Part 2.
PUBLIC UTILITY COMMISSION OF TEXAS
Chapter 25.
SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS
Subchapter H. ELECTRICAL PLANNING
1.
RENEWABLE ENERGY RESOURCES AND USE OF NATURAL GAS
16 TAC §25.173
The Public Utility Commission of Texas (commission) adopts
an amendment to §25.173, relating to Goal for Renewable Energy, with
changes to the proposed text as published in the October 3, 2003 issue of
the
Texas Register
(28 TexReg 8480). The amendment
changes the formula for calculating final renewable energy credit (REC) purchase
requirements, adds a mechanism to account for corrections to retail sales
data, and permits the Program Administrator of the REC trading program to
petition for deadline changes under certain circumstances. Project Number
28407 is assigned to this proceeding.
The commission proposed three changes to §25.173 in response to concerns
about compliance difficulties caused by adjustments made by the Program Administrator
in determining final REC requirements for individual competitive retailers
(CRs) when taking into account settled corrections to retail sales. The commission
proposed amending the rule so that each CR's final REC requirement for a compliance
period is increased to recapture the total usable offsets calculated by dividing
the CR's preliminary REC requirement by the total preliminary REC requirement
of all CRs.
The commission also proposed that concurrent with determining a CR's final
REC requirements for the compliance period, the Program Administrator is to
recalculate the final REC requirements for the previous compliance period,
taking into account settled corrections to retail sales. Finally, the commission
proposed amending the rule to allow the Program Administrator to request an
adjustment to the deadlines set forth in §25.173(l) in subsequent compliance
periods if changes to the ERCOT settlement calendar affect the availability
of reliable sales data. The commission requested comments on the proposed
changes.
The commission received written comments on the proposed amendment on November
3, 2003 and reply comments on November 14 and 17, 2003. Parties submitting
written comments included Reliant Resources, Incorporated (RRI), Green Mountain
Energy Company (Green Mountain), the Texas Wind Coalition, American Electric
Power Company (AEP), and TXU Energy Retail Company (TXU Energy).
Comments on proposed changes to §25.173(h)(2)(C).
RRI strongly supported the changes proposed in §25.173(h)(2)(C) pertaining
to the allocation of final REC requirements among CRs for a compliance period
in order to recapture the total usable REC offsets. RRI asserted that the
current method of reallocating offsets unfairly discriminates against CRs
without offsets because it reallocates the offsets based on an adjusted market
share determination instead of the actual market share on which the initial
allocation is based. RRI alleged that the current method of reallocating offsets
permits "double-dipping" by CRs applying offsets. RRI provided extensive comments
and a mathematical example of this problem in Project Number 26912,
AEP argued that the commission's proposed change is confusing, unwarranted
and inequitable. Specifically, AEP asserted that the proposed revision circumvents
the treatment of REC offsets related to existing renewable facilities as agreed
upon during the development of the existing rule and appears to increase the
purchase requirements imposed upon all CRs that possess REC offsets. AEP asserted
that entities that made long-term investments in renewable resources prior
to adoption of §25.173 were given the opportunity to fully satisfy their
REC obligations by utilizing REC offsets and that this opportunity will be
diminished if the proposed amendment is adopted because it would effectively
reduce the impact of any REC offsets. AEP argued that those entities that
invested in renewable resources before they were required to do so and which,
as a result, possess REC offsets far in excess of their preliminary REC requirements
may nonetheless have a final REC purchase obligation. AEP argued that this
significantly impacts small businesses and affected persons that made significant
investments in existing renewable resources and runs contrary to the commission's
contention that the current rule ensures that cumulative capacity targets
required under Public Utility Regulatory Act (PURA) §39.904(a) are achieved
in a manner that does not unnecessarily raise costs of the overall program
to Texas consumers. AEP urged that, to the extent that the commission establishes
a REC purchase requirement based more heavily upon a CR's percentage of total
retail energy sales in Texas, any changes to this methodology should be explained
in greater detail to eliminate the possibility of confusion.
TXU Energy agreed with AEP that the impact of the commission's proposed
amendment would be to reduce the value of REC offsets. TXU Energy argues that
the proposed amendment is not needed.
In its reply to AEP's comments, RRI urged the commission to reject any
arguments that the proposed amendment is more complicated or confusing than
the existing rule and indicated that it has previously provided comments that
mathematically explain in detail the two different methods and that both are
straightforward algebraic formulations. In fact, RRI argued the proposed method
is slightly less complicated because it uses the original market share instead
of an adjusted market share in calculating the offset reallocation, which
is more intuitive. RRI asserted that the current methodology permits CRs with
offsets to count those offsets twice--first by subtracting them from their
preliminary requirement and again by using an adjusted market share calculation
in recapturing offsets. RRI argued that it is the current rule that is unfair
and inequitable to those CRs who do not have offsets because those CRs must
obtain a disproportionate amount of additional RECs to make up the difference
for the market as a whole. As to AEP's argument that the proposed amendment
will increase costs to serve residential and small commercial customers, RRI
replied that this suggestion is without merit. It argued that few CRs own
offsets since offsets are only available to entities with renewable investments
prior to electric restructuring. RRI contended that the proposed amendment
should drive costs down as CRs will not have to buy more RECs to make up for
the offsets used by others under the existing rule.
