COMMONWEALTH OF MASSACHUSETTS DEPARTMENT OF PUBLIC UTILITIES
______) Petition of NSTAR Electric Company d/b/a ) Eversource Energy for Approval of Proposed ) D.P.U. 18-64 Long-Term Contracts for Clean Energy Projects ) Pursuant to Section 83D of An Act Relative to ) Green Communities, St. 2008, c. 169, as amended ) by St. 2016, c. 188, § 12 ) ______) ______) Petition of Massachusetts Electric Company and ) Nantucket Electric Company d/b/a National Grid ) for Approval of Proposed Long-Term ) D.P.U. 18-65 Contracts for Clean Energy Projects Pursuant to ) Section 83D of An Act Relative to Green ) Communities, St. 2008, c. 169, as amended by ) St. 2016, c. 188, § 12 ) ______) ______) Petition of Fitchburg Gas and Electric Light ) Company d/b/a Unitil for Approval of Proposed ) D.P.U. 18-66 Long-Term Contracts for Clean Energy Projects ) Pursuant to Section 83D of An Act Relative to ) Green Communities, St. 2008, c. 169, as amended ) by St. 2016, c. 188, § 12 ) ______)
INITIAL BRIEF OF CONSERVATION LAW FOUNDATION
Conservation Law Foundation (“CLF”) hereby submits its Initial Brief in support of the
Petitions and the Contracts.
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
On July 23, 2018, NSTAR Electric Company d/b/a Eversource Energy (“Eversource”),
Massachusetts Electric Company and Nantucket Electric Company d/b/a National Grid
(“National Grid”), and Fitchburg Gas and Electric Light Company d/b/a Unitil (“Unitil”)
(collectively, the electric “Distribution Companies”) each filed petitions with the Department of
Public Utilities (“Department”) pursuant to Section 83D of An Act Relative to Green
Communities, St. 2008, c. 169 (the Green Communities Act”), as amended by § 12 (“Section
83D ”) of the Energy Diversity Act of 2016, St. 2016, c. 188 (the “Energy Diversity Act”), and the Department’s regulations implementing Section 83D at 220 C.M.R. § 24.00 et seq. (the
“Petitions”), for approval of long-term power purchase agreements with H.Q. Energy Services
(U.S.) Inc. (“HQ”), an affiliate of Hydro Quebec, to acquire their pro rata share of an aggregate of 9,554,940 MWh of Qualified Clean Energy and associated Environmental Attributes from hydroelectric generation (the “PPAs”) to be delivered into New England over new transmission facilities, referred to as the NECEC Transmission Line, in accordance with a Transmission
Service Agreement by and between each of the Distribution Companies and Central Maine
Power Company (the “TSAs”) (together, the “Contracts”). The Petitions were jointly docketed as D.P.U. 18-64, 18-65, and 18-66 for Eversource, National Grid, and Unitil, respectively.
On August 9, 2018, CLF filed petitions to intervene in each docket. CLF’s petitions were based on, among other things, its special expertise and experience: (i) in state and regional energy policy; (ii) in the assessment of various Massachusetts programs, policies, regulations and approvals regarding their ability to contribute to the greenhouse gas (“GHG”) emissions
Page 1 of 12 reductions required by the Global Warming Solutions Act, Chapter 298 of the Acts of 2008 (the
“GWSA”) and the Green Communities Act; and (iii) relating to its involvement in Kain vs. Dep’t of Envtl. Prot., 474 Mass. 278 (2016) and subsequent related proceedings. The Department granted CLF’s petition to intervene as a full party in D.P.U. 18-64, 18-65, and 18-66 on August
27, 2018.
