On Thursday, January 28, 2013, Maine’s Public Utility Commission (PUC) approved, by a 2-1 vote, the terms of a long-term contract for the first floating turbine offshore windfarm in Maine. After a few months of negotiation, this is good news for the state, and for renewable energy.

This vote clears a major hurdle toward Statoil putting four, three-megawatt wind turbines on floating platforms in deepwater 12 miles off Boothbay, and marks the early days of implementation of Maine’s Ocean Energy Act. Signed into law in 2009, the Act encourages projects like this one, so as to support the development of renewable energy technology that harnesses ocean energy. In this project, energy generated from the project would be transported via underwater cable to a transfer station on land, delivering renewable energy to the mainland.

Approval for this project has been a long time coming. Statoil, which has successfully operated a one-turbine pilot project off the Norwegian coast for the past year, originally sought approval for a version of its project in October of 2012. At the time, CLF submitted comments supporting the project and the long-term contract, but the PUC tabled its deliberations and asked Statoil to come up with terms that would have a lower price for the electricity generated and guarantee more future benefit to Maine. Click here to see PUC Chairman Welch’s notes from deliberations. Since then, the project has only improved.

Working with PUC staff, Statoil revised the terms of its contract to reduce the price of energy to Maine consumers and add more assurances that if its initial small scale windfarm is successful, it will make all efforts to employ Maine companies as it scales up the project. Click here to see Statoil’s Revised Term Sheet.  We liked these additional terms even more than Statoil’s initial proposal. Again we wrote in favor of the project and expressed our increased support. Click here to view our additional comments.

The vote at this past week’s hearing was 2-1, with Commissioner Littell and Chairman Welch voting in favor of the project. Littell has long been a champion of efforts to reduce carbon emissions, whether during his time at the DEP where he championed RGGI or now at the PUC. Welch deserves credit as he was not supportive of the long-term contract in its initial phase, but recognized that Statoil had made efforts to address his concerns and even more so recognized the potential that offshore wind holds for Maine.

On June 26, 2011, Governor Chafee signed into law the “Distributed Generation Standard Contracts Act.”  The bill had passed both houses of the General Assembly unanimously. The “distributed generation” in the title of the law refers to small, local renewable energy projects.

The new law was designed to do three things: (1) increase the number of small renewable energy projects that are built in Rhode Island; by (2) making it easier, quicker, and cheaper for developers of these projects to get contracts to sell their electricity to Rhode Island’s dominant utility, National Grid; and (3) get those renewable energy projects distributed into more of Rhode Island’s cities and towns.

Not every law passed by the General Assembly works out the way it was meant to, but the Distributed Generation Standard Contracts Act has been phenomenally successful in accomplishing each of its three goals.

Previous renewable energy laws in Rhode Island have worked the way they were intended: to get National Grid to buy more and more of its electricity each year from clean, renewable energy sources. But Rhode Island’s previous renewable energy laws also had a significant flaw: they worked very well for big projects, like Deepwater Wind’s proposed offshore wind farm, but they worked less well for small projects (like a town that wants to set up a single wind turbine at its town hall, as Portsmouth did). That is because under the prior laws, developers would have to hire a small army of lawyers to negotiate an excruciatingly long, detailed contract with Grid, setting forth everything from the price of the electricity to delivery schedule. (For example, the contract that Deepwater filed with the Public Utilities Commission on December 10, 2009 ran 62 pages in length!)  Hiring lawyers to negotiate a 62-page contract was just too time-consuming and expensive for a developer who had a small project.

The new law fixed that problem. As the name of the law suggests, it provided for a “standard contract” for developers of small projects. The standard contract was short, written in plain English, and easy to understand. In addition, the law provided for a standard price to be paid, and established a mechanism for setting a fair price for each different type of project – wind, solar, and so forth. These prices were designed to be high enough to get projects actually built, but low enough to protect electricity rate-payers.

And that is exactly how the new law has worked. In the 15 months since the bill was signed into law, National Grid has held three separate sign-up periods. To date, 18 separate projects have been signed up.  Each of these 18 separate projects will be built right here in Rhode Island. Thus, Rhode Islanders will directly enjoy the environmental and economic-development benefits of these projects. The main purpose of the new law, to get more local renewable energy projects built, has been accomplished – in spades.

The developer of each of these 18 projects got a simple, standard contract to sign, and will receive a set price for the electricity produced.  Thus, another one of the law’s purposes has been accomplished.

The projects themselves are located in Providence, East Providence, Portsmouth, Lincoln, Westerly, Bristol, West Greenwich, East Greenwich, Hopkinton, Middletown, Cumberland, North Kingstown, North Smithfield, and West Warwick.  This geographical distribution of new renewable energy projects was a third purpose of the law.

