Pennsylvania's Alternative Energy Portfolio Standard (AEPS), created by S.B. 1030 on November 30, 2004, requires each electric distribution company (EDC) and electric generation supplier (EGS) to retail electric customers in Pennsylvania to supply 18% of its electricity using alternative-energy resources by 2020.* The law initially exempted EDCs (and EGSs operating within an EDC's service territory) from having to comply with the standard during rate freeze and restructuring cost recovery periods. The exemption periods began expiring in 2007, and as of January 1, 2011 none remain in force. Pennsylvania's standard provides for a solar set-aside, mandating a certain percentage of electricity generated by photovoltaics (PV). Pennsylvania's AEPS also includes demand-side management, waste coal, coal-mine methane and coal gasification as eligible technologies.
In 2007 [http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=... H.B. 1203] provided a more detailed solar schedule, clarified the force majeure clause, confirmed REC property rights for generators, added solar thermal to Tier I, clarified that AEPS credits (Alternative Energy Credits or AECs) cannot have been retired for other purposes, and expanded the definition of customer-generator. Revised rules addressing these changes and other necessary clarifications became effective in November 2008.
Separate from the PUC rule making that took place during 2008, the Pennsylvania legislature enacted [http://www.legis.state.pa.us/CFDOCS/Legis/PN/Public/btCheck.cfm?txtType=... H.B. 2200] in October 2008 further amending the RPS. The amendments added specific low-impact hydropower projects as Tier I resources, and also classified pulping and wood manufacturing by-products as either Tier I (in-state facilities) or Tier II (out-of-state facilities) resources. Prior to this, all facilities of this type were defined as Tier II resources. The Pennsylvania Public Utilities Commission (PUC) is required to increase the Tier I percentage (%) requirements on a quarterly basis to reflect these additions to the Tier I resource classification. The PUC subsequently issued an order describing how this will take place, beginning June 1, 2009 (the beginning of the 2009-2010 compliance year). This magnitude of this adjustment has been tiny, amounting to an average increase of 0.004% to the Tier I compliance requirement during CY 2012.
There are two categories of energy sources under the law, termed "Tiers". The standard calls for utilities to generate 8% of their electricity by using "Tier I" energy sources and 10% using "Tier II" sources by May 31, 2021. Generally, eligible resources must originate within Pennsylvania or within the PJM regional transmission organization (RTO) in order to be counted for compliance. However, out-of-state resources located in the MISO (which also serves a portion of Pennsylvania) may be used in areas served by the MISO. This effectively limits the use of out-of-state MISO based resources to the Pennsylvania Power Co. or EGSs operating within its service territory.
Tier I sources include new and existing facilities which produce electricity using the following sources/technologies: photovoltaic energy, solar-thermal energy, wind, low-impact hydro, geothermal, biomass, biologically-derived methane gas, coal-mine methane and fuel cells.
Tier II sources include (new and existing) waste coal, distributed generation (DG) systems, demand-side management, large-scale hydro, municipal solid waste, wood pulping and manufacturing byproducts, and integrated gasification combined cycle (IGCC) coal technology. (See 73 P.S. § 1648.2 for detailed definitions of eligible alternative-energy sources.) The Technical Reference Manual, first adopted in May 2009 but revised annually, contains a detailed description of how demand-side management will be addressed under the standard. The eligible energy efficiency technologies listed at the top of this page are a selection of specific measured identified in the Technical Reference Manual. Solar thermal technologies that do not produce electricity (e.g., domestic solar water heaters) are considered Tier II demand-side management resources.
The PUC has adopted the following 15-year compliance schedule to implement Pennsylvania's AEPS. The compliance year (CY) for the standard runs from June 1 to May 31 and is followed by a 3-month true-up period. The table below refers to each compliance year according to the year in which it ends (e.g., CY 2008 ran from June 1, 2007 to May 31, 2008). Due to supplier exemptions, CY 2007 did not begin until February 28, 2007. All other compliance years include a full year of time.
|Compliance Year (CY)||Tier I (including Solar PV)**||Tier II||Solar PV|
Compliance is based on alternative energy credits (AECs). An AEC is equal to a megawatt-hour of qualified generation, and credits are the property of the generator unless expressly transferred. Banking of excess credits is allowed for up to two years, thus an AEC's useful life is three years, the year it was produced and the two subsequent years for which it can be banked. AECs are tracked by the PJM [http://www.pjm-eis.com/getting-started/about-GATS.aspx GATS system]. Notably, the 2008 rule amendments exempt PV systems of 15 kW or less from a requirement that AEC production be verified by metered data, instead allowing the AEC program administrator to verify system output through alternate means (i.e., an engineering estimate of annual production). All other systems must have AEC production verified by metered data, and the rule has been implemented to only allow such "alternate means" to be used in cases where the system is not equipped with a revenue-grade system production meter.
The law establishes an alternative compliance payment (ACP) of $45 per megawatt-hour for shortfalls in Tier I and Tier II resources. A separate ACP for solar PV is calculated as 200% times the sum of (1) the market value of solar AECs for the reporting period and (2) the levelized value of up-front rebates received by sellers of solar AECs. Monies received through the ACP will be transferred into Pennsylvania's Sustainable Energy Funds and used solely to support alternative-energy projects.
The PUC has determined that electric distribution companies may fully recover "the reasonable and prudently incurred costs of complying" with the AEPS. These include the costs for purchases of alternative energy or alternative energy credits, payments to credit program administrators, and costs levied by RTOs to ensure that alternative resources are reliable. Recoverable costs generally do not include ACPs. The costs will be recovered through an automatic adjustment and are considered to be a cost of generation supply.
The AEPS contains a force majeure clause under which the PUC can make a determination as to whether there are sufficient alternative energy resources in the market for utilities to meet their targets. If the PUC determines that utilities are unable to comply with the standard despite good faith efforts, it may alter the obligation for a given year. The Commission may then require higher obligations in subsequent years to compensate for shortfalls.
Reports summarizing progress and compliance with the standard for 2007 - 2010 are available on the program website.
*Pennsylvania's rural electric cooperatives must offer retail customers a voluntary program of energy efficiency and demand-side management programs to satisfy compliance with the AEPS.
**With the 2008 legislation designating additional Tier I resources and providing for equivalent increases to the Tier I compliance %, the values listed here no longer precisely reflect actual Tier I obligations. As the increases associated with this change will be based on actual generation from the newly designated Tier I resources, it cannot be known precisely in advance how much the values will change for future years. As noted above, the quarterly adjustments averaged 0.004% during CY 2012.