ARGUMENT
I. THE DEPARTMENT SHOULD APPROVE THE CONTRACTS BECAUSE THEY WILL REDUCE GHG EMISSIONS AS REQUIRED BY THE GWSA
Subject to an adjustment to Distribution Company remuneration that the Department determines to be in the public interest, the Department should grant the Petitions and approve the
Contracts because the Contracts fulfill the fundamental purpose of the Section 83D procurement: they will directly assist the Commonwealth in meeting GHG emissions reductions mandated by the GWSA. Record evidence conclusively demonstrates that over their 20 year term, the
Contracts will reduce the Commonwealth’s statewide GHG emissions dramatically, by approximately 36 million metric tons of carbon dioxide (“MMTCO2e”).
A. The Fundamental Purpose of the Section 83D Procurement Is to Reduce Statewide GHG Emissions in the Electricity Sector.
Since at least 2010, the Commonwealth has identified the need for, and its intent to procure, a large volume of imported clean electricity as part of a coordinated, multi-sector strategy to meet near and long-term emissions reduction mandates set by, and pursuant to, the
GWSA.1 In 2016, the Commonwealth enacted Section 83D primarily to address that need and
1 See Exec. Office of Energy and Energy and Envtl. Affairs, Massachusetts Clean Energy and Climate Plan for 2020 (Dec. 29, 2010), at 45-46 (recommending clean energy imports over a new, purpose-built 1,200MW transmission line from Canada into southern New England), available at https://www.greenneedham.org/blog/wp- content/uploads/2011/02/2020-clean-energy-plan.pdf; Exec. Office of Energy and Energy and Envtl. Affairs, 2015 Update - Massachusetts Clean Energy and Climate Plan for 2020 (Dec. 31, 2015) (“2015 CECP Update”), at 11 (suggesting “a particular focus” on clean energy imports “is appropriate given the mount of reductions anticipated from this policy), 15 (identifying additional clean energy imports beyond 2020 as “important for achieving the Page 2 of 12 fulfil that intent, that is, for the purpose of permanently reducing GHG emissions in the electricity sector in order to achieve emissions reductions mandates set by, and pursuant to, the
GWSA.2 That core aim for the procurement was plainly expressed in the Request for Proposals
(the “Section 83D RFP”) pursuant to which the Contracts were initially submitted for consideration:
The Energy Diversity Act, which includes Section 83D and 83C procurements, recognizes the necessity of the Commonwealth to achieving the goals established pursuant to the GWSA. The GWSA requires the Commonwealth to establish goals and meet targets for the reduction of greenhouse gas emissions by 2020, 2030, 2040, and 2050. The goals established by the Commonwealth specifically require a reduction of 25 percent below 1990 levels by 2020 and a reduction of 80 percent below 1990 levels by 2050. The requirements to competitively solicit and contract for Clean Energy Generation – firm service hydroelectric generation, offshore wind generation, and new Class I RPS eligible resources both firmed up with firm service hydroelectric generation or standalone– are intended to maximize the Commonwealth’s ability to achieve GWSA goals.3
In order to ensure proposals, including the Contracts, would fulfil that core aim of the Section
83D procurement, the RFP reflected express statutory language by requiring that all projects must demonstrate the use of “an appropriate tracking system to ensure a unit specific accounting of the delivery of clean energy” expressly “to enable the Department of Environmental
Protection, in consultation with the DOER, to accurately measure progress in achieving the
[GWSA’s] 2050 emissions limit), 32 (identifying the then-proposed Section 83D enabling legislation as an electric sector emissions reduction policy), available at https://www.mass.gov/files/documents/2017/12/06/Clean%20Energy%20and%20Climate% 20Plan%20for%202020.pdf. 2 See Joint Press Release by Gov. Charlie Baker, Sec’y of Energy and Envtl. Affairs Matthew Beaton, Senate Pres. Stan Rosenberg, House Speaker Robert DeLeo, and DOER Comm’r Judith Judson (Aug. 8, 2016), available at: https://www.mass.gov/news/governor-baker-signs-comprehensive-energy-diversity-legislation (presenting the Energy Diversity Act as evidence of bi-partisan support for “strengthening the state’s clean energy economy and progressing towards Massachusetts’ greenhouse gas reduction requirements,” as “progress in achieving the emissions reductions targets set forth by the Global Warming Solutions Act,” and as a “recommit[ment] . . . to meeting our Global Warming Solutions Act requirements”). 3 Ex. JU-2 (“Request for Proposals for Long-Term Contracts for Clean Energy Projects”) at 8; accord id. (“The fundamental purpose of the RFP is to satisfy the policy directives encompassed within Section 83D and to assist the Commonwealth with meeting its Global Warming Solution Act (‘GWSA’) goals.”); accord id. at 7 (“encouraging “proposals which include Clean Energy Generation able to commit to begin deliveries prior to the end of 2020 to maximize the Commonwealth’s ability to meet its [GWSA] goals.”). Page 3 of 12
Commonwealth’s goals under Chapter 298 of the Acts of 2008 or Chapter 21N of the General
