Renewable Energy Production Incentive Program

DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 451

[Docket No. EE-NOI-97-301]

Renewable Energy Production Incentive Program

AGENCY: Department of Energy.

ACTION: Notice of Inquiry and public meeting and request for public

comment.

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SUMMARY: The Department of Energy (DOE) is publishing this Notice of

Inquiry (NOI) to obtain information on possible changes to the

Renewable Energy Production Incentive (REPI) program that will improve

its

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effectiveness as a financial incentive for the development of new

qualifying renewable energy generation facilities.

DATES: Written comments (7 copies) will be considered if received at

the address provided below no later than July 31, 1997. A public

meeting will be held on July 15, 1997, beginning at 9:30 a.m., at the

address listed below. Requests to speak must by received by the

Department on or before July 11, 1997.

ADDRESSES: All written comments (7 copies) as well as requests to speak

at the public meeting are to be submitted to: U.S. Department of

Energy, Office of Energy Efficiency and Renewable Energy, EE-10, Docket

No. EE-NOI-97-301, 1000 Independence Avenue, SW., Washington, DC 20585,

(202) 586-3012. FAX comments will not be accepted. The comment and the

envelope in which the required number of copies is mailed should be

marked ``Notice of Inquiry, Docket EE-NOI-97-301.'' The public meeting

will be held at U.S. Department of Energy, Forrestal Building, Room 1E-

245, 1000 Independence Avenue, SW., Washington, DC 20585. Copies of the

transcript of the public meeting and public comments received may be

read at the DOE Freedom of Information Reading Room, U.S. Department of

Energy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, SW.,

Washington, DC 20585, (202) 586-6020, between the hours of 9 a.m. and 4

p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Robert H. Brewer, Office of Energy

Efficiency and Renewable Energy, EE-10, U.S. Department of Energy, 1000

Independence Avenue, SW., Room 5H-021, Washington, DC 20585, (202) 586-

2206. For information concerning the public meeting and submission of

comments, contact Andi Kasarsky, (202) 586-3012.

SUPPLEMENTARY INFORMATION:

Background

In this NOI, the DOE requests information on possible changes to

the REPI program to improve its incentive value. The REPI program,

which was established by the Energy Policy Act of 1992, is designed to

provide a 10-year production incentive payment of 1.5 cents per

kilowatt-hour (kWh), adjusted for inflation and subject to the

availability of annual appropriations, to States or subdivisions of

States or non-profit electric cooperatives, herein referred to as

public power organizations, that own new or newly converted qualifying

renewable energy generation facilities. Since the incentive payments

depend on the availability of annual appropriations, potential owners

of qualifying renewable energy facilities are uncertain that future

production incentive payments will be made. This uncertainty reduces

the incentive value of the production incentive payments when decisions

are being made concerning development of new renewable energy

generation facilities.

To implement the REPI program, the Department issued a proposed

rule on May 13, 1994 (59 FR 24982), and published a final rule on July

19, 1995 (60 FR 36959). This process has resulted in regulations

codified at 10 CFR Part 451 (1997), which govern the implementation of

the REPI program. In accordance with these regulations, the Department

makes determinations on the eligibility of owners and facilities

concerning incentive payments. The Department also reviews qualified

applicants' annual submissions of net electricity produced from

qualified facilities. Annual payments are made for this electric

production, subject to the availability of annual appropriations. If

there are insufficient appropriations to make full incentive payments,

some or all applicants may receive either no payment or payment for

only a portion of the net electricity produced by their facility, with

the remainder designated as (unpaid) accrued energy. An applicant may

submit a request for payment based on accrued energy in subsequent

years within the allowed ten-fiscal year period for that facility.

Congressional appropriations have been sufficient to fully pay

production incentives for net electricity produced by qualified

facilities in fiscal year 1994 (payments of $693,120) and in fiscal

year 1995 (payments of $2,398,472). Based on a review of applications

for net electricity produced in fiscal year 1996, appropriations are

insufficient to fully pay all qualifying applicants for the net

electricity that their facility produced ($2,490,893 is available for

these payments). When appropriated funds are insufficient to fully pay

all qualified applicants, a two-tier payment process, as described in

10 CFR Section 451.9(e) (1997), is used. Applications for payment have

grown from seven for fiscal year 1994 production to eleven for fiscal

year 1995 production to eighteen for fiscal year 1996 production.

