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Guide to Receiving and Transferring Renewable Energy Certificates for Power Generation in the Western U.S.
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October 1, 2007
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By Peter V. Allen and Paul C. Lacourciere
Thelen Reid Brown Raysman & Steiner LLP
California is in the process of changing the method by which renewable electricity generation is tracked (and the associated environmental attributes transferred) for purposes of compliance with its Renewable Portfolio Standard (RPS) program. Beginning in 2008, generators and utilities will be required to use the Western Renewable Energy Generation Information System (WREGIS) for this purpose.
WREGIS has been under development for several years and became operational in mid-2007. It will serve as the platform for tracking, transferring and retiring renewable energy certificates (RECs), each of which represents the environmental attributes associated with 1 megawatt-hour (MWh) of renewable electricity. This article provides an overview of the steps generators need to take in order to ensure that usable RECs are generated by their facility.
Overview
WREGIS provides for the creation, verification and tracking of RECs from renewable electricity generation units within the Western Interconnection. This region consists of Alberta, British Columbia, Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming; parts of Nebraska, South Dakota and Texas; and the northern portion of Baja California.
In order to participate in WREGIS: (1) generators and users of RECs need to establish an account with WREGIS; (2) generators need to provide information about their generation units to WREGIS; (3) generators must take steps independent of WREGIS to make sure their generation qualifies for the California RPS (or other compliance programs); (4) generators must arrange for generation data to be properly reported to WREGIS; and (5) generators and users must schedule and confirm REC transfers. Details for this process are given below. Generators that do not wish to deal with WREGIS may designate a Generator Agent that can act on their behalf with WREGIS. This topic is not addressed in this article.
It is important to note that WREGIS it is not a centralized exchange. The purchase and sale of RECs occurs outside WREGIS. Separate contracts need to be negotiated (or separate exchanges developed) in order to establish price and terms for REC transactions.
Establishing an Account and Registering the Generation Unit
Generation owners and end-users of RECs need to establish accounts on WREGIS in order to track and transfer RECs. Becoming an "Account Holder" involves completing an on-line registration process, executing and submitting an Account Holder Agreement/Terms of Use, and paying applicable fees. The details are available at www.wregis.org. After the process is completed, WREGIS will notify users when their accounts have been activated.
Once the account is activated, the Account Holder needs to register each generating unit. This also is an online process and requires that the Account Holder provide basic "static" information regarding the facility, such as ownership, technology and location. Unit registration and an assigned meter ID number are required before RECs can be generated. In general, each generation unit at a facility must be registered with WREGIS individually although in certain circumstances multiple units can be aggregated to a single meter for WREGIS purposes.
Reporting Generation Data
In addition to reporting the static data, actual electricity generation data (and other "dynamic" data) needs to be supplied to WREGIS in order to determine the quantity of RECs that are generated. WREGIS classifies generating units according to their size, whether they report to a balancing authority and whether they serve on-site load in addition to providing wholesale generation.
Each generator classification has its own requirements for data reporting and metering. Small (360 kW or under), customer-sited distributed generation can self-report generation data to WREGIS. Larger units, however, must have a Qualified Reporting Entity (QRE) that provides WREGIS with unit-specific generation data. As of early September 2007, there was one approved QRE, with two other applications pending. The number of QREs is expected to increase. QRE-supplied data is used by WREGIS to create RECs based on the MWhs of electricity generated. RECs generally are issued based on the quantity of electricity generated and delivered into the transmission or distribution grid although on-site load that would have otherwise received electricity from the grid may, in some instances, also produce RECs. RECs are not currently issued for generation that supplies station service or that is not connected to the grid.
Program Certification
Registration of a generation unit with WREGIS does not mean that the unit is eligible for any state, provincial, or voluntary program. If RECs from a generation unit are to be used for a state program such as California's RPS or a voluntary program such as Green-E, the Account Holder, during the unit registration process, must designate for which programs the units are eligible.
This program eligibility information is reviewed and verified by the relevant Program Administrator. For the California RPS, the Program Administrator is the California Energy Commission (CEC), which has a verification process separate from WREGIS. The CEC has forms available on its Web site at www.energy.ca.gov that must be completed, signed and submitted in hard copy in order to complete the verification process. Once CEC has confirmed eligibility to WREGIS, it will issue a certification and letter with an RPS ID number (which will be recognized by WREGIS). The WREGIS Administrator will not take any further action to confirm whether the generator qualifies for the relevant program. Qualification is solely the generator's responsibility.
A generator can register with WREGIS either before or after requesting (or obtaining) certification from CEC. If registration occurs first with WREGIS, RPS-compliant certificates will not be generated until after CEC adds the generation unit to its list of eligible units and sends that list to WREGIS. If the generation unit already is certified by the CEC, users can request during the WREGIS registration process that WREGIS confirm eligibility with the CEC.
Generating and Transferring RECs
After all of the registration and verification steps have been completed, WREGIS will create RECs corresponding to the generation data it receives. Each certificate represents all of the renewable and environmental attributes (as defined by WREGIS) from 1 MWh of renewable generation. Certificates are issued once a month and are for each whole MWh generated; fractional MWh are carried over to the next month. Certificates are issued 90 days after the generating period. (For example, if power is generated in January and reported in February, the Account Holder will get its certificates in May.) Certificates are "whole" and cannot be changed after they are created. In order to disaggregate a certificate, it must be withdrawn from WREGIS. WREGIS does not define the lifetime or expiration date of certificates, but states and provinces may do so.
Once created, RECs can be transferred among Account Holders. To transfer RECs, the transferring Account Holder initiates the transfer, and the recipient must accept it within 14 days in order to complete the transfer. More detailed information about the mechanics of REC account management and REC transfers is available in the WREGIS Operating Rules and at www.wregis.org.
Caveats and Current Developments
Although the WREGIS system became operational in June 2007, not every aspect of it is fully functional for every program or geographic area. It does appear to be functional for California RPS purposes. Its use will be required for California RPS compliance purposes beginning January 1, 2008. According to the CEC, fees are waived if Account Holders register in 2007, in large part to encourage people to sign up now rather than at the last minute. In other words, users should start thinking about signing up soon.
California's SB 107 allows for the use of unbundled or tradable RECs to satisfy the requirements of the California RPS program but does not require it. The California Public Utility Commission is currently considering whether (and how) to implement the use of unbundled and tradable RECs for purposes of compliance with the California RPS program in Rulemaking 06-02-012. To date CPUC has not authorized the use of unbundled RECs, but it currently appears that the CPUC will do so. It is, however, too early in the CPUC process to predict with any certainty what rules might govern the use of RECs for California RPS compliance.
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For more information about the issues covered in this report, please contact Peter V. Allen in our San Francisco office at 415-369-7561 or at pvallen@thelen.com, or Paul C. Lacourciere in our San Francisco office at 415-369-7601 or at placourciere@thelen.com, or contact your Thelen attorney. For more information about Thelen's Construction & Government Contracts Department, click here.
©2007 Thelen Reid Brown Raysman & Steiner LLP
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