Laws.”4
B. The Contracts Will Dramatically Reduce Statewide GHG Emissions from the Electricity Sector.
Record evidence is susceptible to only one reasonable conclusion regarding the GHG impact of the Contracts: Over their 20 year term, they will substantially and without question reduce the Commonwealth’s statewide GHG emissions, as measured by the Department of
Environmental Protection’s GHG Inventory (the “MassDEP GHG Inventory”) in accordance with the GWSA.
1. The GWSA Requires Sustained and Dramatic Decreases in GHG Emissions in the Electric Sector Through 2050.
As the Section 83D RFP recognized,5 the GWSA established a comprehensive, legally enforceable framework requiring the Commonwealth to permanently reduce its GHG emissions by at least eighty percent below 1990 levels by 2050. G.L. c. 21N, § 3(b); Kain v. Dep’t of
Envtl. Prot., 474 Mass. 278, 282 (2016) (“Kain”); New England Power Generators Ass’n, Inc. v.
Dep’t of Envtl. Prot., 480 Mass. 398, 400 (2018) (“NEPGA”). In the electricity sector, then, the
Commonwealth must reduce annual GHG emissions from approximately 28.2 MMTCO2e in
1990 to a level at or below 5.6 MMTCO2e in 2050.6 And such reductions must be “actual, measurable, and permanent.” Kain, 474 Mass. at 300.
2. Compliance with GWSA Emissions Reductions Mandates Is Properly Measured Only By the MassDEP GHG Inventory.
In order to achieve its emissions reduction goal, the GWSA expressly defined the
4 Id. at 28 (“2.2.2.10 Utilizing an Appropriate Tracking System to Account and Enable for GWSA Goals”); accord Section 83D(j). 5 See Ex. JU-2 at 8. 6 See 2015 CECP Update at 9; accord id. at 53 (fig. 14). Page 4 of 12 emissions that must by law be reduced and directed the Department of Environmental Protection to establish, maintain, and publish an inventory of those emissions. G.L. c. 21N, §§ 1, 2(a) - (c);
NEPGA, 480 Mass. at 401. Those emissions are defined as “statewide greenhouse gas emissions,” that is “the total annual emissions of greenhouse gases in the Commonwealth, including all emissions of greenhouse gases from the generation of electricity delivered to and consumed in the Commonwealth, even if that electricity is produced elsewhere.” NEPGA, 480
Mass. at 401 (quoting G.L. c. 21N, § 1) (internal quotation marks omitted). The inventory by which such statewide emissions are measured is the MassDEP GHG Inventory.7
The Supreme Judicial Court has twice confirmed the supremacy of the MassDEP GHG
Inventory and its measurement of statutory “statewide greenhouse gas emissions” for purposes of assessing GWSA compliance regarding GHG emissions reductions, or increases, which result from state programs, policies, or regulations. In Kain, the Court rejected claims by the state that compliance with the GWSA could be established based on generalized regional emissions reductions that resulted from the operation of the Regional Greenhouse Gas Initiative. Kain, 474
Mass. at 297-98. GWSA compliance, according to the Court, must instead be measured by volumetric reductions or increases in the Commonwealth’s statewide GHG emissions, id. at 297-
98, 298 n.25, which are by statute measured by the MassDEP GHG Inventory, id. at 283 (citing