Rhode Island’s new Distributed Generation Standard Contracts Act has been so successful that it is becoming a model for the rest of the country. Renewable energy advocates in New York and Iowa are hoping to replicate the Rhode Island law in their states. The California Public Utilities Commission has circulated the Rhode Island law to its in-house legal staff. A group of Oregon legislators is poised to introduce a bill in the coming legislative session modeled after the successful Rhode Island law.

The Distributed Generation Standard Contracts Act is a classic win-win. It addresses the problem of climate change by reducing the carbon emissions that cause climate change. And it helps the Rhode Island economy by facilitating local development of renewable energy projects.

This is a law that Rhode Islanders can be proud of. Its enactment reflects well on our legislators (who passed it unanimously) and on Governor Chafee (who signed it into law). The law has been administered carefully and diligently by our Office of Energy Resources. And National Grid, which receives an economic incentive when projects start producing power, has worked conscientiously with developers to help developers succeed.

This week Rhode Island’s dominant utility, National Grid, made its first-ever filing with the Public Utilities Commission (PUC) under Rhode Island’s newly enacted “revenue decoupling” statute. Grid’s filing resolves once and for all a debate that has been swirling around the environmental community in Rhode Island (and the rest of New England) for years – an argument over whether decoupling is a rip-off of utility rate-payers. CLF (and other environmental advocates) have argued for years that there are important environmental benefits to be reaped from decoupling. Opponents, including some ratepayer advocates, argued that decoupling would be bad for rate-payers because it would inevitably lead to unjustified rate hikes.

In response to Grid’s filing with the PUC, the PUC opened a new docket (case) to consider decoupling.  CLF has filed papers to intervene in (participate in) this new PUC docket as a full party; you can see CLF’s Motion To Intervene here.

Grid’s highly technical, 51-page filing with the PUC this week is dense reading, with pages upon pages of complicated charts, but at the end of the day the filing resolves the controversy. Decoupling is good for ratepayers. And in just this first year of operation, Rhode Island electricity ratepayers will receive a collective refund from National Grid of over a million dollars.

Some explanation of what decoupling is and how this controversy has developed is in order.

Traditional utility regulation provides little incentive for utilities to promote energy efficiency. This is because reduction in sales equals a reduction in profits for the utility.

Decoupling is a way to address this problem and to align the utility’s pecuniary interest with the public interest in efficiency and conservation. Decoupling separates (that is, “decouples”) a utility’s income from the amount of commodity the utility sells. This effectively removes a major disincentive to utility enthusiasm for and participation in energy efficiency measures.

Decoupling is not all that is needed to achieve carbon-emission reductions through energy efficiency; but decoupling is one important and necessary ingredient. Many states have decoupled, and there is a high correlation between states that reduce carbon emissions the most (thereby lowering ratepayer bills the most) and states that have decoupled.

Work on “decoupling” is one aspect of CLF’s wider work on reducing carbon emissions in order to address the climate change emergency. More specifically, decoupling is closely linked to our work on energy efficiency. One of the most effective ways to reduce carbon emissions in the short- and medium-term is to work on energy efficiency.

In 2008, CLF participated in a litigation in the PUC in which we tried to get the PUC to decouple gas prices. The litigation, PUC Docket 3943, took weeks, and CLF presented an expert witness, crossed examined witnesses of other parties, submitted briefs. But CLF lost the case; the PUC ruled that it would not decouple gas prices in Rhode Island.

In 2009, CLF tried again, this time trying to get the PUC to decouple electricity prices. This litigation, PUC Docket 4065, also took weeks – again, we presented an expert witness, cross-examined other parties’ witnesses, briefed the issue. Again we lost; the PUC ruled that it would not decouple electricity prices.

The main argument against decoupling was that it would hurt ratepayers. The Division of Public Utilities and Carriers (this is the statutory ratepayer advocate in Rhode Island, and is different than the PUC) opposed decoupling for this reason, as did others. One expert witness against decoupling put it this way: “[T]he plan would allow a broad range of automatic rate adjustments that would result in rate increases . . . .There is no down side to the Company. The only down side is to the ratepayers.”

In response, CLF introduced evidence that actually came from 28 natural gas utilities and 12 electric utilities in 17 states across the country that have operative decoupling mechanisms. This broad range of utilities showed two important results from decoupling. First, decoupling adjustments tend to be small, even miniscule. Compared to total residential retail rates, decoupling adjustments have been most often under two percent, positive or negative, with the majority under 1 percent. Second, decoupling adjustments go both ways, sometimes providing small refunds to customers, sometimes providing small surcharges.

Nevertheless, despite the evidence we introduced, we lost both cases. The PUC was persuaded that decoupling was just a trick whereby the utility could always ratchet rates upward.

In 2010, CLF, working with other environmental organizations supported a bill in the Rhode Island General Assembly that would require decoupling of both electricity and gas prices. On May 20, 2010, Governor Donald Carcieri signed the bill into law.

