STATE OF MAINE PUBLIC UTILITIES COMMISSION Docket No. 2010-00235 January 24, 2018 PUBLIC UTILITIES COMMISSION Ocean Energy Long-Term Contracting ORDER REQUESTING COMMENT VANNOY, Chairman; WILLIAMSON and DAVIS, Commissioners I. SUMMARY Through this Order, the Commission requests comment on whether it should reconsider its February 13, 2014 Part One Order and February 19, 2014 Part Two Order (collectively, Approving Orders) approving the December 4, 2013 Term Sheet for the Maine Aqua Ventus (MAV) offshore wind project (the Project). The Commission defers a decision on the proposed Long-Term Contract for Capacity and Associated Energy (Agreement or Contract) between MAV and Central Maine Power Company (CMP) filed on December 13, 2017 until after these comments are received and considered. II. BACKGROUND1 The proposed MAV Contract results from the 2010 legislation An Act To Implement the Recommendations of the Governor’s Ocean Energy Task Force, P.L. 2009, ch. 615 (Ocean Energy Act) and the 2013 supplemental legislation An Act To Provide for Economic Development with Offshore Wind Power, P.L. 2013, ch. 378 (Supplemental Act). These laws required the Commission to conduct a competitive solicitation for proposals for long-term contracts to supply installed capacity, associated renewable energy, and renewable energy credits (RECs) from one or more deep-water offshore wind energy pilot projects or tidal energy demonstration projects. Specifically, the Ocean Energy Act states that the Commission may direct one or more transmission and distribution (T&D) utilities, as appropriate, to enter into a longterm contract pursuant to a request for proposals (RFP) only if it determines that the bidder: A. Proposes sale of renewable energy produced by a deep-water offshore wind energy pilot project or a tidal energy demonstration project as defined in the RFP; B. Has the technical and financial capacity to develop, construct, operate and, to the extent consistent with applicable federal law, decommission and remove the 1 For a more detailed explanation of the background to this proceeding, please refer to the attached February 19, 2014 Part Two Order. ORDER REQUESTING COMMENT 2 Docket No. 2010-00235 project in the manner provided by Title 38, section 480HH, subsection 3, paragraph G; C. Has quantified the tangible economic benefits of the project to the State, including those regarding goods and services to be purchased and use of local suppliers, contractors and other professionals, during the proposed term of the contract; D. Has experience relevant to tidal power or the offshore wind energy industry, as applicable, including, in the case of a deep-water offshore wind energy pilot project proposal, experience relevant to the construction and operation of floating wind turbines, and has the potential to construct a deepwater offshore wind energy project 100 megawatts or greater in capacity in the future to provide electric consumers in Maine with project-generated power at reduced rates; E. Has demonstrated a commitment to invest in manufacturing facilities in Maine that are related to deep-water offshore wind energy or tidal energy, as applicable, including, but not limited to, component, turbine, blade, foundation or maintenance facilities; and F. Has taken advantage of all federal support for the project, including subsidies, tax incentives and grants, and incorporated those resources into its bid price. Additionally, the Act limits the increase in electrical rates resulting from long-term contracts authorized pursuant to the RFP and the Supplemental Act sets that limitation such that the impact on any customer class could be no greater than $1.45 per MWh. Based on the original version of the Act, the Commission concluded that the Legislature intended that customers that take service at transmission and subtransmission voltage would not have a rate impact resulting from any ocean energy long-term contracts. Maine Public Utilities Commission, Ocean Energy Long-Term Contracting, Order on Rate Impact Limitation, Docket No. 2010-235 (Sept. 28, 2010). At the end of the solicitation process prescribed by statute, the MAV Project was the only remaining bid available for Commission consideration. After discussions with Commission Staff, MAV submitted a proposed term sheet on December 4, 2013 containing the essential terms of a long-term power purchase agreement for a 12 MW offshore wind pilot project located in the UMaine Test Site (Term Sheet). The Term Sheet proposed the basic terms that would form the basis of a subsequent contract, including the contract duration, the price, and certain economic benefit obligations. MAV proposed that the contract be for a twenty-year term at a price of $0.23 per kilowatt hour (kWh) during the first contract year, increasing by 2.25 percent in each subsequent year. The economic benefit obligations included provisions to, in part, employ Maine persons, purchase Maine products, and contract with Maine businesses