G.L. c. 21N, § 2(a) - (c)). Two years later in NEPGA, the Court similarly rejected claims by electric power generators that a state emissions reduction regulation violated the GWSA because it might lead to generalized regional emissions increases while effectively reducing the
7 MassDEP, Statewide Greenhouse Gas (GHG) Emissions Baseline & Projection Update (July 2016), at App. C (Massachusetts Annual Greenhouse Gas Emissions Inventory: 1990-2016, with Partial 2017 Data), available at: https://www.mass.gov/lists/massdep-emissions-inventories#greenhouse-gas-baseline,-inventory-&-projection-; accord 2015 CECP Update at 2-8 (1.1.1 Massachusetts Greenhouse Gas (GHG) Inventory). Accord Joint Pre-Filed Direct Testimony of Joanne Morin and Joanna Troy (Dec. 21, 2018) (“DOER Joint Test.”) at 13:257-259 (“The impact relative to the Base Case was evaluated utilizing the established methodology for GWSA compliance, which is the MassDEP Inventory, and all emission reductions were assigned appropriate value.”). Page 5 of 12
Commonwealth’s statewide GHG emissions. NEPGA, 480 Mass. at 408-10. Citing and affirming its Kain decision, the Court held that a reasonable demonstration that “statewide greenhouse gas emissions,” as measured by the MassDEP GHG Inventory, would decline as a result of a state regulation was sufficient for purposes of assessing whether the regulation was consistent with the purpose of the GWSA. Id. That the regulation had the potential to cause a certain amount of “leakage,” that is an increase in emissions elsewhere as the Commonwealth’s emissions were reduced, was insufficient for purposes of challenging the state emissions reduction action. When it enacted the GWSA, a “statutory scheme imposing lower emission limits over time, the Legislature was aware that some leakage was inevitable,” the Court held,8 and “[s]ome doubts as to whether leakage may occur need not prevent the [Commonwealth] from acting to ensure that the electric sector is working towards the [GWSA]’s purpose.”9
3. The Record Conclusively Demonstrates the Contracts Will Reduce Statewide GHG Emissions as Required by the GWSA.
In assessing whether proposals submitted pursuant to the Section 83D RFP would help fulfil the procurement’s core emissions reduction purpose, then, it was both necessary and sufficient that they be quantitatively assessed for their impact on “statewide greenhouse gas emissions” as measured by the MassDEP GHG Inventory. Accordingly, the Evaluation Team quantitatively assessed all proposals for their “GWSA benefit,” or the incremental contribution of each proposal “towards meeting the Massachusetts GWSA in addition to compliance with the
[state’s Renewable Portfolio Standard (“RPS”) and Clean Energy Standard (“CES”)] requirements.”10 In the case of the Contracts, the record unambiguously establishes that their
8 NEPGA, 480 Mass. at 408. 9 Id. at 409 n.12. 10 Joint Pre-Filed Direct Testimony of Jeffrey Waltman, Timothy Brennan, and Robert Furino (Jul. 23, 2018) (“EDC Joint Test.”) at 27:13-16; Ex. JU-6 (“Quantitative Evaluation Report”) at 6. Page 6 of 12 qualitative GHG assessment was both adequate to determine GWSA-compliance and favorable: the Contracts will substantially reduce the Commonwealth’s statewide GHG emissions,11 materially aiding its efforts to achieve GWSA-mandated emissions reductions.
