How can i industry sign banking massachusetts word later
thank you for standing by and welcome to the energy industry team web conference series at this time all participants are in a listen-only mode I must advise you that this conference is being recorded today January 27 2011 I would now like to have a conference over to your speaker for today miss Jennifer Barnes please go ahead ma'am hello I'm Jennifer Bart's with Foley and Martin irandam pleased to welcome you to the energy industry team briefing series the title of today's program is Massachusetts SS Rex the Massachusetts RPS solar carve-out program explained joining us today from Foley is partner Jeff askin and associate bill before from the massachusetts department of energy resources are Natalie Andrews renewable energy project coordinator and Mychal judge RPS solar carve-out program coordinator at this time I'd like to turn the presentation over to Jeff adkin so thankful at Jennifer again this is Jeff atkin so many of the folks on the call and attending on a webinar bill before myself from fully we both work in a renewable energy group a partner that kind of an effect both of us cover most parts of renewable energy development I chair our solar energy practice we have around 90 attorneys in in the energy practice group and just over 30 they're in our solar practice bill bill kind of prior to coming to fully work at the Department of Energy and and has been pretty much going full time with us in the solar space I'll give a little background on Michael as well and natalie they can get a little more detail on their background that will cover some housekeeping in a little overview Mike he's worked at the massachusetts department of energy resources for just over a year and prior to that he worked in a solar rebate program at the Clean Energy Center natalie has also worked at the Massachusetts Department energy for just over three years and she focuses on solar policy and on the RPS program you so just a little bit about a little housekeeping the worst this is the presentation is going to be probably just under an hour there is a Q&A tab on the on the webinar fifth set up the tab up top just has in the middle you can type in some questions we've already received some questions earlier as well at the end of the program will go over to the extent we have time those those questions and answers and if we don't get to them we'll get back individually to thee that people to ask the question so the program is going to be recorded it will be on our website and available after usually takes about a week or so for it to get up if you need any audio assistance just press pound zero and we can have a technician that will help you out as far as for I gave a little background on us were you know a thousand a thousand attorney firm 21 offices worldwide and a pretty big group of us this is even at 85 + here instead I think we're over 90 now that focused on energy and really all aspects of it in Massachusetts particularly we've done you know several projects on the solar side already and have seen many more kind of coming down the pipeline one of the reasons why with with Mike and Natalie we decided to put this webinar together so as far as the organization of the webinar today we're going to first go over and Bill we'll go over a quick overview of sore development and s correct trends then Mike and Natalie will jump into a more detailed review of the Massachusetts solar carve-out program and we'll finish with 10 to 15 minutes at the end for Q&A so with that bill alternate overview thanks very much chef just want to thank everyone for tuning in today we definitely have a lot of information to cover but I think it'd probably be worthwhile to spend a few minutes just describing some basics and some general trends that we're seeing in the solar market throughout the u.s. on this first slide here just want to provide a few general definitions I'm sure it's review from any of you but you'll hear us use the acronym RPS Rex s Rex in terms of RPS renewable portfolio standard it's a state regulation and requires utilities to use renewable energy or renewable energy credits to account for a certain percentage of their retail electricity sales now within the RPS certain states have a specific provision referred to as a solar carve-out for a solar set aside and that provision requires utilities to use solar energy specifically or solar renewable energy credits s Rex to account for a certain percentage of the retail electricity sales just to point out one one note on that you know the solar carve-out is a specific portion of the RPS it's not in addition to the RPS so we take a look on this map it will give you a general sense of the various RPS policies from state to state one thing to know about this you know there is no general kind of national standard despite talks and attempts to craft one for those of you who tuned in to the state of the union address the other night that was definitely a topic that the president brought up but we're not there yet so what we have now is what's in front of you and that is different regulations in different states one thing to notice is that some states have enacted standards while others are merely goals and the goals you know in general black the teeth or enforcement power that standards have and if you just kind of briefly peruse the different numbers and percentages you'll see a lot of RPS numbers in the twenty to thirty percent range but note that the years to achieve those numbers vary greatly in California for example where Jeff and I are right now where our goal is thirty-three percent body or 2020 and if you look in Massachusetts on the far right hand corner their goal is 20 2.1 percent by 2020 you'll notice there in the in the box from Massachusetts that there's a breakdown of the twenty two point one percent I'm going to let me Natalie and Mike explain how Massachusetts is rps is broken