New Jersey OREC Regulations Issued! Fishermen's Energy Submits First Application to NJ BPU!

New Rules Issued Implementing New Jersey's OWEDA On Thursday February 10, 2011, the New Jersey Board of Public Utilities ("BPU") approved new rules implementing the New Jersey Offshore Wind Economic Development Act (OWEDA). See NJBPU Press Release, dated 2/10/11. The rules became effective upon last Thursday's filing with the New Jersey Office of Administrative Law. The rules, codified at N.J.A.C. 14:8-6, were promulgated through a Special Adoption, and will remain in effect until 18 months from the effective date– i.e., until August 10, 2012. The Rules, which largely mirror the OWEDA, establish the Offshore Wind Renewable Energy Certificate (OREC) program. The OREC program requires developers of "qualified offshore wind projects" to submit an application requesting that the BPU issue ORECs for the designated project. Once applications have been deemed administratively complete, the BPU will have 180 days to review the substance of an application and issue a finding. The BPU will designate dates by which applications must be received so that they are able to review all developer applications simultaneously and comparatively. This application must include, among other things, a detailed description of the project, construction plans, financing methods and analysis demonstrating the financial integrity of the developer and access to sufficient capital, proposed OREC pricing methods, and operations, maintenance and safety plans. In addition, the application must include a comprehensive cost-benefit analysis which must demonstrate "positive economic and environmental net benefits to the State." Once the application has been received, the BPU may issue Offshore Wind Renewable Energy Certificates. These ORECs can be purchased by electricity distributors in New Jersey. The OWEDA provides that electricity sold to retail customers in New Jersey must include, at the least, the minimum percentage of energy derived from Offshore Wind generation projects as required for that energy year, as determined by the BPU. The new Rules include some provisions which many developers are likely to find objectionable or difficult to implement. For example, the Rules require an applicant to identify by name the key project personnel and then commit to maintaining those exact people throughout the project development process. The Rules do not appear to include exceptions for personnel identified in the application who later leave the applicant's employ, get promoted, or otherwise shift their career function over the course of what could reasonably be years. Another provision requires applicants to describe the type of job creation anticipated through the project and then formally commit to those jobs actually coming to fruition. If the described jobs do not come about, the applicant must provide a direct adverse consequence that it will impose upon itself. Rob Gibbs, Vice President of Garden State Offshore Energy, one of the three anticipated prospective applicant project developers (i.e., GSOE, Bluewater Wind and Fishermen's Energy), said the following with regard to the new Rules: We're pleased the OREC regulations are out and are currently reviewing them to ensure what's been adopted is financeable from a project perspective. While the regulations contain a good deal of detail with respect to application requirements, we were disappointed the Board did not go further in establishing common assumptions that all interested developers would use in their applications. For instance, establishing common assumptions on capacity factor, forward energy prices, etc. would enable the Board to compare applications on a similar basis rather than letting interested developers use divergent data points that are subjective and could make it more difficult for meaningful comparison. We also would have liked to have seen more definitive time periods for submitting applications but we understand a stakeholder process will be held in the next few weeks so we're encouraged that this will be fleshed out quickly. Fishermen's Energy Submits First OREC Application Fishermen's Energy of New Jersey, LLC (Fishermen's) announced that it filed the first application for approval for the issuance of ORECs with the New Jersey Board of Public Utilities on February 9, 2011. The application was filed for a "Demonstration Project" consisting of six turbines with an output not to exceed 25MW. The project will be located in New Jersey state waters about 2.8 miles from Atlantic City. If approved by the NJ BPU, the Fishermen's Atlantic City Windfarm, located in New Jersey State waters, is on schedule to be the first grid connected offshore wind project in the United States. Daniel Cohen, President of Fishermen's Energy, stated: The decision to allow us to receive OREC funding will be up to the NJ BPU. The price for the electricity is within the range we testified to during the legislative process to enact the Offshore Wind Development Act, with about a one tenth of one percent rate increase in the first operating year, which will decrease each year thereafter, as the cost of fossil fired energy increases. This is a bargain for New Jersey and its ratepayers as a societal and energy cost hedge and to start a new industry. Mike Madia, Chief Operating Officer of Fishermen's Energy and the team leader in charge of the BPU application, further asserted that the project's benefits will far outweigh its upfront costs: This project will be a magnet for industrial development of wind energy manufacturing in New Jersey. The State's and the NJ BPU's willingness to support this first offshore wind project for New Jersey and the US will be a key selling point to convince wind turbine manufacturing and related supply chain participants to locate new facilities in New Jersey, bringing their associated jobs and investment. Aside from industrial jobs, based on polling data among tourists, Fishermen's projects that the presence of an operating wind farm visually associated with Atlantic City and that is accessible to tourists by boat from shore, will result in increased tourism to Atlantic City, drawing people to the birthplace of offshore wind in the Americas. This coupled with the economic incentives for manufacturing included in the Offshore Wind Economic Development Act provides compelling reasons for new industry to locate in New Jersey.

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