The GHG assessment of the Contracts by the Section 83D Evaluation Team and its consultant, Tabors Caramanis Rudkevich (“TCR”), used “general principles and methodology for calculating the incremental contribution (MWh) to GWSA compliance” provided by the
Department of Energy Resources (“DOER”).12 TCR implemented DOER’s principles and methodology via a GHG Inventory Calculation Protocol which used a “GHG Inventory model [] to capture the two major types of GHG emission impacts an 83D Proposal has on
Massachusetts,” those related to electricity generated in and/or imported into the state as a result of the proposal, and those related to environmental attribute credits retired for purposes of compliance with the state’s RPS and CES or “solely for GWSA compliance.”13 Importantly, this quantitative evaluation methodology was designed to “approximate[] a proposal’s or portfolio’s impact to GWSA compliance relative to the base case by using a calculation that approximates the Massachusetts’ Department of Environmental Protection (“MassDEP”) Inventory.”14 Such an approximation was necessary for assessing a proposed project’s potential to contribute to the
Commonwealth’s GWSA compliance efforts because the MassDEP GHG Inventory is “the established methodology” in the Commonwealth for determining “GWSA compliance.”15
11 EDC Joint Test. at 44:2-5 (“TCR modeled a projected GHG emission reduction of 36.61 MMTCO2e for the years 2019-2040 versus the 83D Base Case.”); Ex. JU-6 at 15-16 (“In each year, this contribution is calculated as the decrease in annual metric tons CO2e under the Proposal Case (Portfolio Case) relative to the Base Case divided by the Base Case emissions rate.”), 19 (GHG Inventory Impact (MMT CO2 avoided vs Base Case2019 ‐ 2040) for “NECEC Hydro Quant Results-2017-12-12” listed as “36.61”). 12 Ex. JU-6 at 4 n.8; id.at 6. 13 Id. at 35 (Attachment B – GHG Inventory Calculation Protocol). 14 Joint Pre-Filed Direct Testimony of Joanne Morin and Joanna Troy (Dec. 21, 2018) (“DOER Joint Test.”) at 11:221 - 12:224 (emphasis added). 15 Id. at 13:257-59; accord Kain, 474 Mass. at 283, 297-98; NEPGA, 480 Mass. at 408-10. Page 7 of 12
Because GWSA compliance in the Commonwealth regarding emissions increases or decreases is properly measured only by quantitative changes in the MassDEP GHG Inventory,16 the record supports only one reasonable conclusion regarding the potential GHG impact of the
Contracts: they are likely to reduce the Commonwealth’s annual statewide GHG emissions by just over 1.8 MMTCO2e each year, or approximately 36.6 MMTCO2e over their 20 year term, and as a result, unambiguously further the purpose and goals of the state’s GWSA. The
Department can – and must – ignore claims in the record to the contrary that either (i) express concern that the Contracts might during certain periods result in flat or elevated regional or extra-regional emissions that are not GWSA-jurisdictional “statewide Greenhouse gas emissions,”17 or (ii) suggest that for purposes of determining GWSA compliance, compliance with the GWSA can only credibly be measured “global[ly]” rather than by the MassDEP GHG
Inventory.18 All such claims are completely speculative, unsupported by any record evidence or analysis that assesses the Contracts’ likely impact on the MassDEP GHG Inventory.19
Moreover, they are of the exact same kind of claims unanimously rejected by the Supreme
Judicial Court in NEPGA as invalid regarding the issue of GWSA compliance. As is the case here, challenger’s core claim in the NEPGA case was based on an overly simplistic, static
16 Kain, 474 Mass. at 283, 297-98; NEPGA, 480 Mass. at 408-10. 17 See, e.g., Joint Pre-Filed Direct Testimony of Christopher Russo, Robert Stoddard and Stephen Whitley (Dec. 21, 2018) (“NextEra Test.”) at 19:28 – 20:5 (suggesting the Contracts would result in “absolutely no change in greenhouse gas emissions”); Comments of the Natural Resources Council of Maine (Aug. 15, 2018), Attach. C (Speyer Testimony in ME PUC Dkt. No. 2017-00232) (“Speyer ME Test.”) at 4:1-20 (suggesting the Contracts “would have a minimal impact on regional carbon emissions and could even generate increases in carbon emissions.”). 18 See, e.g., NextEra Test. at 19:8-11; Ex. AG-DM (Pre-Filed Testimony of Dean Murphy (Dec. 21, 2018)) at 14:18- 19. 