Monday, December 17, 2007

Wind Power: Who Pays and Who Benefits?

Who should bear the costs and the benefits of wind power? The Public Service Commission (PSC) staff report offered this recommendation:
After an informed and deliberative review of the proposed PPA, Staff recommends that the State Agencies approve the PPA with the condition precedent that the Commission enter an order approving a non-bypassable charge, pursuant to 26 Del. C. § 1010(c), that spreads the cost associated with the PPA to Delmarva’s entire customer base.
I have been hearing of a great deal of interest in expanding the customer base. In and of itself, it's a reasonable question. However, making adoption of the PPA contingent is problematic
First the law governing this process, EURCSA, specifies Standard Offer Service (SOS) or retail customers, and does not allow for a change in the customer base as part of the decision on the outcome of negotiations.
Second, sending the issue to the General Assembly to act on this particular issue raises the risk of having legislators try to open the PPA on a host of other issues.
Pat Gearity addresses the legal issues in her letter to the PSC:

It is definitely possible to address the “fairness” issue (cost-sharing across DPL or state-wide) but I believe it must be done in a logical sequence, or the wind farm proposal could be destroyed in a Gordian knot of competing interests, through no fault of its own. I believe EURCSA, 29 Del. Code §1010c provides the answer (my bold below):

§ 1010. Electric distribution companies' obligation to serve customers.

(c) After hearing and a determination that it is in the public interest, the Commission is authorized to restrict retail competition and/or add a nonbypassable charge to protect the customers of the electric distribution company receiving standard offer service. The General Assembly recognizes that electric distribution companies are now required to provide standard offer service to many customers who may not have the opportunity to choose their own electric supplier. Consequently, it is necessary to protect these customers from substantial migration away from standard offer service, whereupon they may be forced to share too great a share of the cost of the fixed assets that are necessary to serve them as required by the Electric Utility Retail Customer Supply Act of 2006, 75 Del. Laws, c. 242. (72 Del. Laws, c. 10, § 3; 74 Del. Laws, c. 73, §§ 4, 5; 75 Del. Laws, c. 242, § 8.)

Section 1010c above states the purpose of the nonbypassable charge is to “protect” the customers from “substantial migration” as the result of a increased rates which could compel others to leave Delmarva Power for another supplier of power. There is no language in the statute to allows the Commission to condition approval of a contract on a surcharge hearing.
Marc Weiss and Nancy Sedmak-Weiss and Professors Firestone and Kempton offer similar arguments in their submissions, which can be read along with Pat's letter here.
If the PPA is approved tomorrow, it is likely to include some proviso on expanding the customer base. How the resolution is worded could determine whether the deal is concluded in a timely manner or the entire matter gets bogged down in the General Assembly.

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