The Texas Wind Coalition urged the commission to ensure that any potential
modification to the REC allocation methodology not lessen the quantity or
timing of aggregate REC retirement obligations and suggested that it be made
clear that the cumulative impact of REC obligation adjustments due to resettlements
will not reduce the total quantity of RECs that have to be acquired during
any compliance year. In reply, RRI noted that while proposed §25.173(h)(2)
modifies the method by which offsets are allocated to market participants,
it does not affect the overall number of RECs or offsets that must be retired
by the market as a whole in any given compliance period.
Commission response
The commission agrees with RRI's reasoning that the methodology in the
existing rule results in some retailers covering the obligation of others,
placing them in a position of double liability, and that this double liability
is unfair. Fundamentally, the current methodology allocates a preliminary
requirement that is statutory in origin, adjusts the allocations, and recovers
the cost of the adjustment from those who are not eligible for the adjustments.
Unlike the preliminary requirement, however, the burden of the adjustment
is not statutory in nature.
The commission finds that AEP has exaggerated and mischaracterized the
reallocation that would result from this amendment. The net changes to a retailer's
final REC requirement may be summarized more accurately as follows:
(1) All retailers in aggregate: No net change; the total statewide requirement
would be the same.
(2) Retailer with
no
offsets: Decrease.
(3) Retailer with
fewer
offsets than preliminary
requirement: Decrease, no change, or increase (depending on number of offsets
relative to requirement; the final requirement will decrease for those with
few offsets, and will increase for those whose offsets are nearly equal to
the preliminary requirement).
(4) Retailer with offsets
equal
to preliminary
requirement: Increase (currently zero).
(5) Retailer with
more
offsets than preliminary
requirement: Increase or no change (depending on amount of excess offsets;
if the retailer has enough offsets, the final requirement still may be zero).
The commission reaffirms its intent to recognize the value of renewable
capacity installed before September 1999. REC offsets were created by the
commission to embody this value in the REC trading program, but they were
never intended to be superior to the value of new capacity. The statutory
requirement for new renewable capacity, which is embodied in the preliminary
requirement, is shared on a pro rata basis among all retailers who are subject
to the requirements of PURA §39.904. The burden of taking into account
the historical value of existing renewable capacity should also be shared
on a pro rata basis by all these same retailers. The commission finds that
the amended methodology strikes a fair balance between allowing individual
retailers credit for their existing renewable resources, and sharing among
all retailers the burden of recognizing existing renewable capacity. Subsection
(h)(2)(C) is amended as published.
Comments on proposed §25.173(h)(3).
While RRI agreed with the principle of adjusting a CR's REC requirement
if final resettlements related to retail sales result in a change in the REC
requirement for the previous compliance period, RRI did not recommend the
commission's proposed change to §25.173(h)(3). In its reply comments
to the Texas Wind Coalition, RRI argued that the true- up process contemplated
in proposed §25.173(h)(3) could result in the REC obligation being moved
from one year to another (even if over the entire program the aggregate number
of RECs retired remained unchanged).
RRI suggested that a better approach would be to ensure that the date for
compliance by CRs follows the date when ERCOT issues true-up settlements of
energy sales and that this approach will ensure that the REC obligations are
calculated correctly the first time--eliminating the need for true-ups. RRI
noted that Section 9.2 of the ERCOT protocols requires that final statements
be issued 59 days following the end of an operating day and true-up statements
issued within six months of an operating day. RRI asserted that the schedule
under the ERCOT protocols as opposed to the compliance deadlines under §25.173
will always result in inaccurate calculations of REC requirements. RRI argued
that the commission's proposed change will place CRs in the position of aiming
for targets that potentially do not reflect reality. Instead, RRI suggested,
the Program Administrator should be given until July 31 of each year (instead
of January 31) to notify each CR of its REC requirement for the previous calendar
year compliance period. July 31 uses the six-month period in which settlement
statements are trued up and an additional month to calculate the requirements
(as provided for in the existing rule). While RRI recognized that true-up
settlements are currently taking more than six months, RRI expected that the
market settlement issues currently being experienced are not permanent issues.
