N.J. Admin. Code § 14:8-6.6

Current through Register Vol. 56, No. 11, June 3, 2024

Section 14:8-6.6 - Funding mechanism

(a) Once the Board has approved an offshore wind project under this subchapter, the qualified OSW project shall be funded through an Offshore Wind Renewable Energy Certificate (OREC) as set forth in this subsection and in accordance with the following fundamental principles:

1. A Board Order that approves a qualified OSW project shall be binding and enforceable on all parties referenced therein;

2. The total annual OREC allowance for a qualified OSW project, once approved by the Board, shall not be subject to reduction or modification during the term of each OREC order unless otherwise agreed to by both parties;

3. A developer of a qualified OSW project shall be eligible to receive the project's approved OREC rates and payments for 20 years subject to the terms and conditions of the Board Order;

4. Qualified OSW projects shall only be entitled to OREC revenues for megawatt hours (MWhs) actually generated over the 20-year term delineated in the Board Order, and shall have no recourse against the Board, the suppliers, the EDCs, the OREC administrator, or the ratepayers for any additional payments;

5. ORECs from a qualified offshore wind project shall have a qualification life of three years, including the year it was generated and the following two years, thus, allowing ORECs to be banked for future use; and

6. All revenues generated by an OSW project shall be returned to ratepayers.

(b) The Board Order granting approval of a qualified OSW project, pursuant to the provisions of N.J.A.C. 14:8 -6.5 for designation as a qualified OSW project, shall conform to the provisions of this section and shall include, but not be limited to:

1. A commercial operations date (COD) after which ORECs may be generated, priced, sold, or otherwise attributed to the project;

2. The annual OREC allowance expressed as the total number of MWhs for which a project may be eligible to receive payment of ORECs. This amount shall be based on the total installed capacity of the project, projected capacity factor, and total number of hours of operation per year and any other factors identified by the applicant, consistent with this subchapter;

3. An OREC schedule showing the scheduled amount of ORECs that a project may submit for payment for each month of the year, with the total monthly scheduled amounts equal to the annual OREC allowance;

4. A qualified offshore wind project may not exceed the annual OREC allowance in any given year. Any unmet OREC allowances in a given year may be carried forward to the next year;

5. A requirement that the qualified OSW project comply with the standard participation agreement with the OREC administrator. The standard participation agreement and any subsequent modifications shall be developed by the OREC administrator and approved by the Board;

6. A requirement that all project revenues are refunded to ratepayers;

7. A calculated OREC surcharge for the OSW project, using the anticipated in-service or COD date, based on the OREC price of each approved OSW project multiplied by the estimated annual OREC production in MWhs and divided by the total forecasted load of EDCs plus any applicable sales tax;

8. A directive to each EDC to serve as payment agent on behalf of the suppliers in the EDC's territory;

9. A requirement that the project report annually to the OREC administrator and to the Board on actions taken by the developer to maximize production and revenues;

10. A requirement that the project reports on the policies that may be adopted by the Board to help reduce future OREC pricing and the total ratepayer impact;

11. Annual reporting requirements to ensure RPS compliance and to facilitate the OREC administrator's annual true up to ensure that all obligations have been met;

12. A fixed, flat OREC price for the proposed term or a fixed price for every contract year pursuant to this section;

13. An approved decommissioning plan; and

14. An approved plan for the OSW project, if it is not decommissioned immediately at the conclusion of the approved 20-year term of OREC funding.

