Reasonable Cost Threshold Rules
Since 2004, as part of our renewable energy rules, the Commission has had two types of “reasonable cost thresholds” (RCTs) in place to limit the cost of renewable energy to utilities and their customers. One of the RCTs is an overall cost cap that currently limits the impact of renewable energy procurement on customers’ bills to no more than 2% in 2011, when utilities are otherwise required to obtain 10% of all their electricity from renewable sources. So, if meeting the 2011 required was projected to cause customer bills to be more than 2% higher than they otherwise would have been without renewable energy, utilities would be excused from full compliance with the renewable energy standard. Fortunately, the wind energy that forms the bulk of the renewable energy our utilities have acquired is very cost-effective, and we are not close to the cap at this time.

The second type of RCT the Commission created in 2004 were specific cost price caps for each of the technologies: wind projects could not cost more than 6 cents per kilowatt-hour (kwh); geothermal and biomass, more than 6.25 cents/kwh; large solar, 10 cents/kwh; and small solar, 15 cents/kwh.

Earlier this year, I drafted a proposed rulemaking order asking for comment on the elimination of the technology RCTs, and setting a path for the escalation of the overall bill cap RCT from 2011 through 2015, providing advance guidance to utilities and renewable project developers. Based on the comment received into this rulemaking docket, I have recommended that the PRC adopt rules this coming week that will eliminate the technology RCTs. These technology-specific price caps are difficult to update and to apply, and moreover, they are no longer needed, given that the development of a competitive market renewable energy projects now provides an assurance that new projects are being acquired at the lowest possible cost. A renewable project developers and renewable energy advocates commenting in the rulemaking docket supported elimination of the technology RCTs, as did all but one utility.

I have also recommended that the PRC adopt an escalation factor of 0.25% per year for the overall bill cap RCT, so that in 2015 when the law requires 15% of our electricity to come from renewable sources, the bill impact can be up to 3%. Given that recent rate cases and escalating fossil fuel prices have increased electric rates by more than 10% in a single year, a 3% rate impact over 9 years (2006 through 2015) is a modest investment in our future and in an energy source that is immune to the price volatility that is hammering consumer pocket-book today.