July 2005
Montana Passes Renewable Energy Legislation
by Robert Olson  and Maria Reinemann --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 2005/08/01)

More states are joining in the national trend towards the enactment of renewable energy legislation. Recently, Montana adopted renewable energy legislation to promote and encourage the growth and development of a variety of renewable energy sources.

The state of Montana’s renewable energy portfolio standard (“RPS”) was enacted on April 28, 2005, through the Montana Renewable Power Production and Rural Economic Development Act (SB 415). The Act, which became effective immediately upon enactment, requires public utilities to produce a certain percentage of their retail electricity sales from renewable sources. The Act establishes a graduated renewable energy standard and requires that, in 2008 through 2009 at least 5% of the electricity sold at retail come from renewable energy sources. This percentage is increased to 10% in 2010 through 2014 and to 15% in 2015 and thereafter. There is no established expiration date for the Act.

Eligible renewable sources include wind, solar, geothermal, existing hydroelectric projects with a nameplate rating of ten megawatts or less, landfill or farm-based methane gas, gas produced during the treatment of wastewater, low emission, non-toxic biomass, and fuel cells where hydrogen is produced with renewable fuels. Eligible facilities must have begun operating after January 1, 2005, and must either be located in Montana or deliver electricity into Montana.

Public utilities can meet the standards by (1) entering into long-term purchase agreements for electricity bundled with renewable energy credits (“RECs”); (2) purchasing renewable energy credits separately; or (3) a combination of both. A renewable energy credit is defined as a tradable certificate of proof of one megawatt hour of electricity generated by an eligible renewable resource that is tracked and verified by the Montana Public Service Commission (“Commission”) and includes all of the environmental attributes associated with that one megawatt-hour unit of electricity production. There is a three-month grace period at the end of any compliance year within which a public utility may purchase renewable energy credits to satisfy compliance for that year. If a public utility exceeds the standard established in any compliance year, that utility may carry forward the amount by which the standard was exceeded to comply with the standard in either or both of the two subsequent compliance years. The carry-forward may not be double-counted.

Should a public utility be unable to comply with the Act during any annual period (January 1 through December 31), such public utility must pay an administrative penalty of $10.00 for each megawatt hour of renewable energy credits that it failed to produce. The public utility may petition the commission for a short-term waiver from full compliance. The public utility may not recover the penalty in electricity rates. Any funds derived from such penalties go into a universal, low-income energy assistance fund.

Between now and June 1, 2006, the Montana Public Service Commission is charged with the responsibility of establishing the alternative energy credit program needed to implement the Act by, among other things, adopt rules to select a renewable energy credit tracking system, establish a system by which renewable resources become certified as such, define the process by which waivers from full compliance may be granted and establish procedures under which contracts for eligible renewable resources and renewable energy credits may receive advance approval.
 

Robert A. Olson is a partner in the law firm of Brown, Olson & Gould P.C. which maintains a nationwide practice in energy law, public utility law and related commercial transactions. He can be reached at:

Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301

rolson@bowlaw.com | (603) 225-9716