by Timothy McQuiston Vermont Business Magazine It appears that Vermont has lost out again on a massive powerline proposal that would have sent upwards of 1,200 megawatts of electricity from Quebec to Massachusetts and brought hundreds of millions of dollars into the state. Vermont appeared to be back in the running for the renewable power project after Eversource Energy's Northern Pass, which would have run through New Hampshire, failed to get a key permit after winning the initial bid. Eversource had been selected as the Massachusetts Department of Energy Resources' winner on January 25. But on February 1, a permit was unanimously rejected by regulators in New Hampshire. But renewed hope appeared dashed this past Friday when the MassDOER said it will enter into negotiations with runner up Avangrid and its Maine-sited transmission line.
DOER issued a request for proposal for renewable power last year, with proposals flooding in, including two using a Vermont route: TDI-New England and National Grid. TDI proposed an under-Lake Champlain option, while National Grid proposed using an existing right of way that cut through the Northeast Kingdom on its way to New Hampshire. TDI promised more than $200 million to the state, which Governor Phil Scott envisioned to help clean up the lake. National Grid also committed $20 million to local development in the NEK. Both would have added millions more in property taxes and other fees.
Massachusetts is in a hurry. And while the strength of the Maine line is that it's cheaper than some of the other proposals at $950 million, versus $1.1 billion for National Grid and $1.6 billion for the TDI and Eversource plans, it still needs several permits and time appears to be running out.
Any contract awarded under the request for proposals must be negotiated by March 27 and submitted to the Massachusetts Department of Public Utilities by April 25. It's not clear what happens if both top bidders fail to get their permits or fail to make the deadlines. The rank of the many proposals was not made public, leaving all other bidders in the dark regarding where they stood and why.
Meanwhile, National Grid does not appear to be throwing in the towel. National Grid Ventures and Citizens Energy issued these statements Friday regarding the Massachusetts Clean Energy update.
“This historic procurement and the clean energy transition are important to our shared future, and we are happy that Massachusetts is leading the way. We believe our projects – the Granite State Power Link and the Northeast Renewable Link – provide the Commonwealth of Massachusetts a triple-win by delivering the greatest emissions reductions at the lowest cost with minimal environmental or community impact. We are proud of these carefully-designed solutions, which meet this procurement’s targets, while providing billions of dollars in economic benefits to the Commonwealth and host communities. Our working relationships with General Electric, Citizens Energy, Vermont Electric Power Company and IBEW further our commitment to bring broad economic opportunity to New England. We are appreciative of diverse and growing support we’ve earned throughout the host states and communities, including Vermont’s Governor Scott, the Northeast Kingdom and New Hampshire state legislators, NVDA, NCIC, and many route towns and residents. We are committed to advancing these and other projects in our renewable energy portfolio that achieve substantial triple-win benefits for customers and communities. We look forward to the independent evaluator’s report to better understand the methodology by which these projects were scored and selected.” – John Flynn, Senior Vice President, National Grid Ventures.
“We will continue to help build important green energy infrastructure and use our profits to serve the energy needs of struggling senior citizens and low-income families.” – Citizens Energy Chairman Joseph P. Kennedy II.
National Grid primarily would use Canadian wind power to supply the Massachusetts renewable energy proposal, while Eversource, Avangrid and TDI would use power supplied primarily by Hydro Quebec.
Nor has Governor Scott given up. His Communications Director Rebecca Kelley told VBM, "We continue to view the New England Clean Power Link project as well-designed and shovel-ready, so we’re still hopeful that there could be a path forward for this project. TDI has expressed continued interest in identifying how to serve the growing needs of the region so this could move forward through other channels. And, as other projects continue to face a permitting process and hurdles that the NECPL – which is fully permitted – has cleared, we remain hopeful there could potentially be a path forward with Massachusetts."
TDI-NE's proposal predates the Masachusetts RFP and originally was proposed as a wholesale merchant supplier of renewable electricity into the New England market. After it lost out in the initial round, TDI-NE CEO Don Jessome issued this statement:
“While we are disappointed by the announcement, we remain fully committed to the project which is well positioned to meet the region’s laudable goal to further reduce greenhouse gas emissions in the coming years.