down later in the presentation because they have a really neat chart that kind of explains the breakdown so if we drill down a little further on this next chart you see states that have RPS policies with solar carve-out provisions on the previous slide there were 29 states that currently have an rps and you see on this slide 16 of those 29 have some form of a solar car belt now if you look look here on this chart you'll notice that the carve-out provisions very some are percentages others are numerical goals and some are multipliers you know for example if you look at Michigan in the state of Michigan one megawatt of solar electric energy generated is counted as three megawatts toward the state's RPS they had it we had a delineate there as triple credits one other thing to note on this chart you will notice that California does not have a solar carve-out to the chagrin of many of us but that's probably a topic for a different day so just in terms of general trends general us trends a couple things to briefly note there is certainly an increasing focus being placed on s Rex as a financial incentive I think what we've seen is many states are moving toward the S rec model to focus on a model that's based on the production of clean energy whereas kind of the traditional rebate model is based on reimbursing costs incurred but s tracks are really focused on generation and in some aspects are being viewed as a more viable mechanism for states to achieve their RPS goals point number two direct solar incentives remain important and continue to evolve a couple things of note that just happens before year-end 2010 I'm sure everyone on this call is aware of it but bonus depreciation for qualified energy property was extended and expanded and you know lo and behold in the 11th hour the section 1603 cash grant program was extended for another year section 1603 has been the darling of the renewable energy world since it came about we worked extensively on on all the issues surrounding that but all say they're there certainly other ascent incentives alive and well the third note I just want to make is that progress continues to be made on legal incentives I'm sorry legal issues surrounding third-party ppas and basically the issue there is you know in the third party PP a model the developer builds and owns the PV system and then sells the power to the customer well the issue is whether the third-party owners are deemed to act as monopoly utilities competitive suppliers or both which depends on kind of this degree of market deregulation but to combat that states like Colorado and New Mexico and California have legislatively determined that third-party own systems are exempt from public utility commission regulation and you'll see that on this next slide here this slide shows in yellow the states that have authorized third-party DPAs as I mentioned you know deemed these contacts to not be subject to public utility commission regulation so I think you're going to see this this map will will look differently for sure in another year or so but progress is being made on that front and just a couple notes to make about general s wrecked trends there's certainly an increasingly sophisticated market involvement from the states I think that the Massachusetts program is evidence of that trend you know policymakers are starting to understand that net metering policies play an important role in creating markets for on-site renewables and those policies need to evolve as the markets expand the second point is just increased price transparency brass Rex for example as we're going to discuss today there's a clearly defined alternative compliance payment there's a defined price floor and data is frequently available from aggregators and in third-party sellers and that leads to the third point which is just you know there are plenty of web-based forums and companies that are specializing kind of in this trade connecting Eric Byers and Nestor xeler and so I think this this next slide asterix in vogue gives you just a general sense of SF markets in other states you see everyone from Arizona and Nevada which you would expect to states like New Hampshire Delaware and Massachusetts which you might not necessarily expect but I just point you to the far right column which shows kind of the variability in a stock prices definitely vary from state to state and all to say that there are a couple factors that drive the value of s Rex you know a huge part is just the state policies state incentives and obviously natural supply and demand forces and in Essex themselves are generally sold in two ways very common way is through long-term fixed price contracts that's where the owner will enter into a multi-year fixed price contract to sell the effect for fixed price i think the upside to that and the attractiveness of that is visited provides a predictable stream of cash flow and it does take a measure of variability out of the SRX sale process the downside in a long-term contract is that that option shifts the price variation to the purchaser and as a result the price is offered by the purchaser could be perceived as being below market you know in other words the project owner may feel like in entering the long term contract they may be leaving some money on the table so that's the long-term contract option second popular way is just for the spot market and that may be done through an aggregator you know essentially the aspects are sold based on fluctuating market conditions and in that model owners assume the risk for price variability but the unique part about Massachusetts is they offer a third option so as Natalie and micro going to further explain Massachusetts offers a public option I like to think of it as kind of a type of safety net you know so if a project owner strikes out everywhere else you know they're not able they don't decide not to enter a long-term contract and decide not to sell their s