RRI suggested other deadlines consistent with the timeline established in
the current rule. After the Program Administrator notifies a CR on July 31
of its REC requirement for the previous calendar year compliance period, the
CR has until October 31 to satisfy its REC requirements (instead of March
31). In turn, on November 1 (instead of April 1), the Program Administrator
would retire RECs that have not been retired by CRs and have reached the end
of their three-year life. RRI suggested a deadline of November 30 (instead
of April 15) for the Program Administrator to submit its annual report to
the commission pursuant to §25.173(g)(11). Finally, RRI proposed extending
the enforcement deadline for noncompliance with REC requirements to December
31 (currently April 1). RRI recommended changes to the definition of "settlement
period" in §25.173(c)(17) as well as changes to the corresponding portions
of §25.173(g)(11), (k)(5), (l)(1)-(2) and (o) to reflect changes in deadlines.
Green Mountain supported RRI's comments regarding the proposed change to §25.173(h)(3),
as it believes that delaying the compliance timeline to conform to the ERCOT
settlement timeline, as recommended by RRI, would avoid the true-up contemplated
in the proposed rule while still ensuring that the total annual REC requirement
is appropriately allocated among load service entities. Green Mountain suggested
that, with the extension of the deadlines as proposed by RRI, the rules should
be relaxed to allow RECs generated in the first quarter of the year following
the compliance period to be used to satisfy obligations for the compliance
period. Specifically, Green Mountain recommended that §25.173(m)(5) be
changed to permit a CR to meet its renewable energy requirements within one
calendar quarter after the end of the compliance period.
TXU Energy disagreed with RRI's position and stated that there is no need
to further delay the actions to be taken to meet a CR's obligation simply
to ensure that its calculation is 100% accurate. TXU Energy agreed that Staff's
proposal would give retail electric providers more than adequate time to know
the impact of prior-period adjustments on their current compliance year requirement
in order to take that into account in REC purchase/sale decisions. However,
TXU Energy asserted that adoption of a true-up mechanism is unnecessary because
corrections to retail sales that have taken place or may continue to take
place in the near term are of minor magnitude.
Commission response
The commission finds that the approach advocated by RRI and Green Mountain
would not necessarily solve the problems caused by revised settlement data.
True-ups could conceivably be backed up to the new dates proposed by RRI,
yet without the flexibility permitted by the proposed amendment, the problem
would simply be delayed and yet remain unsolvable. While RRI may prove correct
in its assumption that true-up delays are a thing of the past, the commission
is unwilling to take that risk by sacrificing administrative flexibility.
The transition to a nodal-priced wholesale market will necessarily involve
many significant changes to ERCOT market operation systems, and these changes
may cause a new round of settlement delays.
For this reason, the commission also disagrees with TXU's contention that
the amendment is not necessary because the magnitude of future true-up changes
will be small. If that turns out to be the case, then this amendment will
do no harm to the REC program. On the other hand, if the transition to a nodal
market (or some other cause) does result in significant resettlement issues,
the amendment will provide the REC Program Administrator with a tool for dealing
with it and assuring that delays do not result in an unfair shifting of the
compliance burden.
The commission therefore adopts new subsection (h)(3) as published, and
declines to add the changes proposed by RRI.
Comments on proposed changes to §25.173(l)(3).
RRI agreed with the commission's proposed modification to provide the Program
Administrator with some flexibility to adjust the timelines if changes to
the ERCOT settlement calendar warrant such a change when calculating REC obligations.
Finally, RRI agreed that the sentence in §25.173(l)(3) pertaining to
compliance deadlines for 2002 can be deleted since they are no longer applicable.
AEP recommended that parties have notice of and an opportunity to comment
on any change to the compliance deadlines which the Program Administrator
requests. As such, AEP recommended that the proposed language be modified
to require that notice be given to affected parties not later than 60 days
prior to the date of any compliance deadline to be adjusted. TXU Energy agreed
that notice as proposed by AEP should be given to affected parties.
RRI asserted that notice as to proposed schedule changes would be unnecessary
under its proposal since it is recommending that the date for compliance by
CRs follows the date when ERCOT issues true-up settlements of energy sales
and that this approach will ensure that the REC obligations are calculated
correctly the first time. As such, the need to invoke proposed §25.173(l)(3)
would be very unusual.
Commission response
The commission finds that AEP's request to require at least 60 days advance
notice of any calendar change requested by the Program Administrator is impractical,
unreasonable, and would render the amendment useless. The amendment as published
would enable the Program Administrator to address unforeseen circumstances--specifically,
problems with obtaining settlement data--that may affect the timely calculation
of CRs' final REC requirements. The extent of such problems and the time required
to correct them may not be known before November, which is when the Program
Administrator would have to request the extension if AEP's suggestion were
adopted.
The commission finds that it would be prudent to allow for some limited
ability to amend deadlines in response to problems beyond the control of the
Program Administrator, and adopts the new paragraph as published.