“TDI-NE firmly believes the fully permitted and fully supported project is the right turn-key solution to help New England reduce greenhouse gas emissions in a cost-effective manner.”
TDI-NE was expected to make the following lease and tax payments to the State of Vermont:
- VT Property Taxes: $274 Million
- VT Corporate Income Taxes: $414 Million
- VT Sales Tax (construction period only): $31 Million
- VTrans Lease Payments for use of Right-of-Way: $212 Million
National Grid's GSPL offered, at a minimum, the following direct benefits to Vermont:
- Over $450 million in local and state property tax revenue.
- $20 million for job creation and retention, and economic development in the Northeast Kingdom via revolving loan funds and economic and community development grants through a partnership with the Northeastern Vermont Development Association (NVDA).
- $487 million in rate reductions within the first ten years of the project.
- $3 million a year for 40 years in rate relief through payments to Vermont Transco LLC, a company structured to return earnings to Vermont.
The Massachusetts DOER provided this update on February 16, 2018, on the Section 83D of the Act Relative to Green Communities (“Section 83D”) Request for Proposals for Clean Energy (“RFP”) along with an overview of Section 83D and the solicitation process in the RFP.
I. Status of Section 83D Procurement
On January 25, 2018, the North Pass Hydro (“NPT Hydro”) project was announced as the selected bidder of the Section 83D RFP. As provided in the RFP, the final acceptance of the NPT Hydro bid and the award of a contract are conditional upon (1) the successful negotiation of contracts between NPT Hydro and the Electric Distribution Companies (“EDCs”) and; (2) regulatory approval of those contracts at the Department of Public Utilities (“DPU”).
The decision to select NPT Hydro was based on a competitive RFP process that resulted in the receipt of 46 bids. These bids were assessed according to the rigorous framework and process outlined by Section 83D and the RFP, and was closely monitored by the Independent Evaluator (“IE”) who was jointly selected by DOER and the Attorney General’s Office (“AGO”).
As a result of a robust bid evaluation process and based on the information supplied by the bidder and available at the time, the NPT Hydro project was determined to provide the greatest overall value to Massachusetts’ customers. Through comparing project costs and benefits to ratepayers as specified in the RFP evaluation criteria, the project proposed by NPT Hydro best satisfied the policy directives contained in Section 83D, including the project’s ability to assist the Commonwealth with meeting its Global Warming Solutions Act (“GWSA”) greenhouse gas reduction goals. In the evaluation analysis the project was projected to produce significant and timely emissions reductions that would assist the Commonwealth with compliance towards the ambitious goals established by the GWSA. As proposed, the project would deliver approximately 9,450,000 megawatt hours of cost-effective and firm clean energy per year starting in 2020.
Following the announcement, DOER recommended on January 31, 2018, and the EDCs agreed, that the IE continue to monitor the next phase of the procurement, including contract negotiations. The decision to include the IE in monitoring this phase of the process is beyond the original scope of the IE’s role, and adds a further layer of oversight.
On February 1, 2018, the New Hampshire Site Evaluation Committee (“NHSEC)” voted to deny a Certificate of Site and Facility for NPT Hydro. To date, a formal written order has yet to be issued. While all bidders in the RFP had permitting risk and were in various stages of obtaining their respective permits, the NHSEC vote has the potential to significantly impact or render infeasible the NPT Hydro project’s ability to deliver clean energy within the timeframe proposed by the bidder, as well as impact other material aspects of the NPT Hydro bid.
The following day, DOER sent a letter to the EDCs requesting that they immediately send a communication to NPT Hydro to obtain information regarding any impacts on NPT Hydro’s bid from the NHSEC vote, as well as whether NPT Hydro plans to seek regulatory and/or legal remedies, and a schedule for this or any other pertinent action. The EDCs requested information from NPT Hydro, and received a confidential response from the project on February 7, 2018. As provided in the February 2 letter, DOER and the IE met with the EDCs on February 9, 12, and 13 to discuss the information provided by NPT Hydro and to determine next steps, including whether the EDCs should consider other bids.