red X on the spot market they can avail themselves of the public auction it's referred to as the auction clearing house in Massachusetts and essentially they can sell their excess Rex for a fixed price of three hundred dollars of which after Massachusetts takes an administrative fee the project owner receives 285 dollars now keep in mind this is referred to as kind of an option of last resort but all to say there is kind of a safety net you know I think the bottom line in looking at just the way best works are sold and when project owners are evaluating this the bottom line is that you have to satisfy underwriting criteria I think lenders usually prefer long-term fixed price contracts from creditworthy aggregators but the public option does provide a safety net and a measure of what the floor of s correct prices will be so getting into a little more specifics of Massachusetts just a broad overview and I'm going to turn it over to Natalie Mike in just a minute but our team has spent a great deal of time monitoring and keeping up with the trends in the solar market state of Massachusetts has been on our radar for a long time and that's just it's really took a great deal of time kind of vetting these regulations and they were just finalized as of December twentieth 2010 so result of that I think we can expect to see a great deal of solar development being Massachusetts in the near term and the coming years we've done lots of research on topic but just a couple outline points you know I think and Natalie Mike will certainly speak to this but two of the goals of the Massachusetts program our ride price certainty and flexibility right so on the price certainty front they've established the current alternative compliance payment of six hundred dollars and as I mentioned through the auction Clearinghouse the price for is three hundred dollars so that gives you a sense of what the market will be and then the opt-in term is currently at ten years now that opt-in term as I'll let them describe that's essentially that gives the project owner the right to participate in the public option so also say you know the project owner can't necessarily participate in the option in perpetuity but currently there's a 10-year opt-in term meaning that that's kind of safety net thinking that will exist for the project owner for ten years and then the other thing I want to highlight is just flexibility the Massachusetts program has mechanisms in place to kind of adjust compliance requirements in future years and that allows them to create demand for s Rex in the event that s tracks aren't being sold Massachusetts has said okay we can we can increase the requirements going forward for the utilities and kind of wha we have a we have a market so that's the extremely broad overview I want to turn it over to Natalie Mike and let them explain in further detail hello this is Natalie I'll be taking the first half of the presentation here and then have like fill in so today I'm going to give a brief overview of the Massachusetts RPS the renewable portfolio standard I'll talk a little bit about how the solar carve-out was developed what the goals and objectives of the program are including updates on the current statistics in the pipeline of projects michael will then go over the details basically of the program including how to get qualified the opt-in term and how that changes how the program in basically how the program design supports prices from dropping 20 dollars and then i'll briefly come back on and cover the trans-canada settlement and discuss the new jersey in pennsylvania ass wrecked market in comparison to ours so to get started if you take a look here at this table you can see that retail electric suppliers in massachusetts have to comply with five different programs as part of the RPS the RPS class 1 and class 2 and a PS which is the alternative portfolio standard the solar carve-out is a subclass of the RPS class 1 program and you'll note in the last column the solar carve-out is the only program in which the alternatives compliance payment rate is not tied to the Consumer Price Index this graph here showing you that after 2008 which was the year in which the Green Communities Act was signed all these new programs basically were added to the RPS and the retail electric suppliers had to comply with them you won't even notice basically the solar carve-out in 2010 and 2011 because it's just so small you can see it in ye
low but over time when we reach the program target of 400 megawatts it'll be about 1% of electricity in Massachusetts coming from solar PV so the solar carve-out wasn't the first incentive program for solar PV projects in Massachusetts when Governor Patrick took office in 2007 he set a goal of 250 megawatts by 2017 the first program that we rolled out to help us to get to that goal was called the Commonwealth solar program and that actually launched and I think January of 2008 was December on there but it was funded with 68 million dollars and the goal was basically to get us to 27 megawatts installed and we had figured it would take about four years for us to go through that 68 million dollars and like most rebate programs it went a lot faster than we expected so lasted about two years and it definitely created a strong pv market in Massachusetts and grew the number of jobs here in the or at least firms from like 20 maybe installers to about 150 so we're definitely seeing the success of creating good incentives for solar and we knew you know that a rebate money there was the run wasn't other funds here to help provide incentive for a large project so we need to switch to a market-based incentives in 2008 the Green Communities act basically allowed for that tap and the Green Communities act included a DG carve out of the class one program and it was sort of known that that DG carve out would be for solar specifically and essentially all of 2009 was spent with you know