Md. Code art. Public Utilities, § 7-704.1Md. Code, Public Utilities § 7-704.1

Current with changes from the 2024 Legislative Session

Section 7-704.1 - Application for offshore wind project

(a)

(1) The General Assembly finds and declares that:

(i) the State has a goal of reaching 8,500 megawatts of offshore wind energy capacity by 2031, including Round 1 offshore wind projects, Round 2 offshore wind projects, and any other procurement efforts;

(ii) the General Assembly anticipates the issuance of sufficient wind energy leases in the central Atlantic region to satisfy the goal stated in item (i) of this paragraph;

(iii) the development of offshore wind energy is important to the economic well-being of the State and the nation;

(iv) offshore wind can provide clean energy at the scale needed to help achieve the State's economy-wide net-zero greenhouse gas emissions reduction targets established in Chapter 38 of the Acts of the General Assembly of 2022;

(v) it is in the public interest of the State to facilitate the construction of at least 1,200 megawatts of Round 2 offshore wind projects in order to:

1. position the State to take advantage of the economic development benefits of the emerging offshore wind industry;

2. promote the development of renewable energy sources that increase the nation's independence from foreign sources of fossil fuels;

3. reduce the adverse environmental and health impacts of traditional fossil fuel energy sources; and

4. provide a long-term hedge against volatile prices of fossil fuels; and

(vi) it is in the public interest of the State to maximize the opportunities for obtaining and using federal funds for offshore wind and related transmission projects through the inclusion of specified labor standards and goals, domestic content requirements, and other provisions to align State law with provisions of the federal Infrastructure Investment and Jobs Act of 2021 and the federal Inflation Reduction Act of 2022.

(2) After the effective date of Commission regulations implementing this section and § 7-704.2 of this subtitle, and before June 30, 2017, a person may submit an application to the Commission for approval of a proposed Round 1 offshore wind project.

(3)

(i) On receipt of the application for approval of a Round 1 offshore wind project, the Commission shall:

1. open an application period when other interested persons may submit applications for approval of Round 1 offshore wind projects; and

2. provide notice that the Commission is accepting applications for approval of Round 1 offshore wind projects.

(ii) The Commission shall set the closing date for the application period to be no sooner than 90 days after the notice provided under subparagraph (i) of this paragraph.

(4) The Commission shall provide additional application periods beginning, respectively:

(i) January 1, 2020, for consideration of Round 2 offshore wind projects to begin creating ORECs not later than 2026;

(ii) January 1, 2021, for consideration of Round 2 offshore wind projects to begin creating ORECs not later than 2028; and

(iii) January 1, 2022, for consideration of Round 2 offshore wind projects to begin creating ORECs not later than 2030.

(5) In its discretion, the Commission may provide for additional application periods that meet the requirements of this section.

(b) Unless extended by mutual consent of the parties, the Commission shall approve, conditionally approve, or deny an application within 180 days after the close of the application period.

(c) An application shall include:

(1) a detailed description and financial analysis of the offshore wind project;

(2) the proposed method of financing the offshore wind project, including documentation demonstrating that the applicant has applied for all current eligible State and federal grants, rebates, tax credits, loan guarantees, or other programs available to offset the cost of the project or provide tax advantages;

(3) a cost-benefit analysis that shall include at a minimum:

(i) a detailed input-output analysis of the impact of the offshore wind project on income, employment, wages, and taxes in the State with particular emphasis on in-State manufacturing employment;

(ii) detailed information concerning assumed employment impacts in the State, including the expected duration of employment opportunities, the salary of each position, and other supporting evidence of employment impacts;

(iii) an analysis of the anticipated environmental benefits, health benefits, and environmental impacts of the offshore wind project to the citizens of the State;

(iv) an analysis of any impact on residential, commercial, and industrial ratepayers over the life of the offshore wind project;

(v) an analysis of any long-term effect on energy and capacity markets as a result of the proposed offshore wind project;

(vi) an analysis of any impact on businesses in the State; and

(vii) other benefits, such as increased in-State construction, operations, maintenance, and equipment purchase;

