A trade group representing third-party power suppliers says a plan to revive the state’s solar industry unfairly singles them out to fund the changes.
The Retail Energy Supply Association is asking legislators to delay implementation of a solar rescue bill, currently being debated in Trenton, until June 2015, which they say would help put all power suppliers — including the state’s regulated utilities — on an equal playing field.
The Assembly Telecommunications and Utilities Committee is scheduled to hold a hearing Thursday on a plan that would boost the renewable energy requirements for New Jersey power suppliers. The change is meant to help the solar industry, which has been in a state of flux for the past year.
The solar industry’s rapid growth has been fueled by the state’s solar renewable energy certificate program. Essentially, the program gives credits — known as SRECs — to solar array owners based on the green energy they produce. The system owners can then sell those credits to power suppliers, who use the credits to offset their renewable energy mandates. The program ultimately is paid for by ratepayers, who see the costs folded into their monthly electric bills.
The program was so successful that last year, the number of SRECs available in the marketplace exceeded the amount needed to meet renewable energy requirements. That sent SREC prices — which at one point exceeded $600 — down to the low-$100s range. It also sent shockwaves through the solar industry, which has been waiting for months for lawmakers to remedy the situation.
The Assembly bill, which is sponsored by Upendra Chivukula (D-Somerset), would boost the renewable energy requirements, but also set a moderated ceiling for SREC prices. A Senate bill, sponsored by Senate President Stephen Sweeney (D-West Deptford) and Bob Smith (D-Middlesex), would do the same thing.
RESA State Chairman Jay Kooper said his group is all for helping to revive solar in New Jersey. The problem, he said, is that the current language in the bill would foist the costs of the solar fix upon retail supplier customers right away, while giving utilities’ customers a temporary exemption.
“What we’re primarily worried about is that not only will this legislation more than double the current SREC obligations, but … it will single out customers of competitive retail suppliers for what we regard as unfair treatment,” said Kooper, who also is director of regulatory affairs at Hess Corp.
That’s because both the versions of the bill would grandfather in existing wholesale electricity contracts, meaning generators with such contracts would only have to adopt the new requirements — and thus, the higher costs — as those existing contracts expire. The provision is limited to power “providers” which, according to the bill, would only include providers who sell their electricity through the regulated basic generation service auction. In other words, according to RESA, the exemption would benefit customers who get their power from utilities, but not customers who get their power from the third-party providers.
Based on a “conservative” estimate that the solar bill will boost SREC prices to $250, RESA said the increased costs to ratepayers would come to $307 million, on average, for the next two years. If SRECs reach $300, the bill for ratepayers could balloon to $400 million, according to RESA’s estimate.
Beyond that, Kooper said the existing legislation wouldn’t alter the requirements to account for the exemptions. Instead, he said, those without exemptions would have to bear a disproportionate portion of the cost.
On Thursday, Kooper will ask the Assembly committee to insert language delaying implementation of the bill until 2015. That would be long enough for his industry’s existing customer contracts to expire. Kooper said typical contracts for RESA members don’t exceed three years.
The contracts, he said, “were not executed at a time when we knew that halfway through the game the state of New Jersey was going to not only ramp up or propose ramping up the solar renewable portfolio mandate requirement, but to do so substantially.”
RESA argues the bill would cause third-party providers to leave the New Jersey market, leaving ratepayers with fewer choices, but Dennis Wilson, president of the Mid-Atlantic Solar Energy Industries Association, dismissed that notion outright.
“I don’t believe that for one minute,” he said. “The impact of SRECs is so tiny as a part of the energy mix, it has no impact on their competitiveness. Miniscule.”
Wilson said current regulations already have given third-party providers a major advantage over utilities. Utilities are required to base their rates on a three-year average of energy prices, meaning spikes or drops in prices are phased in, while third-party providers can purchase energy on the spot market, with market-reflective pricing. Lately, natural gas has helped drive down the cost of electricity, giving third-party providers the opportunity to scoop up market share as they advertise lower rates.
Beyond that, Wilson argued, the solar industry can’t wait three years for help.
“It would mean a crash — a deeper crash — in the SREC marketplace, the inability to close projects with customers, and thousands of employees out on the street,” he said.