talking to industry and the compliance entities to develop a strong solar carve-out we had a lengthy stakeholder process and the program was launched January first of 2010 small projects are still eligible for a small rebate through the Commonwealth solar to program and that's up to 10 kW and only the first 5 kW actually receive you know small 75 cents i think per watt rebate in addition of course there's also the federal incentives that help make projects in massachusetts possible in this chart here is just showing what the Commonwealth solar and stimulus program you know have really helped us to get started but it's the growth of the industry is really going to be relying on the solar carve-out and we're hoping that we're going to get to that four hundred megawatt target of PB installed you'll note that that target the 400 is larger than the governor's goal of 250 megawatts and that's because when we were going through the stakeholder process we thought it would you know 250 would be too low to really encourage development in Massachusetts so we set the goal higher because we want to see industry developed and jobs created here the main goals of the program are to stimulate development of PV across multiple sectors not just the large megawatt plus projects but also the residential and commercial projects we want to reduce the dependence on rebates and minimize the impact to ratepayers noting that you know all this is done because we believe strongly in the importance of renewable energy and getting us off of our dependence on fossil fuel recognizing the jobs that in economic and environmental benefits of this program brings to the state if you take a look on the right hand side you can see some statistics probably you know even though we just created this slide a slightly outdated because we are constantly getting new projects submitted to us and improving them over 200 systems have been qualified than they represent about 17 megawatts of projects you'll note that only about four that is actually installed in generating s racks and you know as solar has a seasonal slowdown here in the winter we're really expecting to see a number of large megawatt scale plus projects coming through in the spring installed cost about five dollars a watt for the first three quarters of 2010 there are about 1100 s tracks created the fourth quarter asterix won't be minted or created until april fifteenth of this year and then we'll have a will know exactly how many s trucks we had for the first year it's definitely a short market but we expected that as the program's you know getting up and going and for this year 2011 the appliance obligation for suppliers is 78,000 plus s racks that need to be generated and now I'll turn it over Mike to cover the basics and the details of the program all right on my mama covers up basics of the program the process of getting qualified as an eligible unit and then some of the details on how we make adjustments to the author determine minimum standards so that's Rex are the new primary instead of personal projects and Massachusetts and as you may know when L it's a market-based incentives that's based on perception and it's designed to provide a stream of revenue over a number of years as opposed to an upfront rebate 1s wreck is equivalent to 1,000 civil watt hours or one megawatt hour of generation they have a useful life of one year so if they're generated in 2010 they can only be used for compliance in 2010 I am in 2011 the requirements of the program of iron it is 69 megawatts of installed capacity so that is referring to is we would need sticky 9 megawatts installed capacity to generate enough s Rex so the market to be in balance and then we calculate the number of nests Rex based on a number of megawatt hours that 69 megawatts of generating Massachusetts which we've estimated around 78,000 577 and that comes out to about point one six seven percent which is then that is the obligation for each investor-owned utility and competitive retail electric supplier that has to the obligation of Professor X so the buyers in the market Bar B invent for investor owned utilities in competitive and retail liquor suppliers and about 20 different for competitive retail electric suppliers in the state and the investor owned utilities are about fifty percent of the market and the competitive suppliers are the other fifty percent and they each have a to purchase a certain percentage of s or a certain percentage of the amount of both total load that they serve in Massachusetts and that percentage is applied to that load and then they have to purchase a number of esther x equivalent to that each year the minimum standard grows thirty percent so that is it's not actually a straight thirty percent growth rate in a way that most people would think of it but it's act thirty percent of what was installed the previous year so in 2010 the requirement was 30 megawatts so thirty percent of that is properly nine megawatts and then we add that to 30 megawatts so in 2010 we assumed that the industry can install 30 megawatts but in 2011 we assume that could install 39 megawatts and when you ask you together that for you to the 69 a West so if the market remains in perfect balance which did likely won't certainly it would increase each year by about thirty percent the ACP rate is six hundred dollars for a sec and this is the rate paid by investor owned utilities and renewable than competitive retail life expires if they fail to meet their obligations the auction account allows for buyers or just sellers of s Rex to get at least $285 for their ex if they're unable to sell them before going to auction and the overall targets the program is for megawatts of installed capacity so the qualification process um to be eligible product needs have a capacity of sick megawatts or less per parcel of land so you can only install six megawatts on a single contiguous parcel implant they also