(c) The Board shall direct each EDC to serve as payment agent on behalf of the suppliers in each EDC territory to facilitate the transfer of OREC funding payments from ratepayers to offshore wind developers. As payment agent, each EDC shall:

1. File with the Board a tariff no later than 180 days prior to the COD date to collect a non-bypassable OREC surcharge to be assessed as a distribution charge that will be sufficient to meet each supplier's OREC obligation;

2. Implement the ratepayer surcharge based on the Board-approved total annual OREC allowance multiplied by the OREC price, and expressed as a per kilowatt hour (kWh) charge to be collected from all ratepayers on behalf of the suppliers;

3. The amount of the OREC surcharge shall be set by the Board annually, and shall become effective on the first day of each energy year, and shall be equal to the forecast revenue requirements of all OREC purchases divided by the total of estimated sales for each EDC, and shall include all applicable taxes and fees;

4. Begin collecting the OREC surcharge four months in advance of the OSW project COD to ensure that adequate funds will be available to complete the initial OREC payment to the OSW developer;

5. Establish separate accounts for each OSW project to ensure that OREC funds for an OSW project are collected and dedicated to each OSW project individually and shall not be intermingled with any other OSW project;

6. Make monthly OREC payments to OSW developers based on the actual number of MWhs produced by the OSW project, until the total annual OREC allowance approved by the Board Order has been reached;

7. Facilitate and execute the transfer of all revenues generated by an OSW project from the OSW developer to the ratepayers as directed by this section and in accordance with N.J.S.A. 48:3-87.1;

8. Provide detailed, monthly accounting reports to the OREC administrator of all transactions, account balances, and any other information requested by the Board or the OREC administrator related to the obligations identified in this section;

9. Participate in any and all true up proceedings, to be conducted by the OREC administrator, as prescribed by the Board; and

10. File with the Board annually for recoverable charges for the administrative fees incurred as payment agent and for the OREC administrator fees.

(d) The Board shall direct the EDCs to enter into a joint contract to retain an OREC administrator. The contract shall be competitively bid to ensure the most efficient and cost competitive price for ratepayers. The OREC administrator shall:

1. Be independent of any supplier, EDC, or qualified OSW developer, affiliate, investor, and/or employee;

2. Serve as the sole administrator for accounting, compliance, invoicing, and other administrative matters related to or arising from the OREC obligations of qualified OSW facilities pursuant to OWEDA;

3. Notify the EDCs at the beginning of each energy year the total offshore wind carve-out obligation and total surcharge on ratepayers to be collected consistent with the Board Order, as well as the amount to be collected for each qualified offshore wind project and to be held in a separate account;

4. Facilitate all transactions between ratepayers, suppliers, EDCs, and OSW developers;

5. Set up a PJM-EIS GATs account to facilitate the transfer of ORECs from the OSW developers to suppliers;

6. Develop a payment tracking and verification system, subject to Board approval, to track all transactions that shall account for, at a minimum:

i. All payments due by EDCs on behalf of suppliers to OSW developers;

ii. All project revenues from OSW developers to be refunded to ratepayers through the EDCs;

iii. All project revenues held by OSW developers in a reserve account;

iv. All ORECs held in PJM EIS GATs accounts for transfer from OSW developers to suppliers;

v. The final retirement of all ORECs by suppliers in compliance with the RPS offshore wind carve-out;

vi. Supplier load data from PJM in order to confirm each supplier's annual OREC obligation;

vii. EDC load data in order to confirm each EDC's relative share of the annual OREC obligation and ratepayer surcharge;

viii. OSW production data from OSW developers and PJM in order to confirm project performance and all associated revenues in the form of ORECs and project revenues;

ix. All project revenues including PJM revenues paid to the project for energy, capacity and ancillary services as well as any penalties incurred by the project.

x. The monthly transfer of ORECs from qualified OSW projects to a PJM-EIS GATS account managed by the OREC administrator and the transfer of all project revenues to EDCs for refund to ratepayers;

xi. The transfer of ORECs on a quarterly basis via a PJM-EIS GATS account to the suppliers;

xii. Receipt of payment by a qualified OSW project for its annual OREC allowance, based on actual generation and at the price and quantities established in their OREC order issued by the Board;

xiii. Receipt of all project revenues by EDCs for which ratepayers are entitled to a refund;

xiv. Refunds of all project revenues to ratepayers; and

xv. All ORECs that have been banked by OSW developers to meet the supplier obligations in any given year;

7. Conduct a true up two times each energy year at six months and at 12 months of the energy year. The 12-month true up shall be completed and submitted to the Board no later than 90 days after the close of the energy year in accordance with this subchapter to ensure compliance with the OSW RPS and to advise the Board in a technical capacity of any necessary modification to the OSW carve-out and annual RPS percentage three years out;

8. Reasonable administrative costs related to the OREC administrator shall be recoverable by the EDCs. An accounting of such costs will be provided by the EDCs in writing on an annual basis to Board staff and Rate Counsel. Board staff and Rate Counsel shall submit any objections within 60 days; and

9. Any changes proposed by the OREC administrator to a Board-approved system shall be submitted to the Board for approval.