19 See Responses to the Distribution Companies’ First Set of Information Requests to NEER (Jan. 29, 2019) (“NEER IR Responses”), Responses to Requests EDC-NEER-1-1, EDC-NEER-1-4 – 6, EDC-NEER-1-9, EDC-NEER-1-11, EDC-NEER-1-31 – 36 (no documents, workpapers or analysis supporting emissions claims by Russo, Stoddard, and Whitley; accord Joint Pre-Filed Surrebuttal Testimony of Christopher Russo, Robert Stoddard and Stephen Whitley (Feb. 15, 2018) at 15-16 (discussing potential project impacts to the MassDEP Inventory only “hypothetically” and “for the sake of argument” only). Page 8 of 12 conception of emissions displacement which purported to show that the challenged state action would result in emissions increases outside of the Commonwealth that negated or offset reductions in statewide GHG emissions.20 The Court rejected that challenge—as the Department should here—recognizing that such assertions were “mere speculation,” particularly given that many of the Commonwealth’s neighbor states and provinces “have similarly committed to ambitious targets for reductions of greenhouse gas emissions” that the challenger, as is true here,21 failed to adequately consider.22
II. THE RECORD SUPPORTS A REMUNERATION RATE LESS THAN 2.75 PERCENT
The Department should reject or significantly limit the Distribution Companies’ request for remuneration of 2.75 percent because the Distribution Companies have failed to adequately demonstrate that they bear any substantial financial risk, cost or impact associated with the
Contracts.
A. Section 83D Grants the Department Discretion to Set Remuneration.
On the issue of Distribution Company remuneration, Section 83D differs markedly from previous, similar procurements. Unlike the Section 83 and Section 83A procurements which preceded it, for which the Legislature required specific remunerations levels (4 percent and 2.75 percent respectively),23 the Legislature did not guarantee Distribution Company remuneration for
20 Id. (no independent analysis of either emissions displacement or inventory impact); accord Speyer ME Test., Ex. JMS-3 at 2 (conclusions based on hypothetical regional energy dispatch analysis only). 21 NEER IR Responses, Response to Request EDC-NEER-1-10 (failed to systematically or quantitatively consider clean energy and climate laws, regulations, and policies of New York, Quebec, or Ontario). 22 NEPGA, 480 Mass. at 410 n.14. 23 See St. 2008, Ch. 169 § 83 (“Section 83”) (requiring the Department’s regulations to “provide for an annual remuneration for the contracting distribution company equal to 4 per cent of the annual payments under the contract to compensate the company for accepting the financial obligation of the long-term contract, such provision to be acted upon by the department of public utilities at the time of contract approval”) (emphasis added); St. 2012, Ch. 209 § 36 (“Section 83A”) (requiring the Department’s regulations to “provide for an annual remuneration for the contracting distribution company equal to 2.75 per cent of the annual payments under the contract to compensate the company for accepting the financial obligation of the long-term contract, such provision to be acted upon by the department of public utilities at the time of contract approval”) (emphasis added). Page 9 of 12 the Section 83D procurement. Instead, it is uncontested24 that the Legislature set a remuneration cap of no more than 2.75 percent, leaving to the Department’s discretion the determination of whether, and if so, how much remuneration was required, specifically in order to “compensate the [Companies] for accepting the financial obligation of the [Contracts].”25
B. The Distribution Companies Have Failed to Justify a Remuneration Rate of 2.75 Percent.
With the addition in Section 83D of the phrase “up to” to the otherwise similar language regarding Distribution Company compensation in Section 83 and Section 83A,26 the Legislature expressed its intent that the Department will select a level of remuneration between zero and 2.75 percent based on the showing, if any, by the Distribution Companies that remuneration is necessary to in order to compensate them for accepting the financial obligation of the Contracts.