have to be located in Massachusetts and that includes municipal light district territories in this within the state they have to use some of their generation on sites and be interconnected to the grid they have to have a commercial operation date later than january first 2008 and they cannot have received additional funding from sources deemed ineligible die by dar so these courses would include prior rebate programs like the original commonwealth solar program are some of its predecessors or arrow funds in excess of fifty-seven percent of the total install across the project on the application is entirely online and the only thing that you actually need to submit to do ER and hard copy form or a couple signature sheet sheets that you just that you have that will be generated automatically when you're applying the repots review process is pretty quick and straightforward the first-time applicants sometimes have a little bit of b-but it's once once you go through the process once it's a very easy and quick process we can usually get applications turned around within a few weeks if they are submitted completely so in order to apply you need to go online and actually register of accountants login to our statement of qualification an application program or program online and this is often to be found on our website you step to fill out a few basic details about yourself in contact information they will automatically populate padua near your filling out the application and then most of the application is actually the contact information for the involved parties but then there's also some specifics about the individual generation units and some other certifications that you need to make while going through the process so often terms um the often term is every single qualified project to design it often turn at the time they're qualified and this sets the amount of time that any s rats the process generates can be deposited into the auction account so for 2010 and right now through probably through the end of money 11 and beyond the often term is that at 10 years or 40 quarters so any project qualify today will have will be guaranteed to sell the this stuff to be able to sell their s Rex through the auction account for 40 quarters from the data are qualified from the core members they're qualified and we make adjust your Lea adjustments in the often term that only affects new new projects so any process that's been qualified won't have there often turn reduce or increase but newly qualified projects may depending on what the opt in turn is in that year so if the market long the option term is reduced by 4 quarters for each ten percent of the compliance obligations positive into the oxygen house so for 2011 the total compliance obligation is 77,000 across 76 77 thousand megawatt hours so it's seven thousand tests for expert deposited into the auction account that would trigger at ten percent for for quarter reduction in the next year's often turn if the market is short so the meanings apt compliance is named after HTT payments very ten percent success is meant for your ATP payments the audit firm is increased by four quarters but the officer could never go above 10 years or 40 quarters and will not go below five years until at least after 2016 it's very possible it will never go that well and in any given year it's never if not increase or decrease by more than two years so the minimum standard this formula may look a little confusing not that bad actually so in in point ten and twenty eleven the minimum standards were set going forward forward we calculated based upon the compliance obligation from the previous year and the number of esperance generated and then a few other factors such as ACP volume and banking volume and auction volume so to go through i put an example on here so the 2012 minimum standard is equal to the compliance obligations from 2011 which is 78,000 577 megawatt hours plus projected a structure of 28 that will be generated in twenty eleven minus the number of actual networks that were generated in 2010 multiple men that is actually x 1.3 that's the thirty percent growth rate and then JCP volume is from 2010 is subtracted from that and thanking volume and the auction volume is added to it so the way that we project the cataracts is we actually have seven months but we have to announce it in august or in july actually remembers the following a minimum standard and we'll have seven months of production data up for that point so we'll have some real data and then we'll use the information we have on the pipeline and a number of qualified products to project the amount of s rights that will be generated by the end of the year and then we actually will know for sure by July the actual number of FX generated in 2010 and then we subtract to a number from the projected number and multiply that by the recent growth rate the ECP volume reasonably subtracted is because that represents a shortage in the market so we want to slow down growth so by subtracting it we're decreasing the minimum standards of following their less than the thirty percent growth rate and then banking volume and auction volume are added because they represent an over supply in the market it's unlikely that we'll see that happening this year but in future years that could be added and that would accelerate the growth of the market to account for the oversupply and try to bring everything back in the balance once for new megawatts of capacity than qualified we won't qualify any future projects but the market will continue to exist until all opt in terms of qualified products has expired so if the final project is the fourth of product because of supported megawatt disqualified say in 2017 in the often term at that time is eight years market will last through at least 20-25 so private cleric vol 5 2010 in 2011-12 will have their 10-year often term which will end but they'll be able to