an 80 percent reduction by 2050.
The significant amounts of clean-energy solicitations contained in the Senate bill are a matter of concern for employers who already pay some of the highest electricity bills in the country. While the bill provides “off-ramps” allowing utilities to decline contracts deemed unreasonable or not cost-effective, the initiative could be economically damaging if wind and hydro power are priced higher than the electricity we current buy from other sources.
Positive elements of the legislation include:
- The procurement process would require the price of each solicitation for offshore wind to result in lower prices than the solicitation before it, a good requirement.
- The bill would define cost-effective contracts simply as cost less benefits. Inexplicably missing from the requirement is that the benefits must accrue to Massachusetts ratepayers. The Senate version still leaves open the possibility that Massachusetts ratepayers could subsidize out-of-state ratepayers by paying for benefits that accrue to other states. AIM will work with the Senate to clarify this section.
- The bill contains a detailed tracking mechanism to ensure that clean-energy generation is used for compliance with the state greenhouse-gas requirements.
- There is no remuneration surcharge to utilities included, potentially saving customers millions of dollars.
- The creation of a task force to develop a new energy efficiency program starting in 2018.
AIM remains concerned about several elements:
- The bill doubles the renewable portfolio standard, which could increase cost, particularly since the increase in the RPS is not tied to the new timetable for the contracts. The mismatch would create a shortage of renewable power in the short term.
- The cost-allocation methodologies for accounting for above-market power is inconsistent with what we believe should be fair to ratepayers.
Lawmakers are expected to propose a significant number of amendments to the bill this week.