A Cure for What Ails You

SEA assists Connecticut PURA in revising DER programs based upon findings of an independent audit

Written by: Jim Kennerly, Director; and Cal Brown, Senior Policy Analyst

Publish Date: December 7, 2022

Estimated Reading Time: 10 minutes

On November 9, 2022, in Docket 22-08-03, the Connecticut Public Utilities Regulatory Authority (PURA) issued a Final Decision that will govern Year 2 of the Non-Residential Renewable Energy Solutions (NRES) program. The Final Decision adopted or took steps towards considering several of the recommendations from the Independent Audit of the Year 10 LREC/ZREC and Year 2 and Guidelines for Curable Errors performed by Sustainable Energy Advantage (SEA).

On behalf of PURA, our team reviewed the electric distribution company’s (EDC’s, Eversource Energy and the United Illuminating Company) processes and outcomes for the Year 9 & 10 LREC/ZREC procurement (the predecessor to the NRES program) and the Year 2 SCEF procurement. These program changes are the product of a robust stakeholder process following the submission of the Report during which stakeholder comments on the Report’s finding and recommendations. The Recommendations provided a menu of options for consideration by stakeholders and policymakers.

Performance Assurance

SEA Audit Findings: The Report found that there was more speculative bidding in the LREC/ZREC program than in the SCEF program. This, the Report found, was due in large part due to differing requirements for bid submission. For example, while SCEF project sponsors are required to post performance assurance payment at the time of bid submission, project sponsors submitting bids into the (now legacy) LREC/ZREC program and Year 1 of the NRES program were required to post only a $300 nonrefundable bid fee to have their bid accepted. . This led to multiple instances where bidders were offered to execute contract agreements at the prices the developer bid, but developers declining to execute such contracts.

Related PURA Determinations: After supportive comments from stakeholders across the spectrum of interests (EDC program administrators, public and quasi-public agencies, and several developers) PURA adopted the SCEF performance assurance model for NRES Year 2. PURA ordered that the EDCs institute a refundable performance assurance fee of $25.00/kW_AC for all project bids, due at time of bid submission. The $300 per bid nonrefundable fee will be subtracted from the performance assurance. However, the required Performance Assurance will be returned to the bidder if any of the following conditions are met (listed verbatim):

• The selected project enters commercial operation in a timely fashion and begins producing energy consistent with the rules outlined in the Program Manual;
• The Project’s eligibility under the tariff is terminated for failure to receive regulatory approval satisfactory in substance to the EDC;
• The Project’s eligibility under the tariff is terminated due to a force majeure event; or
• The bid is not selected under the procurement for which the bid was submitted.

Notably, projects that are offered to execute a contract as bid, but decline would not be eligible for a refund of the posted performance assurance.

“Curable” Errors

SEA Audit Findings: The Report found that the EDCs did not have a uniform, transparent definition of what constituted a error in a bid that a developer could be reasonably expected to cure. Therefore, at PURA’s request, SEA developed a set of Draft Guidelines for Curable Errors for stakeholders to consider, proposing that most forms of errors (categorized as “human errors” and “errors of communication”) should be curable withing a window of time after the bidder is notified of an error. However, intentional actions the “game” the procurement nor clear violations of established program rules should not be curable.

Related PURA Determinations: In codifying the Guidelines and Report Recommendation into the Final Decision, PURA:

• Defined human-caused errors as “any error that was unintentional in nature, including and not limited to, typographical errors, forgetting to attach a required document, missing or incomplete data or form entries, submitting an ineligible or incorrect data point or form, and submitting a form that cannot be opened or read”, and clarified that the EDCs’ default approach to such errors should be to assume that they are curable. However, PURA provided the EDCs with a degree of discretion as well, directing them to disqualify bids that contain an unusually high number of errors or contain substantial errors (the agency did not define the latter), at their discretion.
• Defined a communication error as “any error that was caused by incorrect, unclear, or inadequate information or communications from the EDCs.” Bidders will be required to provide evidence that the EDCs miscommunicated certain information.
• Extended the cure window for both human-caused and communication errors from three business days to five.
• Clarified that, in evaluating bids for the commission of errors, the EDCs may use more expansive definitions for errors than the ones provided by PURA, so long doing so would not go against PURA’s objectives for the NRES and SCEF programs.
  • These Objectives are (listed verbatim):
    • Foster the sustained, orderly development of the state’s Class I renewable energy industry;
    • Deploy the full megawatt capacity allowable under statute, to the extent possible (see Conn. Gen. Stat. § 16-244z(c)(1)(A));
    • Ensure least-cost outcomes through the annual solicitation process;
    • Enable program accessibility for customers through simplified program and tariff designs; and
    • Encourage increased inclusivity overall, as well as program participation by customers in underserved and environmental justice communities.
• Explicitly granted discretion to the EDCs in evaluating bids with errors that fall into a grey area, but noted that the EDCs should give bidders the benefit of the doubt when evaluating bids, absent evidence of a pattern of behavior showing an intention to game the rules or submit low-quality bids.
• Ordered the EDCs to file a plan to coordinate on determinations regarding curable errors and other NRES administrative matters and incorporate guidelines of curable errors into the program manual
  • This order addressed the Audit Recommendation for an avenue for the EDCs as Program Administrators to create a clear line of communication and a uniform application of what constitutes a curable error.

Dispute Resolution (Including Potential for Independent Ombudsperson) 

SEA Report Findings: The Report also provided PURA with options for approaching the question of project sponsor-EDC dispute resolution the consideration of an independent ombudsperson to “dedicated resource to elevate and recommend resolutions of issues before PURA.” Such an ombudsperson would likely be a neutral third party who could serve as an independent voice in disputes between parties, or pointedly be empowered to arbitrate disputes themselves. We note that ombudspersons or similar roles are not uncommon across the northeast, as interconnection disputes in Rhode Island, Massachusetts, Maine, and Connecticut require mediation as a dispute resolution step.

PURA noted that many of the solar developer stakeholders supported an independent ombudsperson administering the program, and that the EDCs do not oppose such an arrangement. Though PURA acknowledged that an ombudsperson could aid in the consistency of program administration (for NRES and potentially other clean energy programs) and suggested that it might be open to hiring an independent ombudsperson in future years. PURA chose not to create an ombudsperson for the forthcoming NRES and SCEF procurements, partially in an effort to see if the curable error guidance (discussed above) addresses market participant concerns. PURA also encouraged stakeholders to submit data and arguments for or against an ombudsperson in the 2023 program review proceeding.

Conclusion

PURA’s incorporation of many of the Recommendations into Year 2 of the NRES program shows the value that a systematic, objective review from a firm experienced in renewable energy markets. We encourage anyone interested in similar analysis to check out our Consulting Practice Areas and request a consultation.