continue to sell SRX without the gerund without the guarantee of going to the auction at the end of the year so it will likely be selling them for less price lower prices but it's all based on what the market prices are dependent so now go through how the auction works so the options really designed as an option of last resort resort we want people to go out in contracts to contracts resurrects and sell them on the spot market in advance and it really should only be used in here for the snow oversupply because in other years there should be enough demand for all aspects to get sold it the auction house opens to the very end of the trading here so from a 15-3 existing secreting interests extends on jun 15th so by that point in the year you should know whether or not you're going to be able to sell your restaurants and at that point in time you can deposit account the auction will be helpful later than July thirty-first and any aspects that are deposited into the account are remanded as extended life s Rex so rather than being good for just the compliant here in which they were generated now they become good for the following compliance year or the year after that so they become more attractive to the buyers because they can use them from one or the using for multiple years compliance fitters did on the quantity they want to purchase not on price because that's our sold the buyers for a fixed price of three hundred dollars from megawatt hour before being assessed a fifteen dollar megawatt-hour auction feed my DoD are so the buyers will fit on a quantity and then this as they will pay the oer voar will take up the 50 not be and then hey that's Rick owners and this is a pretty quick turnaround I think it should happen not sure if it actually says in our regulations or not but it happens within a couple weeks if the auction sales to queer meaning not every at every single s rent was not sold then it will be held again and do this happens within a couple days and once it when to tell again that's right sorry minted and this time they have a three year shelf life as opposed to if the second option failed to clear we increase the minimum standard for the fall in compliance here and by the number of s wrecks there in the auction and a third auction has been held a few days later and this is actually an increase in addition to previous entries so one of the part of the formula for increased women standard is to improve it at the option lime to the minimum standard for the following year so say 10,000 s wrecks were deposited into the auction account in 2011 the minimum standard for 12 2012 would then be have an additional ten thousand megawatt hours added to it if the first year after the auction failed clear and it goes to the third round we then increase it by an additional ten thousand so this is saying to investor owned utilities and retail life expires that if you don't purchase th
se s right now you're likely going to have to purchase from next year and it use out a higher price so really incentivize them business if I system to buy do that strikes at this point but in the event or the third option should fail to clear X Rex will retain their three year shelf life and then any unsold xrefs will be returned to their owners on a pro-rated basis so if you deposit is 100x into the account and only fifty percent of the auction clear fifty percent of your assets will actually sell but then you get the other fifty percent returns of you and they retain that three year shelf life so even though you didn't sell them the likely to be the most valuable assets out there in the market because they'll have that threw yourself place and you will be able to sell them for three years so it's very very unlikely in that anyone's ever going to be left holding s Rex and not be able to sell them and tyr is very confident that the auction will clear hopefully on the first round and definitely by the third grab in care if skip it Yuma needs to be held at all um theaters a few important dates this list is actually on our website too most of them are eight relating to when Tess Rex are actually created at equal gif and then the other dates are related to often term announcements when we receive components filings in how the auctions work a lot of this takes place between july in the end of august and then the other other dates listed in the air are mostly the quarterly venting dates in yes if you want to look at this you can always refer back to this presentation or you can find it on our website as well so now i'm going to turn it back over to Natalie and she's going to cover the trans-canada lawsuit from earlier this year and the settlement and a few other things to close out the presentation thanks Mike ok basically TransCanada filed a complaint in federal court against our program in april of 2010 and what they were alleging is that portions of the Green Communities act that you know are intended to increase in state solar projects were unconstitutional because they favor Massachusetts producers in violation of the Commerce Clause and the Commerce Clause if you're not familiar basically generally prohibits States from enacting laws that burden out-of-state businesses in order to give a competitive advantage to in-state businesses and essentially the solar carve-out program is only open to projects that are built in Massachusetts and we're not qualifying projects that are built to new New Hampshire Rhode Island and this you know did not go through a legal proceeding we settled in May of 2010 and the settlement included changes to the program and specifically the change is that any existing load and that competitive retail electric suppliers had before january first 2010 when the program was established is those existing contracts are exempt from the alternative compliance payment at the six hundred dollar level instead they now have to pay the RPS class 1a CP level which is about sixty