Here, the Distribution Companies have failed to meet their burden of proof27 that any such compensation is needed. While the Distribution Companies assert that there is public value relating to the Contracts associated with the strength of their company balance sheets,28 they have provided no evidence or testimony—beyond mere assertion—that they have in the past,29 or might in the future, incur any material or quantifiable financial risk in connection with their
24 D.P.U. 18-64, 18-65, 18-66 Evidentiary Hearing Transcript, vol. 1 (“Tr. Vol. 1”), 75:1-9 (testimony of Distribution Company witnesses Waltman, Brennan, Furino, and Hevert). 25 Section 83D(d)(3) (directing the Department to issue regulations “provid[ing] for an annual remuneration for the contracting distribution company up to 2.75 per cent of the annual payments under the contract to compensate the company for accepting the financial obligation of the long-term contract, such provision to be acted upon by the [Department] at the time of contract approval”) (emphasis added); 220 CMR § 24.07(1) (same). 26 Compare supra n.23 with supra n.25. 27 It is the Distribution Companies’ burden to provide the Department with the evidence detailing the costs that each company will incur from accepting the financial obligation of the Contracts. Fitchburg Gas and Electric Light Company, D.T.E. 99-118, at 7, n.5 (2001) (the Company bears the burden of proving each and every element of its case by a preponderance of “such evidence as a reasonable mind might accept as adequate to support a conclusion.”); accord Investigation into Incentive Regulation, D.P.U. 94-158, at 52 (1995); G. L. c. 30A, § 11(6). 28 See, e.g., Responses to the Department’s First Set of Information Requests (Sep. 20, 2018), Response to Request DPU-1-7. 29 See, e.g., Tr. Vol. 1, at 85 – 106 (no evidence of quantified financial risk or impact from existing Section 83 or 83A contracts, including when the Legislature reduced their allowed compensation by more than a third, from 4 to 2.75 percent); Response to RR-AG-1 (same). Page 10 of 12 participation in this or previous, similar legislatively-mandated clean energy procurements that justifies meaningful compensation.30
C. Distribution Company Costs Arising From Section 83D Are Quantifiable and Near Zero.
In the face of credible testimony and evidence to the contrary presented by the Attorney
General, the Distribution Companies’ failure to provide quantifiable justification for remuneration of 2.75 percent31 is fatal to their request. Although the Distribution Companies assert both that they will incur meaningful financial risk or impact as a result of the Contracts,32 and that such risk or impact is not quantifiable,33 the financial burden that the Contracts place on the Distribution Companies is in fact readily quantifiable and very low.
There is unrebutted34 record evidence that there exists a reasonable and reliable method of quantifying exactly the type of potential financial burdens at issue here—the Standard and
Poor’s methodology35—and that using that methodology, the Distribution Companies face a
“very low risk factor, and potentially a risk factor of zero”36 in connection with the Contracts.