All comments, including any not specifically referenced herein, were fully
considered by the commission.
This amendment is adopted under the Public Utility Regulatory
Act, Texas Utilities Code Annotated §14.002 (Vernon 1998 & Supplement
2004)(PURA), which provides the commission with the authority to make and
enforce rules reasonably required in the exercise of its powers and jurisdiction;
and, specifically PURA §39.904, which requires that the commission adopt
rules to promote the development of renewable energy technologies.
Cross Reference to Statutes: Public Utility Regulatory Act §14.002
and §39.904.
§25.173.Goal for Renewable Energy.
(a)
Purpose. The purpose of this section is to ensure that
an additional 2,000 megawatts (MW) of generating capacity from renewable energy
technologies is installed in Texas by 2009 pursuant to the Public Utility
Regulatory Act (PURA) §39.904, to establish a renewable energy credits
trading program that would ensure that the new renewable energy capacity is
built in the most efficient and economical manner, to encourage the development,
construction, and operation of new renewable energy resources at those sites
in this state that have the greatest economic potential for capture and development
of this state's environmentally beneficial resources, to protect and enhance
the quality of the environment in Texas through increased use of renewable
resources, to respond to customers' expressed preferences for renewable resources
by ensuring that all customers have access to providers of energy generated
by renewable energy resources pursuant to PURA §39.101(b)(3), and to
ensure that the cumulative installed renewable capacity in Texas will be at
least 2,880 MW by January 1, 2009.
(b)
Application. This section applies to power generation companies
as defined in §25.5 of this title (relating to definitions), and competitive
retailers as defined in subsection (c) of this section. This section shall
not apply to an electric utility subject to PURA §39.102(c) until the
expiration of the utility's rate freeze period.
(c)
Definitions.
(1)
Competitive retailer--A municipally-owned utility, generation
and transmission cooperative (G&T), or distribution cooperative that offers
customer choice in the restructured competitive electric power market in Texas
or a retail electric provider (REP) as defined in §25.5 of this title.
(2)
Compliance period--A calendar year beginning January 1
and ending December 31 of each year in which renewable energy credits are
required of a competitive retailer.
(3)
Designated representative--A responsible natural person
authorized by the owners or operators of a renewable resource to register
that resource with the program administrator. The designated representative
must have the authority to represent and legally bind the owners and operators
of the renewable resource in all matters pertaining to the renewable energy
credits trading program.
(4)
Early banking--Awarding renewable energy credits (RECs)
to generators for sale in the trading program prior to the program's first
compliance period.
(5)
Existing facilities--Renewable energy generators placed
in service before September 1, 1999.
(6)
Generation offset technology--Any renewable technology
that reduces the demand for electricity at a site where a customer consumes
electricity. An example of this technology is solar water heating.
(7)
New facilities--Renewable energy generators placed in service
on or after September 1, 1999. A new facility includes the incremental capacity
and associated energy from an existing renewable facility achieved through
repowering activities undertaken on or after September 1, 1999.
(8)
Off-grid generation--The generation of renewable energy
in an application that is not interconnected to a utility transmission or
distribution system.
(9)
Program administrator--The entity approved by the commission
that is responsible for carrying out the administrative responsibilities related
to the renewable energy credits trading program as set forth in subsection
(g) of this section.
(10)
REC offset (offset)--An REC offset represents one MWh
of renewable energy from an existing facility that may be used in place of
an REC to meet a renewable energy requirement imposed under this section.
REC offsets may not be traded, shall be calculated as set forth in subsection
(i) of this section, and shall be applied as set forth in subsection (h) of
this section.
(11)
Renewable energy credit (REC or credit)--An REC represents
one megawatt hour (MWh) of renewable energy that is physically metered and
verified in Texas and meets the requirements set forth in subsection (e) of
this section.
(12)
Renewable energy credit account (REC account)--An account
maintained by the renewable energy credits trading program administrator for
the purpose of tracking the production, sale, transfer, purchase, and retirement
of RECs by a program participant.
(13)
Renewable energy credits trading program (trading program)--The
process of awarding, trading, tracking, and submitting RECs as a means of
meeting the renewable energy requirements set out in subsection (d) of this
section.
(14)
Renewable energy resource (renewable resource)--A resource
that produces energy derived from renewable energy technologies.
(15)
Renewable energy technology--Any technology that exclusively
relies on an energy source that is naturally regenerated over a short time
and derived directly from the sun, indirectly from the sun, or from moving
water or other natural movements and mechanisms of the environment. Renewable
energy technologies include those that rely on energy derived directly from
the sun, on wind, geothermal, hydroelectric, wave, or tidal energy, or on
biomass or biomass-based waste products, including landfill gas. A renewable
energy technology does not rely on energy resources derived from fossil fuels,
waste products from fossil fuels, or waste products from inorganic sources.