dollars and you know as Mike mentioned earlier the competitive suppliers are about half of the market here in Massachusetts so you know about half of the load in 2010 will be made through those $60 ACP payments but going forward the competitive retail electric suppliers typically only enter into one to three-year contracts so we'll be seeing the existing load diminished significantly in 2011 2012 so they'll be purchasing ass racks for a larger portion of their load and the last slide to close it out it's just basically the Massachusetts program is you know different from other aspect programs New Jersey is the state with the second largest number of megawatts installed they have a very successful aspect program unlike Massachusetts they their utilities have a basically a way to rate base long-term contracts with the s correct developers so they'll enter into long-term contracts for PV projects and you know we just didn't have that mechanism here they also have a rolling ACP schedule so you you know for certain eight years out what the you know ceiling price for aspects are going to be New Jersey has definitely experienced you know a shortage so prices have been really high close to the ACP level to contrast in Pennsylvania they accept projects that are located in Delaware Illinois Maryland Ohio Virginia North Carolina West Virginia and Washington DC so in 2011 they're a threat minimum standard or goal is about 33,000 s Rex but there's about 46,000 s racks that are registered in Pennsylvania so there's definitely going to be you know a long market there so you know we should see the a stock prices they are decreasing which is of course you know i'm going to be difficult to get projects built and where they don't have any sort of floor price it you know could significantly shut down and slow the industry so we were looked definitely looking in 2009 when we were designing a program to other states and try to figure out you know what the best practices were to incorporate in our program design excellent well thanks a lot bill and Mike and Natalie and why don't we run to a couple of questions and finish up here and and perhaps kind of as a preliminary matter it might be useful for micro Natalie to give a little a brief overview a little more detail on the legislative history and you know whether you think there is any risk that the program might be eliminated or suspended or go away that's kind of a risk that oftentimes developers and lenders ask but yeah I'll take this person so mom the Green Communities active 2008 allowed for us to establish a DD carve out and specifically required a statement and dar subsequently held of a Wimpy stakeholder process to develop the regulations and after several revisions were released throughout 2010 the final regulation was actually signed by the secretary of state earlier this month so the regulations are fully promulgated in effect and I mean the legislative risk is similar to pretty much any other policy the content of the program is regulatory and can be changed by you AR through a range of regulatory proceedings which would be public and we have to see how public comment events a consideration but on the actual requirement for a carve-out would require a legislative change and being given the support for renewables and has to choose it by the legislature and the governor right now it's possible the something could happen but I think it's probably unlikely but if there is as with any other policy there is some legislative risk that definitely needs to be considered fair enough fair enough out a few questions we have regarding the auction the option price and that kind of specifically and maybe Natalie one that kind of comes up for people is did you know 300 or the 285 dollar price is that really a kind of a guaranteed price or a floor life yeah so we don't we don't like to use the word guaranteed our lawyers are here have probably ingrained that enough but you know it definitely is the mechanism where you're going to get potentially the you know the lowest price for your excess Rex and it's designed so the program does not you know as we said go down to zero dollars for you know ten dollars or something for your ass Rex should someone want to enter into a contract you no longer term contract for something less than 285 because they think it has last less risk there's nothing stopping permit anyone from doing that but you know we feel that the auction mechanism is in a a good a good bet and you know the whole design of the program is geared for someone to get the 285 basic floor price for their aspects as a minimum so for outside of the option you kind of expect prices probably to be a little higher than that generally speaking yeah and that's what we've heard anecdotally from you know developers and people that call up to get their projects qualify while they're talking to them on the phone you know we definitely heard of prices you know in the high threes and fours and spot markets even higher than that so okay and Mike you talked a little about the the mechanisms established in the option to kind of ensure that desperate they don't go on so qualified as forex don't go unsold and the three rounds of options and and kind of be a level of attractiveness of the SRX going up in each round do you do you envision kind of any circumstances where the a strikes would actually not be sold or is the intent really you know that's kind of those of the price of the Apple and to really get them sold and there's going to be enough pressure on the electric utilities to do that means we're I mean I guess it's possible that someone could not have to have unfold as Rex but I mean as I said earlier there are three rounds of the auction and most people almost all people should be able tell their Asterix before that the buyers in the market the difference in particular the utilities actually have to go to the Department of Public Utilities before them