In light of recent developments and in order to execute long term contracts by March 27 and subsequently submit them for DPU approval by April 25, the EDCs, in coordination with DOER and with participation of the IE, took the following actions on February 14, 2018:
1. NPT Hydro was notified that the EDCs will continue conditional contract negotiations with the project, with the option of ceasing discussions with NPT Hydro and terminating its conditional selection by March 27, 2018; and
2. The New England Clean Energy Connect 100% Hydro project (“NECEC Hydro”) was offered to enter into concurrent conditional contract negotiations.
If contract negotiations are not successful with NPT, the EDCs are in a position to proceed with the next best project that satisfies the policy directives contained in Section 83D, including the project’s ability to assist the Commonwealth with meeting its GWSA greenhouse gas reduction goals. This approach is designed to ensure that the 83D RFP schedule for March 27, 2018 contract execution and April 25, 2018 contract submission is maintained, while ensuring that any contract entered into by the EDCs reflects the original project timeline proposed by the bidder.
On February 15, 2018, the DOER, EDCs and IE received acceptance from NPT Hydro and NECEC Hydro of these terms.
II. Legislative Background
Passed as part of the “Act to Promote Energy Diversity” in 2016, Section 83D provides the framework to solicit clean energy generation resources. It directs the EDCs to jointly and competitively solicit proposals for clean energy generation. Provided that reasonable proposals were received, Section 83D requires the EDCs to enter into cost effective long-term contracts for clean energy generation for an annual amount of electricity equal to approximately 9,450,000 megawatt hours by December 31, 2022.
Additionally, Section 83D provides the solicitation process framework, defining the roles of the EDCs, DOER, and the IE in the execution of the solicitation process. Among other things, DOER’s role includes the joint selection of the IE together with AGO, the proposal of a timetable and method of solicitation together with the EDCs and in consultation with the AGO, and a review of reasonableness of the bids. The IE’s role includes the monitoring of and reporting on the solicitation and bid selection process to ensure an open, fair and transparent process that is not unduly influenced by an EDC affiliate. The IE must file a report with the DPU providing its independent assessment of whether all bids were evaluated in a fair and non-discriminatory manner. In order to preserve the IE’s role as an independent monitor of the process, the IE is neither a soliciting party, nor does it serve as a member of the Evaluation Team or Selection Team.
No long-term contract may become effective and binding upon the EDCs’ ratepayers without DPU approval. As part of the DPU’s review process, the DPU must consider the IE’s report and the recommendations of the AGO. The DPU cannot approve a long-term contract unless it finds that it is a cost-effective mechanism for procuring low-cost renewable energy on a long-term basis. In making this determination, DPU must take into account specific statutory and policy factors identified in Section 83D. If the IE includes in its findings that the solicitation and bid selection was not fair and objective and that the process was substantially prejudiced as a result, Section 83D requires the DPU to reject the contract.
III. Bid Evaluation and Selection Process
Pursuant to the statutory mandate under Section 83D, the EDCs and DOER proposed the RFP’s timetable and method for the solicitation to the DPU on February 2, 2017. The EDCs and DOER consulted with the AGO on the choice of solicitation method. Once filed, the RFP was made publicly available, and the DPU requested comments on the RFP’s timetable and method for the solicitation. The DPU rendered its approval on March 27, 2017.
The fundamental purpose of the RFP is to satisfy requirements of Section 83D and to assist the Commonwealth with meeting its GWSA goals. The standards and criteria outlined in the RFP were designed towards a selection of a project or projects that would have a strong likelihood of being financed and constructed and would provide a cost-effective source of long-term clean energy generation to the Commonwealth.
As indicated in the RFP, the Evaluation Team, which includes the EDCs and DOER, is responsible for evaluating and ranking project bids. The IE’s role is to closely monitor and report on the solicitation and bid evaluation process. This role requires the IE to monitor and have access to all information and data related to the solicitation and bid selection process, including any confidential information provided by bidders.