(16)
Repowering--Modernizing or upgrading an existing facility
in order to increase its capacity or efficiency.
(17)
Settlement period--The first calendar quarter following
a compliance period in which the settlement process for that compliance year
takes place.
(18)
Small producer--A renewable resource that is less than
two megawatts (MW) in size.
(d)
Renewable energy credits trading program (trading program).
Renewable energy credits may be generated, transferred, and retired by renewable
energy power generators, competitive retailers, and other market participants
as set forth in this section.
(1)
The program administrator shall apportion a renewable resource
requirement among all competitive retailers as a percentage of the retail
sales of each competitive retailer as set forth in subsection (h) of this
section. Each competitive retailer shall be responsible for retiring sufficient
RECs as set forth in subsections (h) and (k) of this section to comply with
this section. The requirement to purchase RECs pursuant to this section becomes
effective on the date each competitive retailer begins serving retail electric
customers in Texas.
(2)
A power generating company may participate in the program
and may generate RECs and buy or sell RECs as set forth in subsection (j)
of this section.
(3)
RECs shall be credited on an energy basis as set forth
in subsection (j) of this section.
(4)
Municipally-owned utilities and distribution cooperatives
that do not offer customer choice are not obligated to purchase RECs. However,
regardless of whether the municipally-owned utility or distribution cooperative
offers customer choice, a municipally-owned utility or distribution cooperative
possessing renewable resources that meet the requirements of subsection (e)
of this section may sell RECs generated by such a resource to competitive
retailers as set forth in subsection (j) of this section.
(5)
Except where specifically stated, the provisions of this
section shall apply uniformly to all participants in the trading program.
(e)
Facilities eligible for producing RECs in the renewable
energy credits trading program. For a renewable facility to be eligible to
produce RECs in the trading program it must be either a new facility or a
small producer as defined in subsection (c) of this section and must also
meet the requirements of this subsection:
(1)
A renewable energy resource must not be ineligible under
subsection (f) of this section and must register pursuant to subsection (n)
of this section;
(2)
The facility's above-market costs must not be included
in the rates of any utility, municipally-owned utility, or distribution cooperative
through base rates, a power cost recovery factor (PCRF), stranded cost recovery
mechanism, or any other fixed or variable rate element charged to end users;
(3)
For a renewable energy technology that requires fossil
fuel, the facility's use of fossil fuel must not exceed 2.0% of the total
annual fuel input on a British thermal unit (BTU) or equivalent basis;
(4)
The output of the facility must be readily capable of being
physically metered and verified in Texas by the program administrator. Energy
from a renewable facility that is delivered into a transmission system where
it is commingled with electricity from non-renewable resources can not be
verified as delivered to Texas customers. A facility is not ineligible by
virtue of the fact that the facility is a generation-offset, off-grid, or
on-site distributed renewable facility if it otherwise meets the requirements
of this section; and
(5)
For a municipally owned utility operating a gas distribution
system, any production or acquisition of landfill gas that is directly supplied
to the gas distribution system is eligible to produce RECs based upon the
conversion of the thermal energy in BTUs to electric energy in kWh using for
the conversion factor the systemwide average heat rate of the gas-fired units
of the combined utility's electric system as measured in BTUs per kWh.
(6)
For industry-standard thermal technologies, the RECs can
be earned only on the renewable portion of energy production. Furthermore,
the contribution toward statewide renewable capacity megawatt goals from such
facilities would be equal to the fraction of the facility's annual MWh energy
output from renewable fuel multiplied by the facility's nameplate MW capacity.
(f)
Facilities not eligible for producing RECs in the renewable
energy credits trading program. A renewable facility is not eligible to produce
RECs in the trading program if it is:
(1)
A renewable energy capacity addition associated with an
emissions reductions project described in Health and Safety Code §382.05193,
that is used to satisfy the permit requirements in Health and Safety Code §382.0519;
(2)
An existing facility that is not a small producer as defined
in subsection (c) of this section; or
(3)
An existing fossil plant that is repowered to use a renewable
fuel.
