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The Maryland Public Service Commission issued a notice requesting comments pursuant to the requirement established in the Public Utilities–Generating Stations– Generation and Siting Act (“Renewable Energy Certainty Act” or “RECA”) regarding whereby the Commission is conducting a study to evaluate various generation procurement models. As previously reported, Power Advisory LLC (“Power Advisory”) has been retained by the Commission to assist in meeting RECA study requirements.

The Commission requests that stakeholders submit additional comments within two weeks of this notice regarding the different generation procurement models described in the White Paper, and the evaluation criteria to be used to assess the models’ relative performance.

The Commission states that it “appreciates the feedback previously provided in PC 66 on generation procurement models, and stakeholders need not repeat themselves.” The White Paper provides a more detailed description of various generation models in an effort to generate feedback and promote alignment regarding the relative performance of the models.

Power Advisory has developed the attached aimed at garnering stakeholder comments. In developing this White Paper, Power Advisory states that it has reviewed and built upon comments filed in PC 66 in response to the Commission’s previous Request for Comments on RECA Generation Procurement Models Study.

“The White Paper reviews different procurement models and highlights aspects that could lead to differences in their effective cost to customers, underlying risk profiles, and ability to address Maryland’s resource adequacy requirements.”

Summary of Generation Procurement Models

The following procurement models are evaluated in this discussion paper.

1. Business as Usual (BAU) where generation is procured through PJM’s Base Residual Auction (BRA), which currently is the primary market mechanism to incent new entry.
2. Utility-owned generation where an electric utility builds the generation under traditional cost-of-service regulation with oversight from the Commission.
3. Partnership where an independent power producer (IPP) or developer/constructor constructs a generation project for an electric utility and transfers the project to the electric utility upon competition (aka Build-Transfer or “BT”), which recovers the cost of the project under traditional cost-of-service regulation.
4. Power purchase agreement (PPA) where an electric utility purchases the output from the project under a long-term PPA.
5. Tolling agreement where an offtaker (electric utility?) pays a power plant or battery energy storage system owner a fee (the toll) to convert fuel into electricity or manage the operation of the battery under a long-term tolling agreement.
6. Competitive Dialogue where the procuring entity engages in a structured dialogue with prequalified developers prior to submission of final bids, enabling project specifications and contractual terms to be refined in light of market conditions.
7. Index payment to the generator for renewable energy certificates (RECs) or GCCs based on the generator’s residual revenue requirement when accounting for revenues from the energy and capacity markets.
8. PJM Reliability Backstop following the model being developed by PJM with stakeholder input.
9. Generation capacity credit purchases where electricity suppliers purchase Generation Capacity Credits (GCCs) in proportion to the supplier’s load obligations.