Pennsylvania's Renewable Portfolio Standards

Alternative Energy Portfolio

• The Pennsylvania Alternative Energy Portfolio regulation went into effect on November 30, 2004. The rules apply to all electrical distribution companies (EDC) and electrical generation suppliers (EGS) that sell to retail customers. A minimum of 18 percent of the electricity supplied by these entities must come from alternative energy sources by the year 2020. EDCs and EGSs affected by rate freezes and restructuring cost recovery periods do not have to comply with the law during those periods.

  Standards specify that a specific percentage of electricity has to come from photovoltaics (PV) -- solar panels that produce electricity. Certain demand-side waste coal, coal gasification and coal-mine methane meet the criteria for eligible technology.

Alternative Energy Credits

• Entities can show compliance with the standard by using Alternative Energy Credits (AECs). When a qualified energy facility creates 1000 kWh of electrical power, it creates one AEC; the facility owner can then trade or sell their AECs. Pennsylvania law states that an ACE has a "useful life of three years -- the year it's created and two years thereafter." The marketplace's supply and demand determine the value of an ACE. In addition, the penalty for noncompliance by utilities goes into the equation to determine the ACE price. Utilities must pay an alternative compliance payment of $45 per megawatt-hour for failing to meet the requirements for Tier I and Tier II resources. AEP uses a different calculation for utilities that have shortfalls in photovoltaic energy for the reporting period.

Tiers

• The state divides eligible energy sources into two categories, or Tiers. Utilities must produce 8 percent of electrical power from Tier I sources; by 2021, 10 percent of the energy sources must come from Tier II sources. New and existing facilities that create electrical power from biomass, wind, photovoltaic, solar-thermal, low-impact hydro and other eligible technologies are categorized as Tier I. Tier II sources encompass waste coal, distributed generation, municipal solid-waste and demand-side management facilities.

Efficiency Appliances

• The AEP applies to a wide variety of "efficiency" appliances, including refrigerators, dishwashers, dehumidifiers and clothes washers. In addition, insulation, windows lighting, ceiling fans, central air conditioners, programmable thermostats and heat pump qualify under the standards