during both the development and the operations phases of the Project. The Commission requested comments on the Project and received approximately 300 responses from individuals and organizations. Comments provided ORDER REQUESTING COMMENT 3 Docket No. 2010-00235 a mix of support and opposition, with those in favor citing the potential for economic benefits to the state and those opposed focusing on the proximity of the Project to Monhegan Island and the associated potential for noise and visual impacts, impacts on migratory birds, scale of the turbines, impacts on lobstering and fisheries, the schedule for the process, and Monhegan as a unique and historic location in Maine and the world. Through the Approving Orders, the Commission approved the MAV Term Sheet.2 In approving the Term Sheet, the Commission analyzed the proposal against the statutory criteria provided by the Ocean Energy Act. The Commission found that the Term Sheet met each of the statutory requirements, determining that, inter alia, the MAV partners provided the necessary technical and financial capabilities to the Project and that the economic benefits the Project provided to the State were sufficient to meet the standards established by statute. After more than three years passed, MAV requested that the contract be developed, and a series of discussions were held among MAV, Commission Staff, and CMP to draft a contract consistent with the Term Sheet and the Approving Orders. On December 13, 2017, MAV submitted the resulting Agreement for Commission approval. III. DISCUSSION In the years spanning passage of the Ocean Energy Act in 2009, Commission approval of the Term Sheet in 2014, and now presentation of the proposed Agreement for Commission consideration, there have been significant changes in domestic and international energy markets and to some of the specific details of this Project. Prior to considering the approval of the Agreement that has been submitted, the Commission requests comments on whether it should reconsider the Approving Orders and reopen this proceeding, pursuant to 35-A M.R.S. § 1321, in light of changed circumstances as described below. A. Energy Market Prices To understand the factors that resulted in the passage of the Ocean Energy Act, it is useful to reference the preamble to the Act. The “Whereas” clauses initially explain that crude oil prices reached $147 per barrel in 2008, and that such prices were expected to remain high or rise even further in the future. Since that time, however, energy markets have experienced downward pressure due to factors that include the nearby shale gas revolution in Pennsylvania. This has led to a reduction in oil prices such that the Energy Information Administration (EIA) projects 2018 crude oil prices to average $57 per barrel, roughly one third of the price referenced by the Ocean Energy Act.3 2 3 Commissioner Vannoy dissented. Energy Information Administration, Annual Energy Outlook 2017, West Texas Intermediate Spot Price (dollars per barrel). ORDER REQUESTING COMMENT 4 Docket No. 2010-00235 A similar downward trend has also occurred in the electricity supply market. The Commission’s most current forecast, provided in November 2017 by London Economics International (LEI), indicate that electricity market prices in in early years of the Project operations will be less than $0.04 per kWh and that by the end of the Contract’s term energy prices will be approximately $0.07 per kWh.4 These LEI forecasts were recently provided in Request for Approval of Third Triennial Plan Pertaining to Efficiency Maine, Socket No, 2015-00175. These recent electricity price projections are approximately 50% to 80% lower than those considered by the Commission when it approved the Term Sheet and, based on this forecast, the contract energy prices would be approximately five-to-six times higher than the value of the energy produced, and the differential would be borne by CMP’s ratepayers. The Commission seeks comment on whether the current outlook for energy prices suggests an inconsistency with the intent of the statute to both develop a technology that would be commercially viable without subsidy and provide “electric consumers in Maine with project-generated power at reduced rates,” P.L. 2009, ch. 615, § A-6, and whether any such inconsistency warrants the reconsideration of the approval of the Term Sheet. B. Technology Advances Offshore wind technology has experienced significant changes over recent years. In particular, necessary cost reductions are being achieved through scale economies from increasing the generating capacity of the turbines. The Commission requests comments on whether the technological features of the pilot Project are likely to provide the same benefit as originally proposed, given the technological advancements in the offshore wind industry in recent years. C. Renewable Energy Goals The preamble to the Ocean Energy Act also describes the potential of offshore wind energy resources