(g)
Responsibilities of program administrator. No later than
June 1, 2000, the commission shall approve an independent entity to serve
as the trading program administrator. At a minimum, the program administrator
shall perform the following functions:
(1)
Create accounts that track RECs for each participant in
the trading program;
(2)
Award RECs to registered renewable energy facilities on
a quarterly basis based on verified meter reads;
(3)
Assign offsets to competitive retailers on an annual basis
based on a nomination submitted by the competitive retailer pursuant to subsection
(n) of this section;
(4)
Annually retire RECs that each competitive retailer submits
to meet its renewable energy requirement;
(5)
Retire RECs at the end of each REC's three-year life;
(6)
Maintain public information on its website that provides
trading program information to interested buyers and sellers of RECs;
(7)
Create an exchange procedure where persons may purchase
and sell RECs. The exchange shall ensure the anonymity of persons purchasing
or selling RECs. The program administrator may delegate this function to an
independent third party. The commission shall approve any such delegation;
(8)
Make public each month the total energy sales of competitive
retailers in Texas for the previous month;
(9)
Perform audits of generators participating in the trading
program to verify accuracy of metered production data;
(10)
Allocate the renewable energy responsibility to each competitive
retailer in accordance with subsection (h) of this section; and
(11)
Submit an annual report to the commission. Beginning with
the program's first compliance period, the program administrator shall submit
a report to the commission on or before April 15 of each calendar year. The
report shall contain information pertaining to renewable energy power generators
and competitive retailers. At a minimum, the report shall contain:
(A)
the amount of existing and new renewable energy capacity
in MW installed in the state by technology type, the owner/operator of each
facility, the date each facility began to produce energy, the amount of energy
generated in megawatt-hours (MWh) each quarter for all capacity participating
in the trading program or that was retired from service; and
(B)
a listing of all competitive retailers participating in
the trading program, each competitive retailer's renewable energy credit requirement,
the number of offsets used by each competitive retailer, the number of credits
retired by each competitive retailer, a listing of all competitive retailers
that were in compliance with the REC requirement, a listing of all competitive
retailers that failed to retire sufficient REC requirement, and the deficiency
of each competitive retailer that failed to retire sufficient RECs to meet
its REC requirement.
(h)
Allocation of REC purchase requirement to competitive retailers.
The program administrator shall allocate REC requirements among competitive
retailers. Any renewable capacity that is retired before January 1, 2009 or
any capacity shortfalls that arise due to purchases of RECs from out-of-state
facilities shall be replaced and incorporated into the allocation methodology
set forth in this subsection. Any changes to the allocation methodology to
reflect replacement capacity shall occur two compliance periods after which
the facility was retired or capacity shortfall occurred. The program administrator
shall use the following methodology to determine the total annual REC requirement
for a given year and the final REC requirement for individual competitive
retailers:
(1)
The total statewide REC requirement for each compliance
period shall be calculated in terms of MWh and shall be equal to the renewable
capacity target multiplied by 8,760 hours per year, multiplied by the appropriate
capacity conversion factor set forth in subsection (j) of this section. The
renewable energy capacity targets for the compliance period beginning January
1, of the year indicated shall be:
(A)
400 MW of new resources in 2002;
(B)
400 MW of new resources in 2003;
(C)
850 MW of new resources in 2004;
(D)
850 MW of new resources 2005;
(E)
1,400 MW of new resources in 2006;
(F)
1,400 MW of new resources in 2007;
(G)
2,000 MW of new resources in 2008; and
(H)
2,000 MW of new resources in 2009 through 2019.
(2)
The final REC requirement for an individual competitive
retailer for a compliance period shall be calculated as follows:
(A)
Each competitive retailer's preliminary REC requirement
is determined by dividing its total retail energy sales in Texas by the total
retail sales in Texas of all competitive retailers, and multiplying that percentage
by the total statewide REC requirement for that compliance period.
(B)
The adjusted REC requirement for each competitive retailer
that is entitled to an offset is determined by reducing its preliminary REC
requirement by the offsets to which it qualifies, as determined under subsection
(i) of this section, with the maximum reduction equal to the competitive retailer's
preliminary REC requirement. The total reduction for all competitive retailers
is equal to the total usable offsets for that compliance period.
(C)
Each competitive retailer's final REC requirement for a
compliance period shall be increased to recapture the total usable offsets
calculated under subparagraph (B) of this paragraph. The additional REC requirement
shall be calculated by dividing the competitive retailer's preliminary REC
requirement by the total preliminary REC requirement of all competitive retailers.
This fraction shall be multiplied by the total usable offsets for that compliance
period and this amount shall be added to the competitive retailer's adjusted
REC requirement to produce the competitive retailer's final REC requirement
for the compliance period.
(3)
Concurrent with determining competitive retailers' final
REC requirements for the current compliance period in accordance with this
subsection, the Program Administrator shall recalculate the final REC requirements
for the previous compliance periods, taking into account corrections to retail
sales resulting from resettlements. The difference between a competitive retailer's
corrected final REC requirement and its original final REC requirement for
the previous compliance periods shall be added to or subtracted from the retailer's
final REC requirement for the current compliance period.
(i)
Nomination and calculation of REC offsets.
