New Jersey Seeks Input As It Considers Removing the RPS Requirement from the BGS Procurement Process

by Cozen O'Connor
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The New Jersey Board of Public Utilities (the Board) recently announced that it is soliciting feedback from industry stakeholders regarding a proposal to remove the Renewable Portfolio Standard (RPS) requirement from the Basic Generation Service (BGS) procurement process. Board staff asked stakeholders to respond to 11 questions, which have now been posted to the Board website.

The questions cover a number of topics, such as the effect of removing the RPS requirement from the procurement process, current BGS supplier contracts for Renewable Energy Credits (RECs), and potential legal impediments. Stakeholders must submit their answers by November 4, 2013. Reply responses will be due by December 2, 2013.

New Jersey’s electric distribution companies (EDCs) procure BGS at annual procurement auctions (the BGS Auctions). The BGS Auctions are regulated by the Board.

Each BGS supplier is required by law to comply with New Jersey’s RPS as part of the BGS procurement process. This RPS requirement means that the BGS suppliers must provide a certain number of RECs each year.

Multiple parties have asked the Board to evaluate whether it would be beneficial to remove the RPS requirement from the BGS procurement process. Boston Pacific Company, Inc. (Boston Pacific) is an independent consultant that evaluates the BGS auction results and makes recommendations to the Board on improving future BGS auctions. In a 2010 report to the Board, Boston Pacific advised the Board to consider removing the RPS requirement from the BGS auction.

Despite the fact that the RPS requirement promotes New Jersey’s renewable generation goals, Boston Pacific stated that ratepayers may be paying too much for renewables and that the process could be more transparent. Boston Pacific also noted that removing the RPS requirement from the BGS procurement process could create a more flexible market place with a broader mix of generation resources.

During a Board proceeding to evaluate the BGS auction process, the New Jersey Division of Rate Counsel (Rate Counsel) also asked the Board to consider removing the RPS requirement from the BGS procurement process. Rate Counsel suggested that as an alternative, the RPS obligation should be placed upon the EDCs, who could be directed to procure renewable energy on behalf of ratepayers as a complement to BGS procurement.

In response to Rate Counsel’s request, in June 2012, the Board directed its staff to explore the possibility of removing the RPS requirement from the BGS procurement process. Board staff is currently in the process of doing so, but has asked for stakeholder input before it makes a final recommendation to the Board.

As a decision by the Board to remove the RPS requirement from the BGS procurement process has the potential to affect the EDCs, BGS suppliers, generators of renewable energy, and ratepayers, this is an issue that should be closely watched.

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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