AARP Connecticut submitted the below comments to the Connecticut Department of Energy and Environmental Protection (DEEP) as well as Public Utilities Regulatory Authority (PURA) regarding the Millstone subsidization.
PROCUREMENT FOR ZERO-CARBON RESOURCES PURSUANT TO CONNECTICUT GENERAL STATUTES – 16a-3m
COMMENT OF AARP ON DRAFT RFP
July 20, 2018
Pursuant to its June 22, 2018, Notice of Opportunity for Comment on the Department’s draft Notice of Request for Proposals from Private Developers for Zero-Carbon Energy of the same date, AARP respectfully submits these comments.
AARP, with its nearly 38 million members in all 50 States, the District of Columbia, and the U.S. territories, is a nonpartisan, nonprofit, nationwide organization that helps empower people to choose how they live as they age, strengthens communities, and fights for the issues that matter most to families, such as healthcare, employment and income security, retirement planning, affordable utilities and protection from financial abuse.
AARP has participated in all phases of the proceedings to implement Executive Order 59 issued by Governor Malloy on July 25, 2017, and June Special Session Public Act 17-3, An Act Concerning Zero Carbon Solicitation and Procurement (the Act), Section 1(d) and (e). As AARP has commented throughout this process, the following criteria should be considered essential:
- Subsidies should be minimal, if any
- Ratepayers impacts should be top priority
- Subsidies should not duplicate those available or proposed to be available from ISO New England, FERC, DOE or any other source.
AARP’s primary concern in the Zero-Carbon RFP process is to ensure that the contract or contracts entered into for Zero-Carbon Resources are the least cost sources of supply, and that the resulting contracts enable Connecticut customers to obtain reasonably priced and affordable electricity. There are a number of provisions of the RFP that could have an adverse impact on the price and affordability of power supplied by winning bidders.
- The nominal discount rate is proposed to be set at 7 percent. Section 184.108.40.206. It is well below the discount rate that would be used to evaluate an investment on behalf of customers of the EDC (its weighted average cost of capital). Such a low discount rate provides a benefit to proposals with longer lives. AARP suggests that the Department use the EDC WACC as the discount rate, or graduate the discount rate so that out-year prices are discounted more than near-term prices.
- AARP repeats its concern that the parallel-phase processing of the proposals under the RFP and the petition before PURA for designation as an “at risk” facility will give an unfair advantage to facilities (such as the Millstone nuclear generating facility) that have already gone through a process to establish their at-risk status (even if that process was not closed with a finding on that issue). Such facilities will have a better sense of their ability to meet the at-risk criteria than others who have not gone through this process before. They will also have an easier time making the analyses and filings that the PURA may require for its consideration. These impacts are qualitative advantages that could translate into apparent quantitative benefits.
- The large percentage of the evaluation given to non-quantitative considerations (25%) and the lack of ranking of the numerous qualitative considerations leave a great deal of discretion with the Department and the Evaluation Team. The Team will have to be careful to use this discretion in a transparent and even-handed way so as to identify the best projects in the bid process.
- Reliance on such ill-defined criteria also creates the risk that projects higher in price will be put ahead of projects that are deemed to better meet the qualitative criteria. The purpose of the Executive Order 59 and related proceedings is to address the concern that certain zero-carbon facilities may be at risk of closure if they are unable to increase their price above the prevailing market price. The Department should consider developing a set of minimum qualitative criteria, failure to meet which would be disqualifying. The balance of the evaluation could then be focused on the price differences between the bidders, and their resulting impact on rates and affordability.
AARP appreciates this opportunity to comment on the draft Notice of Requests for Proposals from Private Developers of Zero-Carbon Energy.
AARP continues to express its concern that the RFP process could provide a windfall to winning bidders, at the expense of reasonable rates.
While there are problems from time to time with the wholesale market and RTO protocols, they remains a better vehicle to facilitate the purchase of power for Connecticut customers than a process that provides an unfair advantage to existing zero-carbon facilities. Indeed, ISO New England was recently allowed by FERC to subsidize the Mystic Generating Facility. Regional approaches are fairer to all. If there is a need to subsidize Millstone, the burden of any extra-market support should fall on all New England electricity customers.