Massachusetts Legislature Moves Forward with Reforms that Would Reshape the Energy Sectors to Achieve Climate and Economic Development Goals
On April 7, 2022, Massachusetts Senate Ways and Means Committee issued its response to an earlier House Ways and Means Bill (House No. 4524). The Senate bill, Senate No. 2819, revised a number of features of the earlier House bill with respect to the Commonwealth’s procurement of offshore wind energy, but also addressed a range of issues focused upon climate matters. The Senate bill also included a range of provisions to advance electric vehicles, other forms of renewable energy, real estate development that advances climate goals and fundamentally alter consumers’ options by eliminating the competitive retail electricity supply market and decarbonizing the natural gas industry, as summarized below.
What’s next? We understand that the Senate will be taking amendments to the bill during the next few days and that the Senate will likely adopt a form of Senate No. 2819 later this month. The House will likely adopt a different version of the bill, resulting in the establishment of a conference committee to work out the details of a final bill by the end of the session this summer.
The Senate proposed a number of changes in the manner in which offshore wind resources are procured by the electric utilities. The bill retains a process for regular procurement by the utilities with goal of having contracts for 5,600 MW in place by summer 2027. The Massachusetts Department of Energy Resources or “DOER” will now select the winning bids based upon specified factors with a somewhat greater emphasis upon economic development and the advancement of environmental justice concerns. Successful bids will continue to be subject to a “price cap,” namely the level of the prior solicitation’s bid. The Senate bill, however, allows for an adjustment or discount to a new price bid in the amount of bid initiatives aimed at economic development, particularly for the benefit of low-income communities. Payments to utilities to compensate them for contracting risk shall be reduced from 2.75% of annual revenues to 1.25%.
A number of features were added to accelerate the adoption of electric vehicles. Substantial funding was made available to incentivize the purchase of EVs and also to support the development of charging stations. Rebates for EV purchases will be paid at the point of sale. The sale of non-EVs will be banned by 2035. There are similar mandates for public transportation and a requirement to adopt policies for customer choice on ridesharing services such as Uber or Lyft.
Another $50 million is available to support charging station construction, with some focus on accessibility and economic equity and a greater level of coordination at the state. New or renovated buildings will need to install infrastructure for at least charging facilities for 10% of parking spaces. New time-of-use rates were mandated to advance the economics of charging EVs.
Renewable or Clean Energy
The Senate bill provides $100 million in funding to support new energy resource, specifically citing to geothermal and “deep” geothermal resources and even nuclear fusion. The funding can also support infrastructure for the offshore wind industry, including port development.
The DOER was directed to update the Massachusetts solar or “SMART” program and grants more flexibility to advance solar development. Solar development was encouraged on agricultural land.
Energy storage was further encouraged, with an emphasis on longer duration projects. The DOER was directed to conduct a study on how to advance implementation, including by requiring solicitations of storage resources by the electric utilities.
Biomass resources were excluded from a number of clean energy subsidies.
The bill also requires a more formal process for the consideration of the future of the natural gas industry, requiring a formal adjudication of gas utility plans; the DPU has been advancing a collaborative process with the gas utilities taking the lead on developing a range of options for the industry to help meet the Commonwealth’s clean energy goals. A particular emphasis is on how to focus ongoing replacement programs for leak-prone pipe given the uncertain future of the industry.
Communities are also permitted to experiment with zoning provisions that require fossil-free new construction, for example by barring new hookups of gas lines.
The Senate bill makes a profound change to the competitive marketplace for electricity by proposing to bar new or the renewal of existing supply contracts for residential customers, outside of municipal aggregation (which is not affected by the bill). A number of studies have shown that low-income customers have been adversely affected in the competitive supply marketplace.
As noted, we expect a substantial energy bill will be adopted this session. We also expect that there will be an important process being put in place through a conference committee. The draft legislative language, in its current form, would surely create both winners and losers among the various players in the state’s energy sector. Interested parties should seek to monitor this process or look for ways to shape the outcome, as proposed features are refined or dropped and new provisions emerge.