in terms of meeting Maine’s renewable energy goals. In particular, the Ocean Energy Act states that offshore energy resources have the potential “to meet the State’s ambitious renewable energy portfolio standards . . . and to position the State to be an exporter of clean, renewable indigenous energy.” However, Maine’s current renewable energy resources exceed the state’s renewable goals 4 In dissenting from the 2014 Order approving the Term Sheet, Chairman Vannoy explained that MAV’s stated goal for offshore wind projects was to achieve a levelized cost of electricity of $0.10 per kWh by the year 2031. This goal was a “best-case” scenario that was premised on large commercial demand for the technology driving economies of scale and the production of equipment. Even if MAV were to achieve this “best-case” scenario goal on future developments of $0.10 per kWh by 2031, the current energy forwards and forecasts suggest that ongoing public funded subsidies may still be required to develop a commercially viable technology. ORDER REQUESTING COMMENT 5 Docket No. 2010-00235 established by its renewable portfolio standard. 35-A M.R.S. § 3210. Based on EIA data from 2016, about two-thirds of the net electricity generation in Maine is from renewable resources, including hydro, biomass, and wind.5 In addition, EIA indicates that Maine terrestrial wind turbines generate three-fifths of all utility-scale wind power in the six New England states.6 The Commission seeks comment on whether the changed circumstances with respect to renewable development in the State serves as a basis for reconsideration of the approval of the Term Sheet. D. Tangible Economic Benefits and Commitment to Manufacturing Facility The Commission seeks comment on whether the increased interest in and development of offshore wind projects by other East Coast states, specifically with respect to the opportunities to achieve tangible economic benefits for the State, would serve as a basis for reconsideration of the approval of the Term Sheet. The Act requires that the tangible economic benefits be quantified and that the economic benefits include the commitment to invest in a manufacturing facility in Maine related to offshore wind or tidal energy. Consistent with this requirement, the Term Sheet contains commitments to contract with Maine-based manufacturers and to make efforts to locate new manufacturers in Maine. In recent years, however, other states on the East Coast have established offshore wind programs and efforts7 with a goal to locate manufacturing facilities in those states. Should the potential for these benefits to accrue to Maine be reassessed in light of the changed landscape for offshore wind and the competition from other states? E. Project Specific Circumstances In addition, several details of the Project that were relevant to Commission approval of the Term Sheet have changed. The Commission seeks comment on whether any of these changes would serve as a basis for reconsideration of the approval of the Term Sheet. Specifically, the Commission seeks comment on whether any of these changes should be reconsidered in accordance with the requirements of the Ocean Energy Act and with the findings of the Commission in its approval of the Term Sheet. 5 U.S. Energy Information Administration, Maine, State Profile and Energy Estimates, available at https://www.eia.gov/state/?sid=ME (last visited Jan. 19, 2018). 6 7 Id. Massachusetts, for example, has required the utilities in that state to procure 1,600 megawatts of power from offshore wind facilities by 2027. An Act to Promote Energy Diversity, St. 2016, c. 188. ORDER REQUESTING COMMENT 1. 6 Docket No. 2010-00235 Project Ownership Structure The partnership structure for the Project that existed in 2014 has been modified. The original partners to the Project were MAV, Cianbro Corporation, the University of Maine, and Emera Inc. (Emera). Maine Public Utilities Commission, Ocean Energy Long-Term Contracting, Docket No. 2010-235, Order Approving Term Sheet (Part Two), 9 (Feb. 19, 2014). Emera, however, has been replaced by Naval Energies (DCNS). The Project partnership structure in existence at the time the Term Sheet was approved was an important factor in the Commission’s analysis and is directly relevant to several of the criteria required by statute. See id. at 9 & fn. 7 (describing Emera’s role in enabling the Project to meet the criteria required by statute). To what extent should the change in participating partners be re-evaluated? 2. Interconnection Location The location that the Project will interconnect with the electric grid has changed from the interconnection location considered in the Approving Orders. At the time the Commission originally considered the Term Sheet, MAV intended to interconnect the Project with the electric grid at Bristol, Maine. Prior to reaching its determination, the Commission had received numerous comments from interested persons in Bristol. However, MAV no longer intends to interconnect at Bristol, and the Project’s interconnection location is currently unsettled. What significance should the Commission assign to the absence of a planned interconnection location? To what extent should persons with an interest in the ultimate interconnection location have an opportunity to comment on the Project? 