(e) Offshore wind developers, for each qualified OSW project, in addition to any other responsibilities that may be required in the Board Order, shall:

1. Take all reasonable efforts and due diligence to maximize revenues from the qualified OSW project;

2. Establish and maintain a PJM-EIS GATS account to track and document the number of ORECs generated, transferred, and retired.

i. The PJM-EIS GATS account shall serve as the basis of verification of the issuance of one OREC for each MWh of electricity that is generated by the qualified OSW project;

3. Account for all ORECs held in the qualified OSW project's GATS account, which shall be the sole and exclusive property of such approved project and may be transferred to the OREC administrator on behalf of suppliers at the discretion of the project owner;

4. At the end of each month, each OSW developer shall provide to the OREC administrator proof of all ORECs that were issued into their GATS account in that month;

5. At the end of each month, each OSW developer shall submit an invoice to each of the EDCs, who act as the designated payment agent for suppliers, for payment of ORECs. The monthly invoice shall detail the total number of MWhs generated by the project that month and the number ORECs available for sale multiplied by the approved OREC price. The invoice shall also include notice of all project revenues generated that month and due to be refunded to ratepayers;

6. The OREC administrator shall be copied on, and shall approve, all monthly invoices sent to the EDCs for payment;

7. A qualified offshore wind project may submit ORECs for payment based on its actual monthly production up to the approved annual OREC allowance. It may exceed the scheduled monthly allowance in a given month, but may not exceed the annual OREC allowance in a given year;

8. A qualified offshore wind project may carry forward any unmet OREC allowances in a given month to the following month; and

9. A qualified offshore wind project may carry forward any unmet annual OREC allowance in a given year to the next year.

(f) Offshore wind developers shall be responsible for the collection and transfer of all project revenues on behalf of ratepayers as follows:

1. A qualified OSW project shall return all revenues associated with the OSW project to ratepayers;

2. All project revenues shall be held in an interest bearing account to be distributed to ratepayers as set forth under this section;

3. A qualified OSW project may hold project revenues including, but not limited to, PJM revenues, which include all revenues paid to the OSW developers by PJM for the sale of electricity, capacity, and ancillary services to the grid, for a period of three months;

4. If held, PJM revenues shall at the expiration of three months, and upon confirmation of receipt by the OSW project of OREC payment for the corresponding MWhs, then be released for refund to ratepayers on a continuing, monthly basis. Any unmet OREC obligation may be covered by the PJM revenues contingent upon at least 10 days prior notice to the OREC administrator;

5. The qualified OSW project shall provide a monthly accounting to the OREC administrator of all project revenues received, held, and distributed;

6. The OREC administrator shall verify that all project revenues not used for an approved use, are refunded to ratepayers;

7. PJM revenues shall be available for use by the qualified OSW project to:

i. Cover the monthly OREC obligation until full payment is made;

ii. Cover OREC payments during the resolution of an event of EDC default, under-payment, or non-payment by the payment agent;

iii. Upon receipt of payment for ORECs, all PJM revenues associated with the OREC are due to be paid with interest to EDCs for refund to ratepayers; and then

iv. For any purpose deemed necessary, during the period in which they are held in an interest bearing account pending payment for the related ORECs, to ensure that all qualified OSW projects receive their full approved OREC revenues on a timely basis, including, but not limited to, covering seasonal mismatches between OREC purchases and OREC production.

N.J. Admin. Code § 14:8-6.6

Adopted by 51 N.J.R. 219(b), effective 2/19/2019