The RFP provides for an evaluation process that the Evaluation Team must follow. The process includes the following three stages and criteria:
(i) In Stage One, the RFP requires the Evaluation Team to evaluate whether the bid satisfies eligibility and threshold requirements. Bids that do not satisfy all of the Stage One screening criteria are likely to be disqualified from further evaluation.
(ii) In Stage Two, the RFP requires the Evaluation Team to evaluate bids based on quantitative and qualitative criteria. The results of the quantitative and qualitative analysis are used to produce a relative scoring of all proposals. Stage Two scoring is based on a 100-point scale, with up to 75 points for quantitative factors and up to 25 points for qualitative factors.
- Quantitative Evaluation (75 Points): The RFP requires the Evaluation Team to evaluate the bid’s direct contract price costs and benefits. This includes comparing bids’ offered energy, environmental attributes, and transmission costs to the associated market value. Additionally, the Evaluation Team evaluates other costs and benefits to all Massachusetts’ retail consumers, such as energy price reductions when the project is placed into service, and impacts from the proposal on the Commonwealth’s greenhouse gas emissions. The quantitative method used a multi-year net present analysis of all costs and benefits to develop a Stage Two quantitative score.
- Qualitative Evaluation (25 Points): The RFP provides criteria for the Evaluation Team to assign 25 points for each proposal, depending on the information provided in each bid. Examples of qualitative criteria include whether a bid supports GWSA requirements, improves reliability, or has significant environmental impacts.
After ranking bids, the Evaluation Team determines which proposals proceed to Stage Three based on the following considerations: (1) the rank order of bids at the end of the Stage Two evaluation; (2) the cost effectiveness of bids based on the Stage Two quantitative evaluation; and (3) the ability of a bid or group of bids to meet the procurement target of 9,450,000 megawatt hours.
(iii) In Stage Three, the Evaluation Team evaluates portfolios or groups of bid(s) to achieve approximately 9,450,000 megawatt hours of clean energy. Portfolios are ranked using the Stage Two evaluations. The Stage Three evaluation also considered additional discretionary factors that were specified in the RFP and included:
- Overall impact of various portfolios of bids on the Commonwealth’s policy goals, including GWSA goals;
- Overall cost effectiveness of various portfolios of proposals;
- Risks associated with project viability of the proposals;
- Any benefits to customers that may not have been fully captured in the Stage Two evaluation (for instance, benefits to the Commonwealth during winter months);
- Transmission-related price risks not fully captured in Stage Two, and;
- Other considerations, as appropriate, to ensure selection of the bid that provides the greatest impact and value consistent with the stated objectives and requirements of Section 83D, as set forth in the RFP.
After Stage Three concludes, the Selection Team, made up of the EDCs with DOER monitoring, selects the bid or bids to move forward to contract negotiations. If the EDCs do not agree, DOER in consultation with the IE must make a binding determination. The RFP provides that DOER will monitor contract negotiations after the bid selection.
The RFP set forth March 27, 2018 as the anticipated date for contract execution and April 25, 2018 as the anticipated date for submitting executed contracts to the DPU for final approval.
As stated above, the final acceptance of any bid, and award of contract, is conditional upon successful regulatory approval at the DPU, which, as a part of its approval process, is required by statute to consider recommendations from the AGO and comments from the public. In order to provide transparency, at the time of contract submission to the DPU, additional detailed information supporting the selection of the contracted project and information pertaining to the evaluation of the bids will be made available. Separately, the IE will provide a report on the evaluation and bid selection process, and whether all bids were evaluated in a fair and nondiscriminatory manner. The public will also have the opportunity to comment on contracts filed before the DPU, and the DPU will conduct a full adjudicatory proceeding to review the contracts.
Further information regarding the Section 83D procurement, including the RFP and public version of the project bids, can be found on the Massachusetts Clean Energy Website at https://macleanenergy.com/.