3. Monhegan Local Benefits As noted, the Term Sheet specifies that the Project will provide electric energy to Monhegan Plantation Power District (MPPD) or an alternative benefits package acceptable to MAV requiring approval by the Commission and pay for and install a fiber optic cable to Monhegan. The Commission found in its Part Two Order that the Project met statutory criteria irrespective of any specific benefit arrangement with local communities and that it had no objection to the Monhegan benefits structure in the Term Sheet. Part Two Order at 16. The local benefits package for Monhegan that is proposed at this time is significantly different and expanded from what was originally part of the proposed terms. To what extent should the changes to the Monhegan benefits package approved by MAV and MPPD be re-evaluated? To what extent should any community benefits package be a part of A Commission directed contract with a utility? IV. REQUEST FOR COMMENT In order to provide an opportunity to obtain input and comments on the factors noted above, the Commission defers decision on this Agreement pending public comment and Commission consideration of those comments. Significant time has passed since the Commission approved the Term Sheet and market conditions and ORDER REQUESTING COMMENT 7 Docket No. 2010-00235 other relevant factors have and will continue to change. Accordingly, the Commission seeks input on reconsideration of the prior orders that approved the MAV Term Sheet. Comment is requested from interested persons on whether the Commission should reconsider, pursuant to 35-A M.R.S. § 1321, the February 13, 2014 Part One Order and the February 19, 2014 Part Two Order approving MAV’s Term Sheet. In particular, the Commission requests that comments address the issues raised by the Commission in the above discussion. Interested persons are encouraged to file comments through the Public Comments Tab of this Docket No. 2010-00235 in the Commission’s Case Management System (CMS). The Commission will afford Public Comments the same weight as comments submitted under the Filings tab. To submit comments, please follow the following instructions: 1. Visit the Commission’s website at http://www.maine.gov/mpuc/. 2. Select the link titled “Online Filing, Docketed Cases, Forms & RFPs” from the list to the left of the initial page. 3. Select the link titled “Public” in the “Online Filing” box. 4. Select the link titled “Submit a comment in a Case/Docket” on the right side of the available links. 5. In the “Case Number” search bar, type 2010-00235 and select the “GO” link. 6. In the appropriate boxes, provide the required information and comments, as well as any attachments that are appropriate, and select the “POST COMMENT” link. The Commission requests that comments be filed by February 14, 2018. Dated at Hallowell, Maine this 24th day of January 2018. BY ORDER OF THE COMMISSION /s/Harry Lanphear ____________________________ Harry Lanphear Administrative Director COMMISSIONERS VOTING FOR: Vannoy Williamson Davis ORDER REQUESTING COMMENT 8 Docket No. 2010-00235 NOTICE OF RIGHTS TO REVIEW OR APPEAL 5 M.R.S. § 9061 requires the Public Utilities Commission to give each party to an adjudicatory proceeding written notice of the party's rights to review or appeal of its decision made at the conclusion of the adjudicatory proceeding. The methods of review or appeal of PUC decisions at the conclusion of an adjudicatory proceeding are as follows: 1. Reconsideration of the Commission's Order may be requested under Section 11(D) of the Commission's Rules of Practice and Procedure (65-407 C.M.R. 110) within 20 days of the date of the Order by filing a petition with the Commission stating the grounds upon which reconsideration is sought. Any petition not granted within 20 days from the date of filing is denied. 2. Appeal of a final decision of the Commission may be taken to the Law Court by filing, within 21 days of the date of the Order, a Notice of Appeal with the Administrative Director of the Commission, pursuant to 35-A M.R.S. § 1320(1)- (4) and the Maine Rules of Appellate Procedure. 3. Additional court review of constitutional issues or issues involving the justness or reasonableness of rates may be had by the filing of an appeal with the Law Court, pursuant to 35-A M.R.S. § 1320(5). Note: The attachment of this Notice to a document does not indicate the Commission's view that the particular document may be subject to review or appeal. Similarly, the failure of the Commission to attach a copy of this Notice to a document does not indicate the Commission's view that the document is not subject to review or appeal.