and get argue for rate relief so they're not purchasing these desperate the lowest price possible in there instead just allowing these metrics to go into auction not something I'm buying them and paying an ACP rate instead the CPUs probably look unfavorably on that so there's a lot of incentive to them to purchase these metrics before they even get the optimum and once they're in the auction it really should be the floor price it's the minimum price they're buying them for and we make guess works more attractive by a lot of abuse for multiple years compliance and we also have this possible two triggers of increasing the minimum standard two times yeah I mean I think it's very unlikely that and the asteroids will never go unsold unless there's a major oversupplied market for multiple years and is there may be on this the price as well natalie is there any you know will the state of Massachusetts ever stepped in and buy vs rack stores it's just going to leave it to the option process yeah the state has no intent to buy a section we know the design of the auction clearing houses the mechanism basically for any unsold resurrection and long market to be deposited and cleared okay and with respect to the ACP rate a couple questions you know is that what you do you expect that to stay at six hundred dollars you know it looks like there's some mechanism to go down and I guess kind of combined would it ever go you suck its drop the load of $300 are below below 300 yeah any I don't so what do you were you asking about whether it be reduced below 600 there or what's the I mean I guess it's at 600 it looks like did drop kind of normally you know I annually is that something but against is that just going to be determined kind of year by year depending on where where the supply is yeah i mean it is one of the few things in in the regulations that we actually still have some discretion over almost everything is done by formula and we maintain the discretion to reduce easy p great fine no more than ten percent annually and we'll make an announcement of any change and it's not the end of january each year and if we do end up reducing it we will justify our decision to do so and as far as going below 300 i mean i don't think that we have any attention to reduce tht key rate below that because its ability to make much sense for us to put the ACP raise less there's a floor price alright program depending a couple more questions and we'll wrap up and Natalie well a few a few people have shown a little are ask us questions about what happens after we opted in terms so after the ten years can you still sell can the project still sell SRX so I think might cover this in the presentation but I'll just reiterate that the end of the program is when one all of the projects that have been qualified when they're opt-in terms have been met so for projects that are getting started you know at the beginning of the program more than likely they'll end up continuing to generate Asterix beyond their often term and they just won't have the option of putting any excess asterisks that aren't sold into the auction account they'll be able to sell them you know in the market until the program has met all of those opt-in terms and then once the program does end and all the opt-in terms have been met projects will still generate Rex and it will just be on the RPF class one rec market you know it's hard to say what that rate would be but it's you know increased annually on the Consumer Price Index so the answer is still can be sold but probably they might just be racks and there might be at a lower price and I guess it wouldn't have the auction mechanism to kind of back it up right but if the markets still strong and you know there's a shortage in one year you you would still be able to expect you know higher than auction prices for your ex okay and last last couple questions just on the so on the four hundred megawatt cap is how is that determined is that first come first serve just through the online application yes the the four hundred megawatt cap is first come first serve where you know accepting projects typically people don't apply until they're close to their their interconnection and for projects that are greater than one megawatt we had some changes in the regulations that came out recently to say that they need to have a you know their state permits in order so they're it if it's you know a building permit or electrical permit because you know at the end of this program we don't want a build-up or to the projects that aren't real so you know we had to add something to it to encourage folks don't you know don't submit your application till you're ready and the other thing is when you know you submit your application you're qualified you're given your often term and quarters and if you know the clock starts ticking if you're qualified and you don't actually you know get constructed for a year you're going to start losing your opt-in term you know which won't really make a big difference until the out years but you know we don't encourage people to apply until they're you know good and ready is there is there a mechanism for projects that are delayed or not being built other than just eating into their own into their own opt-in term which you know could hurt their project is there any other mechanism to kind of remove them from the pool yea after in our regulations after two years basically you have to reapply okay so if there's a project that's qualified doesn't doesn't get built within that period of time and again I will basically a nap she reply again okay and there whatever they had qualified for goes back into the pool yeah okay all right so I think that answers you know most of the questions there's a couple additional ones which we can kind of get back to the individual individuals asking that but thank you very much Mike thank you very much Natalie and Bill and I think that wraps us up