(4) a proposed OREC pricing schedule for the offshore wind project that shall specify a price for the generation attributes, including the energy, capacity, ancillary services, and environmental attributes;

(5) a decommissioning plan for the project, including provisions for decommissioning as required by the United States Department of the Interior;

(6) a commitment to:

(i) abide by the requirements set forth in subsection (f) of this section; and

(ii) deposit at least $6,000,000, in the manner required under subsection (h) of this section, into the Maryland Offshore Wind Business Development Fund established under § 9-20C-03 of the State Government Article;

(7) a description of the applicant's plan for engaging small businesses, as defined in § 14-501 of the State Finance and Procurement Article;

(8) a commitment that the applicant will:

(i) use best efforts to apply for all eligible State and federal grants, rebates, tax credits, loan guarantees, or other similar benefits as those benefits become available; and

(ii) subject to subsection (k) of this section, pass along to ratepayers, without the need for any subsequent Commission approval, 80% of the value of any State or federal grants, rebates, tax credits, loan guarantees, or other similar benefits received by the project and not included in the application; and

(9) any other information the Commission requires.

(d) The following are subject to a community benefit agreement under subsection (f) of this section:

(1) an application for any new qualified offshore wind project; and

(2) a proposal selected by the Commission under § 7-704.3 of this subtitle for an offshore wind transmission project.

(e)

(1) The Commission shall use the following criteria to evaluate and compare proposed offshore wind projects submitted during an application period:

(i) lowest cost impact on ratepayers of the price set under a proposed OREC pricing schedule;

(ii) potential reductions in transmission congestion prices within the State;

(iii) potential changes in capacity prices within the State;

(iv) potential reductions in locational marginal pricing;

(v) potential long-term changes in capacity prices within the State from the offshore wind project as it compares to conventional energy sources;

(vi) the extent to which the cost-benefit analysis submitted under subsection (c)(3) of this section demonstrates positive net economic, environmental, and health benefits to the State;

(vii) the extent to which an applicant's plan for engaging small businesses meets the goals specified in Title 14, Subtitle 5 of the State Finance and Procurement Article;

(viii) the extent to which an applicant's plan provides for the use of skilled labor, particularly with regard to the construction and manufacturing components of the project, through outreach, hiring, or referral systems that are affiliated with registered apprenticeship programs under Title 11, Subtitle 4 of the Labor and Employment Article;

(ix) the extent to which an applicant's plan provides for the use of an agreement designed to ensure the use of skilled labor and to promote the prompt, efficient, and safe completion of the project, particularly with regard to the construction, manufacturing, and maintenance of the project;

(x) the extent to which an applicant's plan provides for compensation to its employees and subcontractors consistent with wages outlined under §§ 17-201 through 17-228 of the State Finance and Procurement Article;

(xi) siting and project feasibility;

(xii) the extent to which the proposed offshore wind project would require transmission or distribution infrastructure improvements in the State;

(xiii) estimated ability to assist in meeting the renewable energy portfolio standard under § 7-703 of this subtitle; and

(xiv) any other criteria that the Commission determines to be appropriate.

(2) In evaluating and comparing an applicant's proposed offshore wind project under paragraph (1) of this subsection, the Commission shall contract for the services of independent consultants and experts.

(3) The Commission shall verify that representatives of the United States Department of Defense and the maritime industry have had the opportunity, through the federal leasing process, to express concerns regarding project siting.

(4)

(i) In this paragraph, "minority" means an individual who is a member of any of the groups listed in § 14-301(k)(1)(i) of the State Finance and Procurement Article.