(1)
A REP, municipally-owned utility, G&T cooperative,
distribution cooperative, or an affiliate of a REP, municipally-owned utility,
or distribution cooperative, may apply offsets to meet all or a portion of
its renewable energy purchase requirement, as calculated in subsection (h)
of this section, only if those offsets are nominated in a filing with the
commission by June 1, 2001. A G&T may nominate the combined offsets for
itself and its member distribution cooperatives upon the presentation of a
resolution by its Board authorizing it to do so.
(2)
The commission shall verify any designations of REC offsets
and notify the program administrator of its determination by December 31,
2001.
(3)
REC offsets shall be equal to the average annual MWh output
of an existing resource for the years 1991-2000 or the entire life of the
existing resource, whichever is less.
(4)
REC offsets qualify for use in a compliance period under
subsection (h) of this section only to the extent that:
(A)
The resource producing the REC offset has continuously
since September 1, 1999 been owned by or its output has been committed under
contract to a utility, municipally-owned utility, or cooperative nominating
the resource under paragraph (1) of this subsection or, if the resource has
been committed under a contract that expired after September 1, 1999 and before
January 1, 2002, it is owned by or its output has been committed under contract
to a utility, municipally-owned utility, or cooperative on January 1, 2002;
and
(B)
The facility producing the REC offsets is operated and
producing energy during the compliance period in a manner consistent with
historic practice.
(5)
If the production from a facility producing the REC offset
energy ceases for any reason, the competitive retailer may no longer claim
the REC offset against its REC requirement.
(j)
Calculation of capacity conversion factor. The capacity
conversion factor used by the program administrator to allocate credits to
competitive retailers shall be calculated as follows:
(1)
The capacity conversion factor (CCF) shall be administratively
set at 35% for 2002 and 2003, the first two compliance periods of the program.
(2)
During the fourth quarter of the second compliance year
(2003), the CCF shall be readjusted to reflect actual generator performance
data associated with all renewable resources in the trading program. The program
administrator shall adjust the CCF every two years thereafter and shall:
(A)
be based on all renewable energy resources in the trading
program for which at least 12 months of performance data is available;
(B)
represent a weighted average of generator performance;
(C)
use all valid performance data that is available for each
renewable resource; and
(D)
ensure that the renewable capacity goals are attained.
(k)
Production and transfer of RECs. The program administrator
shall administer a trading program for renewable energy credits in accordance
with the requirements of this subsection.
(1)
A REC will be awarded to the owner of a renewable resource
when a MWh is metered at that renewable resource. A generator producing 0.5
MWh or greater as its last unit generated should be awarded one REC on a quarterly
basis. The program administrator shall record the amount of metered MWh and
credit the REC account of the renewable resource that generated the energy
on a quarterly basis.
(2)
The transfer of RECs between parties shall be effective
only when the transfer is recorded by the program administrator.
(3)
The program administrator shall require that RECs be adequately
identified prior to recording a transfer and shall issue an acknowledgement
of the transaction to parties upon provision of adequate information. At a
minimum, the following information shall be provided:
(A)
identification of the parties;
(B)
REC serial number, REC issue date, and the renewable resource
that produced the REC;
(C)
the number of RECs to be transferred; and
(D)
the transaction date.
(4)
A competitive retailer shall surrender RECs to the program
administrator for retirement from the market in order to meet its REC allocation
for a compliance period. The program administrator will document all REC retirements
annually.
(5)
On or after each April 1, the program administrator will
retire RECs that have not been retired by competitive retailers and have reached
the end of their three-year life.
(6)
The program administrator may establish a procedure to
ensure that the award, transfer, and retirement of credits are accurately
recorded.
(l)
Settlement process. Beginning in January 2003, the first
quarter following the compliance period shall be the settlement period during
which the following actions shall occur:
(1)
By January 31, the program administrator will notify each
competitive retailer of its total REC requirement for the previous compliance
period as determined pursuant to subsection (h) of this section.
(2)
By March 31, each competitive retailer must submit credits
to the program administrator from its account equivalent to its REC requirement
for the previous compliance period. If the competitive retailer has insufficient
credits in its account to satisfy its obligation, and this shortfall exceeds
the applicable deficit allowance as set forth in subsection (m)(2) of this
section, the competitive retailer is subject to the penalty provisions in
subsection (o) of this section.
(3)
The program administrator may request the commission to
adjust the deadlines set forth in this section if changes to the ERCOT settlement
calendar or other factors affect the availability of reliable retail sales
data.
(m)
Trading program compliance cycle.
(1)
The first compliance period shall begin on January 1, 2002
and there will be 18 consecutive compliance periods. Early banking of RECs
is permissible and may commence no earlier than July 1, 2001. The program's
first settlement period shall take place during the first quarter of 2003.
(2)
A competitive retailer may incur a deficit allowance equal
to 10% of its REC requirement in 2002 and 2003 (the first two compliance periods
of the program). This 10% deficit allowance shall not apply to entities that
initiate customer choice after 2003. During the first settlement period, each
competitive retailer will be subject to a penalty for any REC shortfall that
is greater than 10% of its REC requirement under subsection (h) of this section.