On October 18, 2010, the PUC opened a new docket in order to implement the new law that mandated decoupling. This time, the question wasn’t whether Rhode Island would decouple, but how. CLF participated as a full party in the docket in order to ensure that the decoupling mechanisms adopted would be designed to reap all the environmental benefits without unduly hurting or harming ratepayers. Nine months later, on July 26, 2011, the PUC approved an excellent set of decoupling rules for both electricity and gas.

And this week, Grid filed its first report under the new Rhode Island decoupling statute and under the PUC rules. It shows that, on the electricity side, Grid is going to rebate to Rhode Island ratepayers just over a million dollars for the year just ending.

Remember the two points that CLF’s expert witnesses made in the decoupling dockets that we lost in 2008 and 2009.

• First, decoupling adjustments tend to be very small, even miniscule.

• Second, decoupling adjustments go both ways. Sometimes ratepayers pay a little extra; sometimes ratepayers get a rebate.

Grid’s filing this week in the PUC shows that CLF was correct on both points. This time, ratepayers are getting a rebate. And, yes, the amount is small. For the average (500 kilowatt-hour per month) electricity customer, the rebate will be 7¢ per month, or 84¢ per year. (And, yes, the adjustments can go both ways, and next year there might be a miniscule surcharge.) Meanwhile, everyone in Rhode Island enjoys the savings and efficiency benefits that decoupling enables – and the environment enjoys lower carbon emissions.

I think there may be two lessons that can be learned from this – one about CLF and one about the broader environmental movement.

About CLF: One of the things I love about working for CLF is the stick-to-itiveness that the organization (and my fellow and sister staff members) have. In 2008, we litigated decoupling, and we lost. So we tried again. When we lost again, we turned to a different forum, the General Assembly. When the law we supported passed, we were pleased – but we didn’t rest. We still had another litigation in the PUC to make sure that the law was properly implemented.

CLF is nothing if not persistent!

And about the broader environmental movement: So often our opponents argue that environmental protections are too costly to implement. Too often, the arguments made by environmentalists about the benefits and savings from environmental protections are just not believed by decision-makers and by ordinary citizens. With decoupling, everyone (including the PUC and so many others) just “knew” that decoupling would be an expensive rip-off. When evidence like this comes to light about the financial and pecuniary benefits of environmental laws, we should make sure that the public knows.

In response to a February 21 order by the Rhode Island Supreme Court, the Conservation Law Foundation (CLF) today filed a brief defending its legal standing in the Deepwater Wind case and issued the following statement:

Jerry Elmer, staff attorney at CLF Rhode Island, said, “If CLF and others are denied standing in this case, it will have the effect of shutting down the process for reviewing and appealing the PUC’s decisions on renewable energy contracts, not just in this case, but potentially on all future contracts as well.”

Tricia K. Jedele, director of CLF Rhode Island, said, “The need for a fair and open process to ensure that renewable energy development is done right in Rhode Island is at the heart of CLF’s case. That fair and open process begins with a finding by the Court that CLF has standing to pursue this appeal on behalf of its members and in the interest of Rhode Island’s clean energy future, which is in the public interest.”

Earlier today in Rhode Island, the Public Utilities Commission (PUC) approved the Deepwater Wind/National Grid Power Purchase Agreement (PPA) for the construction of an eight-turbine wind farm in Block Island Sound, denying CLF’s Motion to Dismiss.

Here’s what CLF’s Rhode Island Advocacy Center Director Tricia Jedele had to say about the decision:

Today’s ruling was inevitable, a result dictated by the legislature in a law defined so narrowly that it could have only one outcome. Unchallenged, this law and the accompanying PUC decision set precedent that will only undermine the efforts to build a future for renewable energy in Rhode Island. The failure to allow the PUC any discretion in its decision-making is the very basis of CLF’s Separation of Powers argument, which we are likely to appeal to the Supreme Court.

The Deepwater Wind project in Block Island Sound first met with problems in April 2010 when its Power Purchase Agreement (PPA) with National Grid was rejected by the PUC on the grounds that it was not commercially reasonable. Rather than appeal the decision, Deepwater, with the support of the Governor and the legislature, sought to do an end run around the review process and rewrite the rules to produce a different outcome the second time around. CLF, a longtime champion of renewable energy done right, was one of the first to challenge the moves as unlawful, unfair and a terrible precedent. CLF contended that the amended law was designed to favor one project and one developer, creating an unlevel playing field that would make it impossible for developers to compete successfully for future projects.

“Renewable energy is too important to this state to do it in a way that could threaten its chances for success,” Jedele said at the time.

In July, in advance of a second review of the PPA required under the amended law, CLF filed a Motion to Dismiss, arguing that the PUC should not review the amended Power Purchase Agreement because the law violates the Constitutional doctrine of separation of powers, and the provision which requires that “all laws be made for the good of the whole.” CLF also argued that even if the PUC were to proceed, it could not review the PPA because the doctrine of res judicata bars litigation of a claim that has already been litigated between the same parties.