(ii) If an applicant is seeking investors in a proposed offshore wind project, it shall take the following steps before the Commission may approve the proposed project:

1. make serious, good-faith efforts to solicit and interview a reasonable number of minority investors;

2. as part of the application, submit a statement to the Commission that lists the names and addresses of all minority investors interviewed and whether or not any of those investors have purchased an equity share in the entity submitting an application;

3. as a condition to the Commission's approval of the offshore wind project, sign a memorandum of understanding with the Commission that requires the applicant to again make serious, good-faith efforts to interview minority investors in any future attempts to raise venture capital or attract new investors to the offshore wind project; and

4. as a condition to the Commission's approval of the offshore wind project, sign a memorandum of understanding with the Commission that requires the applicant to use best efforts and effective outreach to obtain, as a goal, contractors and subcontractors for the project that are minority business enterprises, to the extent practicable, as supported by a disparity study.

(iii) The Governor's Office of Small, Minority, and Women Business Affairs, in consultation with the Office of the Attorney General, shall provide assistance to all potential applicants and potential minority investors to satisfy the requirements under subparagraph (ii)1 and 3 of this paragraph.

(5) As a condition of the Commission's approval of the offshore wind project, the applicant shall sign a memorandum of understanding with the Commission and skilled labor organizations that requires the applicant to follow the portions of the applicant's plan that relate to the criteria set forth in paragraph (1)(viii) and (ix) of this subsection.

(f)

(1)

(i) In this paragraph, "community benefit agreement" means an agreement applicable to the development of any qualified offshore wind project or offshore wind transmission facility that:

1. promotes increased opportunities for local businesses and small, minority, women-owned, and veteran-owned businesses in the clean energy industry;

2. ensures the timely, safe, and efficient completion of the project by:

A. facilitating a steady supply of highly skilled craft workers who shall be paid not less than the prevailing wage rate determined by the Commissioner of Labor and Industry under Title 17, Subtitle 2 of the State Finance and Procurement Article; and

B. guaranteeing that the construction work performed in connection with the project will be subject to an agreement that:

I. is with one or more labor organizations; and

II. establishes, in accordance with paragraph (3) of this subsection, the terms and conditions of employment at the construction site of the project or a portion of the project;

3. promotes safe completion of the project by ensuring that at least 80% of the craft workers on the project have completed an Occupational Safety and Health Administration 10-hour or 30-hour course;

4. promotes career training opportunities in the manufacturing, maintenance, and construction industries for local residents, veterans, women, and minorities;

5. provides for best efforts and effective outreach to obtain, as a goal, the use of a workforce including minorities, to the extent practicable;

6. reflects a 21st-century labor-management approach by developers and suppliers based on cooperation, harmony, and partnership that proactively seeks to ensure that workers can freely choose to both organize and collectively bargain;

7. provides plans to use domestic iron, steel, and manufactured goods to the greatest extent practicable by disclosing contracted suppliers;

8. uses locally and domestically manufactured construction materials and components; and

9. maximizes the use of skilled local labor, particularly with regard to the construction and manufacturing components of the project, using methods including outreach, hiring, or referral methods that are affiliated with registered apprenticeship programs under Title 11, Subtitle 4 of the Labor and Employment Article.

(ii) If the Commission receives reasonable proposals that demonstrate positive net economic, environmental, and health benefits to the State, based on the criteria specified in subsection (c)(3) of this section, and subject to subparagraph (iii) of this paragraph, the Commission shall approve orders to facilitate the financing of qualified offshore wind projects, including at least 1,200 megawatts of Round 2 offshore wind projects.

(iii) The Commission may not approve an applicant's proposed offshore wind project unless:

1. for a Round 1 offshore wind project application:

A. the projected net rate impact for an average residential customer, based on annual consumption of 12,000 kilowatt-hours, combined with the projected net rate impact of other Round 1 offshore wind projects, does not exceed $1.50 per month in 2012 dollars, over the duration of the proposed OREC pricing schedule;

B. the projected net rate impact for all nonresidential customers considered as a blended average, combined with the projected net rate impact of other Round 1 offshore wind projects, does not exceed 1.5% of nonresidential customers' total annual electric bills, over the duration of the proposed OREC pricing schedule; and

C. the price specified in the proposed OREC pricing schedule does not exceed $190 per megawatt-hour in 2012 dollars; and

2. for a Round 2 offshore wind project application:

A. the projected incremental net rate impact for an average residential customer, based on annual consumption of 12 megawatt-hours, combined with the projected incremental net rate impact of other Round 2 offshore wind projects, does not exceed 88 cents per month in 2018 dollars, over the duration of the proposed OREC pricing schedule;

B. the projected incremental net rate impact for all nonresidential customers considered as a blended average, combined with the projected net rate impact of other Round 2 offshore wind projects, does not exceed 0.9% of nonresidential customers' total annual electric bills during any year of the proposed OREC pricing schedule; and

C. the project is subject to a community benefit agreement.

(2)

(i) When calculating the net benefits to the State under paragraph (1)(ii) of this subsection, the Commission shall contract for the services of independent consultants and experts.

(ii) When calculating the projected net average rate impacts for Round 1 offshore wind projects under paragraph (1)(iii)1A and B of this subsection and for Round 2 offshore wind projects under paragraph (1)(iii)2A and B of this subsection, the Commission shall apply the same net OREC cost per megawatt-hour to residential and nonresidential customers.

(3) An agreement required under paragraph (1)(i)2B of this subsection shall:

(i) guarantee against strikes, lockouts, and similar disruptions;

(ii) ensure that all work on the project fully conforms to all relevant State and federal laws, rules, and regulations;

(iii) create mutually binding procedures for resolving labor disputes arising during the term of the project;

(iv) set forth other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and

(v) bind all contractors and subcontractors to the terms of the agreement through the inclusion of appropriate provisions in all relevant solicitation and contract documents.

(g)

(1) An order the Commission issues approving a proposed offshore wind project shall:

(i) specify the OREC pricing schedule, which may not authorize an OREC price greater than, for a Round 1 offshore wind project, $190 per megawatt-hour in 2012 dollars;

(ii) specify the duration of the OREC pricing schedule, not to exceed 20 years;

(iii) specify the number of ORECs the offshore wind project may sell each year;

(iv) provide that:

1. a payment may not be made for an OREC until electricity supply is generated by the offshore wind project; and

2. ratepayers, purchasers of ORECs, and the State shall be held harmless for any cost overruns associated with the offshore wind project; and

(v) require that any debt instrument issued in connection with a qualified offshore wind project include language specifying that the debt instrument does not establish a debt, obligation, or liability of the State.

(2) An order approving a proposed offshore wind project vests the owner of the qualified offshore wind project with the right to receive payments for ORECs according to the terms in the order.

(3) On or before March 1 each year, the Commission shall report to the Governor and, in accordance with § 2-1257 of the State Government Article, to the Senate Committee on Education, Energy, and the Environment and the House Economic Matters Committee on:

(i) compliance by applicants with the minority business enterprise participation goals under subsection (e)(4) of this section; and

(ii) with respect to the community benefit agreement under subsection (f)(1) of this section:

1. the availability and use of opportunities for local businesses and small, minority, women-owned, and veteran-owned businesses;

2. the success of efforts to promote career training opportunities in the manufacturing, maintenance, and construction industries for local residents, veterans, women, and minorities; and

3. compliance with the minority workforce goal under subsection (f)(1)(i)5 of this section.

(h) For Round 2 offshore wind project applications, the Commission shall approve OREC orders representing a minimum of 400 megawatts of nameplate capacity proposed during each application period unless:

(1) not enough Round 2 offshore wind project applications are submitted to meet the net benefit test under subsection (c)(3) of this section; or

(2) the cumulative net ratepayer impact exceeds the maximums provided in subsection (f)(1)(ii)2 of this section.

(i)

(1) Within 60 days after the Commission approves the application of a proposed offshore wind project, the qualified offshore wind project shall deposit $2,000,000 into the Maryland Offshore Wind Business Development Fund established under § 9-20C-03 of the State Government Article.

(2) Within 1 year after the initial deposit under paragraph (1) of this subsection, the qualified offshore wind project shall deposit an additional $2,000,000 into the Maryland Offshore Wind Business Development Fund.

(3) Within 2 years after the initial deposit under paragraph (1) of this subsection, the qualified offshore wind project shall deposit an additional $2,000,000 into the Maryland Offshore Wind Business Development Fund.