Given that the Distribution Companies will be fully compensated for all costs they incur in relation to their participation in and execution of the Contracts,37 the extremely low financial risk
30 Ex. AG-R-VM (Pre-Filed Rebuttal Test. of Vincent Musco (Feb. 15, 2019)), at 1:7 – 3:4; accord Ex. AG-VM (Pre-Filed Testimony of Vincent Musco (Dec. 21, 2018)), at 5:11 – 18; accord id. at 14:7 – 45:8. 31 Responses to the Department’s Second Set of Information Requests (Oct. 18, 2018), Response to Request DPU-2- 11 (offering no “documents, financial statements, quantitative evaluations, credit reports, imputed debt analyses, or calculations . . . that support . . . the Companies’ proposal to set the remuneration rate at 2.75 percent” and maintaining “no [such] specific quantitative analysis . . . is needed”). 32 See, e.g., Responses to the Department’s Fourth Set of Information Requests (Dec. 5, 2018), Response to Request DPU-4-10. 33 See supra n.31. 34 See Ex. AG-R-VM at 5:4 – 6:2. 35 See id. at 3:9 – 4:23; accord Ex. AG-VM at 21:4 – 25:2. 36 Ex. AG-VM at 25:5-17; Ex. AG-R-VM at 4:6. 37 See Distribution Companies’ Response to Request DPU-4-10; accord Ex. AG-R-VM at 15:1-3 (“[E]ven if the Department approves remuneration of zero percent, the [Distribution Companies] still enjoy complete, legislatively- mandated cost recovery charged under the [Contracts].”) Page 11 of 12 factor quantified by the Standard & Poor’s methodology supports the Department’s award of a remuneration percentage “at or near zero.”38
CONCLUSION
The record strongly supports the Department’s approval of the Contracts with additional
Distribution Company remuneration set at or near zero. Regarding the issue of the Contracts’ ability to directly advance the fundamental, emissions-reduction purpose of the Section 83D procurement, evidence in the record is clear, unambiguous, and unrebutted: As measured by the
MassDEP GHG Inventory—the sole legal measure of GWSA-compliance relating to emissions reductions (or increases)—the Contracts are likely to reduce the Commonwealth’s annual statewide GHG emissions significantly, by just over 1.8 MMTCO2e each year, or approximately
36.6 MMTCO2e over their 20 year term. The record is similarly clear regarding additional
Distribution Company remuneration: Little if any such added compensation is warranted because the Distribution Companies face virtually no quantifiable, uncompensated financial risk in connection with their participation in, and execution of, the Contracts.
Date: March 22, 2019 Respectfully submitted,
CONSERVATION LAW FOUNDATION
By its attorney,
David K. Ismay, Esq.
Conservation Law Foundation 62 Summer Street Boston, MA 02110 T: 617-850-1777 E: [email protected]
38 See Ex. AG-VM at 5:18-20. Page 12 of 12
COMMONWEALTH OF MASSACHUSETTS DEPARTMENT OF PUBLIC UTILITIES ______) Petition of NSTAR Electric Company d/b/a ) Eversource Energy for Approval of Proposed ) D.P.U. 18-64 Long-Term Contracts for Clean Energy Projects ) Pursuant to Section 83D of An Act Relative to ) Green Communities, St. 2008, c. 169, as amended ) by St. 2016, c. 188, § 12 ) ______) ______) Petition of Massachusetts Electric Company and ) Nantucket Electric Company d/b/a National Grid ) for Approval of Proposed Long-Term ) D.P.U. 18-65 Contracts for Clean Energy Projects Pursuant to ) Section 83D of An Act Relative to Green ) Communities, St. 2008, c. 169, as amended by ) St. 2016, c. 188, § 12 ) ______) ______) Petition of Fitchburg Gas and Electric Light ) Company d/b/a Unitil for Approval of Proposed ) D.P.U. 18-66 Long-Term Contracts for Clean Energy Projects ) Pursuant to Section 83D of An Act Relative to ) Green Communities, St. 2008, c. 169, as amended ) by St. 2016, c. 188, § 12 ) ______)
CERTIFICATE OF SERVICE
I hereby certify that I have this day served the foregoing documents upon all parties of record in these proceedings in accordance with the Department’s Aug. 30, 2018 Procedural
Notice and Ground Rules.
Dated at Boston, Massachusetts, this 22nd day of March 2019.
______David K. Ismay, Esq. Conservation Law Foundation 62 Summer Street, Boston, MA 02110 [email protected]