The intended purpose of the REPI program is to provide a 10-year

production incentive payment to public power organizations that would

be fully considered in their decision to potentially select an eligible

type of renewable energy generation system. However, public comment and

subsequent stakeholder feedback reveal that the REPI production

incentive payments are either not valued or are undervalued during the

decision-making process, since they are dependent upon annual

appropriations. The following excerpt is from the discussion of

comments in the final rule for the REPI program: ``Several of the

commenters who recommended a 10-year escrow account argued that

potential investors in new renewable energy facilities are unlikely to

take account of payments under this program in assessing an investment

without assurances, at the time of investment, that the full schedule

of payments would be made. DOE believes this argument has merit.

However, additional work by DOE and its stakeholders is needed to

develop a payout approach that will maximize the effectiveness of the

program as an incentive for promoting incremental investment in new

renewable energy facilities. DOE intends to publish a notice in the

near future that invites suggestions from interested persons regarding

possible program modifications, including possible statutory or

regulatory changes, that can increase the incentive value of this

effort.'' 60 FR 36963 (1995). This NOI is that notice.

Representatives of public power organizations have stated that an

effective REPI program can become the single most important incentive

mechanism available to them for encouraging investment in new renewable

energy generation facilities. Various commenters have suggested a few

options that they believe would lead to the full valuation of the 10-

year REPI production incentive payments in the decisions by public

power organizations to acquire and operate new renewable energy

generation facilities. These suggested changes would require either

regulatory or statutory change. One suggestion, which would require

changing the existing regulations, is the use of annual REPI

appropriations to establish a ``10-year escrow account'' to fully fund

the incentive payments for the estimated amount of net generation over

the eligible ten-year period. Because of the ten-year commitment, fewer

qualified facilities would receive funding for a given year's

appropriation, which might necessitate a prioritization procedure to

fully fund qualified facilities. Possible priority procedures for

funding qualified facilities could be based on either the facility

startup date or the date an application for the facility is received.

Another suggestion, which would require statutory change, is the

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establishment of a trust fund account for REPI payments that would be

funded by accelerated appropriations, other revenue sources (such as a

line charge or wire charge), or a combination of both. The third

suggestion, which would also require statutory change, is to allow

public power entities to pass on the incentive payment over the 10-year

payment period as a tax credit to customers who agree to purchase,

potentially under a separate rate schedule, the electricity from a

qualified renewable energy facility. In this NOI, DOE seeks comment on

these options and other appropriate options that may improve the

incentive value of the REPI program.

Issues for Public Comment

With respect to potential changes to the REPI program that would

enhance the incentive effect of REPI payments in the decision-making of

public power organizations concerning development of new renewable

energy generation facilities, DOE seeks the following information:

(1) Recommendations regarding changes to the REPI program that

would enhance the value of the production incentive payments in

development decisions. Please specify what regulatory or statutory

changes, if any, would be required for each recommendation.

(2) Discussion of how these changes would enhance the value of

production incentive payments in development decisions.

(3) To the extent meaningful information can be provided, estimates

of the amount of additional renewable energy generation (in megawatts

capacity installed) that might begin operation by September 30, 2003,

if these recommended changes are implemented.

Opportunities for Public Comment

A. Written Comment Procedures

Interested persons are invited to respond to this notice by

submitting their ideas and views concerning options for modifying the

REPI program so that the full value of its 10-year production incentive

payments is considered in the decisions by public power organizations

to acquire and operate new renewable energy generation facilities.

Seven copies of each comment should be submitted to the Office of

Energy Efficiency and Renewable Energy in compliance with the

instructions set forth above in the Dates and Addresses section of this

notice.

B. Public Meeting

A public meeting on the NOI will be held at the time and place

indicated in the DATES and ADDRESSES Section of this notice. To request

an opportunity to speak at the public meeting, please use the phone

number indicated at the beginning of this notice. The person should

provide a phone number where he or she may be reached during the day.

Each potential speaker will be notified by DOE as to the approximate

time they will be speaking. Seven copies of the speaker's statement

should be submitted at the beginning of the meeting. In the event any

person wishing to speak cannot meet this requirement, alternative

arrangements can be made in advance with DOE.

A transcript of the meeting will be made by DOE. It will be on file

for inspection at the DOE Freedom of Information Reading Room at the

address indicated at the beginning of this notice.

If DOE must cancel the public meeting, DOE will make every effort

to publish an advance notice of such cancellation in the Federal

Register. Actual notice of cancellation will also be given to all

persons scheduled to speak. The meeting date may be canceled in the

event no member of the public requests the opportunity to make an oral

presentation.

Issued in Washington, DC, on June 4, 1997.

Joseph J. Romm,

Acting Assistant Secretary, Energy Efficiency and Renewable Energy.

[FR Doc. 97-15106 Filed 6-9-97; 8:45 am]

BILLING CODE 6450-01-P