(j)

(1) The findings and evidence relied on by the General Assembly for the continuation of the Minority Business Enterprise Program under Title 14, Subtitle 3 of the State Finance and Procurement Article are incorporated in this subsection.

(2) To the extent practicable and authorized by the United States Constitution, approved applicants for a proposed offshore wind project shall comply with the State's Minority Business Enterprise Program.

(3)

(i) On or before 6 months after the issuance of an order approving an OREC application, the Governor's Office of Small, Minority, and Women Business Affairs, in consultation with the Office of the Attorney General and an approved applicant, shall establish a clear plan for setting reasonable and appropriate minority business enterprise participation goals and procedures for each phase of the qualified offshore wind project.

(ii) To the extent practicable, the goals and procedures specified in subparagraph (i) of this paragraph shall be based on the requirements of Title 14, Subtitle 3 of the State Finance and Procurement Article and the regulations implementing that subtitle.

(iii) Every 6 months following the issuance of an order approving an OREC application, an approved applicant shall submit a report on its progress establishing and implementing minority business enterprise goals and procedures to the Commission.

(4) On and after July 1, 2025, the provisions of this subsection and any regulations adopted in accordance with this subsection shall be of no effect and may not be enforced.

(k)

(1) A developer of a Round 1 offshore wind project or Round 2 offshore wind project approved under this section may apply to the Commission for a full or partial exemption from the requirements in subsection (c)(8)(ii) of this section for any federal Inflation Reduction Act of 2022 grants, rebates, tax credits, or loan guarantees received by the project if at least 15% of the total labor hours of construction, alteration, or repair work for the project, including any construction, alteration, or repair work performed by a contractor or subcontractor, is performed by qualified apprentices consistent with federal law.

(2) A developer seeking an exemption under paragraph (1) of this subsection shall certify that the exemption is required to fulfill the developer's obligations under an approved OREC order.

(3) The Commission shall:

(i) establish an application process for a developer to apply for an exemption under paragraph (1) of this subsection;

(ii) approve, deny, or request additional information regarding an application submitted under this subsection within 60 days after receipt of the application;

(iii) in evaluating an application submitted under this subsection, take into consideration the potential benefits and impacts of approving the application, including:

1. the State's goals for developing offshore wind energy;

2. workforce and supply chain impacts; and

3. the risk that price inflation may have on achieving the State's offshore wind energy goals; and

(iv) keep any proprietary information submitted by an applicant confidential.

(4) If the Commission approves a partial exemption under paragraph (1) of this subsection, the nonexempt value of any federal Inflation Reduction Act of 2022 grants, rebates, tax credits, or loan guarantees received by the project shall be passed along to ratepayers.

(l)

(1) In this subsection, "revised Round 2 offshore wind project" means a Round 2 offshore wind project that has filed an application with the Commission for revised project schedules, sizes, or pricing, including OREC pricing, under this subsection.

(2) This subsection applies to Round 1 offshore wind projects and Round 2 offshore wind projects that:

(i) are to be located in a wind energy area authorized by the Bureau of Ocean Energy Management; and

(ii) possess ORECs, or are subject to a Commission order approving an OREC price schedule, as of June 1, 2024.

(3)

(i) On June 1, 2024, the Commission shall open a revised Round 2 offshore wind project proceeding that is limited to evaluating revised project schedules, sizes, or pricing, including OREC pricing, for a previously approved Round 2 offshore wind project.

(ii) Any previously approved Round 2 offshore wind project may submit a revised plan for the project by filing an application with the Commission.

(iii) An application for a revised Round 2 offshore wind project shall be limited to addressing revised project schedules, sizes, or pricing, including OREC pricing.

(iv)

1. On receipt of an application for approval of a revised Round 2 offshore wind project, the Commission shall conduct an expedited review of the application.

2. Unless extended by mutual consent of the parties, the Commission shall approve, conditionally approve, or deny an application within 90 days after the application is filed and found by the Commission to be administratively complete.

