ComEd 2006 Annual Report Download - page 31

Renewable and Alternative Energy Portfolio Standards
Approximately 26 states have adopted some form of renewable portfolio standard (RPS)
legislation. On November 30, 2004, Pennsylvania adopted Act 213, the Alternative Energy Portfolio
Standards Act of 2004 (AEPS Act). The AEPS Act mandates that two years after its effective date
(February 28, 2005) at least 1.5% of electric energy sold by an electric distribution company or electric
generation supplier to Pennsylvania retail electric customers must come from Tier I alternative energy
resources. The Tier I requirement escalates to 8.0% by the 15th year after the effective date of the
AEPS Act. The AEPS Act also establishes a Tier II requirement of 4.2% for years one through four.
This requirement grows to 10.0% by the 15th year. In March 2005, the PAPUC issued its first
implementation order related to the AEPS. In this order, the PAPUC established a schedule for Tier I
and Tier II resources with year one covering the period June 1, 2006 through May 31, 2007. During
year one, compliance with the Tier I and Tier II requirements begins on February 28, 2007.
Tier I resources include: solar photovoltaic energy, wind power, low-impact hydro, geothermal
energy, biologically derived methane gas, fuel cells, biomass energy and coal mine methane. A small
percentage of the Tier I requirements must be met specifically by solar photovoltaic technologies
(starting at 0.0013% in year 1 and escalating to 0.25% by year 10). Tier II resources include: waste
coal, distributed generation systems, demand side management, large-scale hydropower, municipal
solid waste and several other technologies.
The AEPS Act provides an exemption for electric distribution companies that have not reached the
end of their cost recovery period during which competitive transition charges or intangible transition
charges are being recovered. At the conclusion of the electric distribution company’s cost recovery
period, this exemption no longer applies and compliance by the electric distribution company is
required. PECO’s cost recovery period expires December 31, 2010.
In the first year after the end of an electric distribution company’s cost recovery period, the AEPS
Act provides for cost recovery on a full and current basis pursuant to an automatic energy adjustment
charge as a cost of generation supply. The banking of credits from voluntary purchases of Tier I and
Tier II sources by electric distribution companies prior to the expiration of their specific cost recovery
periods is also allowed under the AEPS Act. Voluntary purchases under the AEPS Act are deferred as
a regulatory asset by the electric distribution company and are fully recoverable at the end of the cost
recovery period, also pursuant to the automatic energy adjustment clause as a cost of generation
supply.
During 2006, the PAPUC issued additional implementation orders and proposed regulations
related to compliance schedules, banking of alternative energy credits, compliance, cost recovery,
force majeure, alternative compliance payments and voluntary alternative energy purchases. It is
anticipated that, during 2007, the PAPUC will finalize regulations concerning AEPS implementation
issues.
While Generation is not directly affected by the AEPS Act from a compliance perspective,
increased deployment of renewable and alternative energy resources within the regional power pool
resulting from the AEPS Act will have some influence on regional energy markets and, at the same
time, may present some opportunities for sales of renewable power.
The ICC, in a January 24, 2006 order, ordered its staff to initiate three separate rulemakings
regarding demand response programs, energy efficiency programs and renewable energy resources.
On October 12, 2006, the ICC voted 5 to 0 to dismiss the three rulemaking proceedings. Separately on
April 4, 2006, ComEd filed with the ICC a request for ICC approval to purchase and receive recovery of
costs associated with the output of a portfolio of competitively procured wind resources of
approximately 300 MW. ComEd asked, and the ALJ agreed, to continue these proceedings until
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