During the second settlement period, each competitive retailer will be subject
to the penalty process for any REC shortfall greater than 10% of the second
year REC allocation. All competitive retailers incurring a 10% deficit pursuant
to this subsection must make up the amount of RECs associated with the deficit
in the next compliance period.
(3)
The issue date of RECs created by a renewable energy resource
shall coincide with the beginning of the compliance year in which the credits
are generated. All RECs shall have a life of three compliance periods, after
which the program administrator will retire them from the trading program.
(4)
Each REC that is not used in the year of its creation may
be banked and is valid for the next two compliance years.
(5)
A competitive retailer may meet its renewable energy requirements
for a compliance period with RECs issued in or prior to that compliance period
which have not been retired.
(n)
Registration and certification of renewable energy facilities.
The commission shall register and certify all renewable facilities that will
produce either REC offsets or RECs for sale in the trading program. To be
awarded RECs or REC offsets, a power generator must complete the registration
process described in this subsection. The program administrator shall not
award offsets or credits for energy produced by a power generator before it
has been certified by the commission.
(1)
The designated representative of the generating facility
shall file an application with the commission on a form approved by the commission
for each renewable energy generation facility. At a minimum, the application
shall include the location, owner, technology, and rated capacity of the facility
and shall demonstrate that the facility meets the resource eligibility criteria
in subsection (e) of this section.
(2)
No later than 30 days after the designated representative
files the certification form with the commission, the commission shall inform
both the program administrator and the designated representative whether the
renewable facility has met the certification requirements. At that time, the
commission shall either certify the renewable facility as eligible to receive
either RECs or offsets, or describe any insufficiencies to be remedied. If
the application is contested, the time for acting is extended by 30 days.
(3)
Upon receiving notice of certification of new facilities,
the program administrator shall create an REC account for the designated representative
of the renewable resource.
(4)
The commission may make on-site visits to any certified
unit of a renewable energy resource and may decertify any unit if it is not
in compliance with the provisions of this subsection.
(5)
A decertified renewable generator may not be awarded RECs.
However, any RECs awarded by the program administrator and transferred to
a competitive retailer prior to the decertification remain valid.
(o)
Penalties and enforcement. If by April 1 of the year following
a compliance year it is determined that a competitive retailer with an allocated
REC purchase requirement has insufficient credits to satisfy its allocation,
the competitive retailer shall be subject to the administrative penalty provisions
of PURA §15.023 as specified in this subsection.
(1)
Except as provided in paragraph (4) of this subsection,
a penalty will be assessed for that portion of the deficient credits.
(2)
The penalty shall be the lesser of $50 per MWh or, upon
presentation of suitable evidence of market value by the competitive retailer,
200% of the average market value of credits for that compliance period.
(3)
There will be no obligation on the competitive retailer
to purchase RECs for deficits, whether or not the deficit was within or was
not within the competitive retailer's reasonable control, except as set forth
in subsection (m)(2) of this section.
(4)
In the event that the commission determines that events
beyond the reasonable control of a competitive retailer prevented it from
meeting its REC requirement there will be no penalty assessed.
(5)
A party is responsible for conducting sufficient advance
planning to acquire its allotment of RECs. Failure of the spot or short-term
market to supply a party with the allocated number of RECs shall not constitute
an event outside the competitive retailer's reasonable control. Events or
circumstances that are outside of a party's reasonable control may include
weather-related damage, mechanical failure, lack of transmission capacity
or availability, strikes, lockouts, actions of a governmental authority that
adversely effect the generation, transmission, or distribution of renewable
energy from an eligible resource under contract to a purchaser.
(p)
Renewable resources eligible for sale in the Texas wholesale
and retail markets. Any energy produced by a renewable resource may be bought
and sold in the Texas wholesale market or to retail customers in Texas and
marketed as renewable energy if it is generated from a resource that meets
the definition in subsection (c)(14) of this section.
(q)
Periodic review. The commission shall periodically assess
the effectiveness of the energy- based credits trading program in this section
to maximize the energy output from the new capacity additions and ensure that
the goal for renewable energy is achieved in the most economically-efficient
manner. If the energy-based trading program is not effective, performance
standards will be designed to ensure that the cumulative installed renewable
capacity in Texas meets the requirements of PURA §39.904.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on February 4, 2004.
TRD-200400690
Adriana Gonzales
Rules Coordinator
Public Utility Commission of Texas
Effective date: February 24, 2004
Proposal publication date: October 3, 2003
For further information, please call: (512) 936-7223
Chapter 73.
ELECTRICIANS
Part 4.
TEXAS DEPARTMENT OF LICENSING AND REGULATION