(v)

1. Except as provided in subsubparagraphs 2 and 3 of this subparagraph, an application for a revised Round 2 offshore wind project shall be subject to all criteria set forth in this section for Round 2 offshore wind projects.

2. An application for a revised Round 2 offshore wind project is not subject to the requirements of subsections (c)(6)(ii) and (i) of this section.

3. If in a revised Round 2 offshore wind project proceeding the Commission reviews multiple reasonable proposals meeting the requirements of this section for Round 2 offshore wind projects, the Commission shall issue orders approving the revised Round 2 offshore wind projects necessary to facilitate as much energy capacity as is consistent with the Round 2 offshore wind project ratepayer protections under this section, including at least 800 megawatts of capacity from revised Round 2 offshore wind projects, if practicable, even if the revised Round 2 offshore wind project applications may result in lower total energy capacity awarded than was previously awarded to the revised Round 2 offshore wind project in its previously approved Round 2 offshore wind project application.

4. When evaluating an application for a revised Round 2 offshore wind project, the Commission shall, to the extent practicable, extend prior or existing proceedings for applicants that have a previously approved order for a Round 2 offshore wind project.

(vi) The Commission may not approve an application for a revised Round 2 offshore wind project unless the application includes commitments for in-State expenditures and investments in a local supply chain that the Commission determines are reasonably related to the size and requirements of the project.

(vii) The Administration shall have access to all confidential information produced by any party relating to a revised Round 2 offshore wind project proceeding, subject to an agreement to protect the confidentiality of the information.

(4)

(i) In order to maximize the amount of renewable energy generated by a Round 1 offshore wind project, any Round 1 offshore wind project may seek approval from the Commission to amend its previously approved Round 1 offshore wind project order to:

1. increase the maximum amount of ORECs sold under the previous order, consistent with the Round 1 offshore wind project ratepayer protections under this section; and

2. modify its project schedule.

(ii) The Commission may approve a request for an increased amount of ORECs sold under a previously approved Round 1 offshore wind project order on a showing that:

1. the unit pricing of the additional ORECs does not exceed the pricing under the previously approved Round 1 offshore wind project order; and

2. the Round 1 offshore wind project is in compliance with the ratepayer protection provisions required for Round 1 offshore wind projects, taking into consideration changes in economic conditions since the original Round 1 offshore wind project awards.

(m)

(1) The Commission, with the assistance of the Administration, the Department of General Services, and other interested State units shall develop a plan for achieving a total of 8,500 megawatts of offshore wind energy capacity by 2031.

(2) The plan:

(i) shall include a schedule of offshore wind energy procurements and proposed amounts of offshore wind energy for procurement through 2031; and

(ii) may include recommendations on multijurisdictional offshore wind energy procurements and any additional offshore wind energy procurement recommendations.

(3) On or before January 1, 2025, the Commission shall submit a report on the plan to the General Assembly, in accordance with § 2-1257 of the State Government Article.

Md. Code art. Public Utilities, § 7-704.1Md. Code, Public Utilities § 7-704.1

Amended by 2024 Md. Laws, Ch. 431,Sec. 1, eff. 6/1/2024.

Amended by 2024 Md. Laws, Ch. 382,Sec. 1, eff. 4/25/2024.

Amended by 2023 Md. Laws, Ch. 138, Sec. 1, eff. 7/1/2023.

Amended by 2023 Md. Laws, Ch. 137, Sec. 1, eff. 7/1/2023.

Amended by 2023 Md. Laws, Ch. 95, Sec. 1, eff. 6/1/2023.

Amended by 2020 Md. Laws, Ch. 553, Sec. 2, eff. 7/1/2020.

Amended by 2019 Md. Laws, Ch. 757, Sec. 1, eff. 10/1/2019.

Amended by 2017 Md. Laws, Ch. 634, Sec. 1, eff. 6/1/2017.

Amended by 2017 Md. Laws, Ch. 633, Sec. 1, eff. 6/1/2017.

Amended by 2017 Md. Laws, Ch. 438, Sec. 1, eff. 5/4/2017.