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Levitan & Associates, Inc. will endeavor to answer all submitted questions in a timely and professional manner. Questions will be answered in the order they are received, except in those cases where a specific question requires additional consideration, thereby extending the response period. Answers will be posted only to the website.

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#Q17:
Does Maryland have the right to change the OREC pricing schedule if there is a benefit subsequent to the application (for example, if the Input Tax Credit, or "ITC" is renewed for offshore wind thus creating incremental tax credits for the project)?
Per COMAR 20.61.06.13, "卼he qualified offshore wind project shall pass along to ratepayers no less than 80 percent of the value of all state or federal grants, rebates, tax credits, loan guarantees and other similar benefits that the project receives that were not included at the time the project submits its application." The resulting reduction in OREC price should be (i) verified by the Commission and (ii) reflected in the OREC invoice submitted to the administrator for the current calendar year.
(Posted 8/22/17)

#Q16:
񘽕04.2 of the Code provides that "The Commission shall determine the offshore wind energy component of the renewable energy portfolio standard under 7703(b)(12) through (17) of this subtitle based on the projected annual creation of ORECs by qualified offshore wind projects."

Will the number of ORECs created be determined through this RFP process?

Do you know when the wind carve-out % for RPS purposes will be determined?
The Commission fulfilled the referenced statutory directive in its May 11, 2017 Order No. 88192. Page 79 of this Order states 揟he Commission抯 independent consultant in this matter determined that the projected annual creation of ORECs by the US Wind project would equate to 53.0% of the offshore wind carve-out in its first year of commercial operations (i.e. 2020); the Skipjack project would equate to 25.9% of the offshore wind carve-out in its first full year of commercial operations (i.e. 2023). Therefore, the annual offshore wind component of the RPS translates into 1.33% and 0.65% for the US Wind and the Skipjack Qualified Offshore Wind Projects, respectively."

Table 2 on page 81 of this Order shows the Offshore Wind Carve-out values from 2021 to 2042 adjusted for a potential 3% forecasting error.
(Posted 6/21/17)

#Q15:
Has the Commission adopted regulations establishing the escrow account discussed in PUA 7-704.2? Further, has the Commission established rules to facilitate and ensure the secure and transparent transfer of revenues and ORECs among the parties?
Yes, in accordance with PUA 7-704.2(B) the Commission adopted regulations that will govern the establishment of an escrow account, which will be subject to Commission supervision. As defined by Commission regulations (COMAR 20.61.01.03(4-1)), the "escrow account" encompasses, with respect to each qualified offshore wind project, a financial account established at and by that project抯 administrator for, among other purposes, receiving payments of OREC purchase payments from OREC purchasers and proceeds of sale of electricity service attributes, and from which transfers will be made to a qualified offshore wind project to pay for ORECs invoiced by that project under COMAR 20.61.06.10.

The appointment of the escrow administrator is governed by COMAR 20.61.06.09. Generally speaking, this regulation requires a qualified offshore wind project to appoint an administrator, for Commission review and approval, to establish the escrow account(s). Other requirements include that the administrator must be a 搎ualified financial institution that satisfies, among other criteria, a tangible net worth test of at least $150,000,000 and has requisite experience in the administration of custodial and escrow accounts. Also of note is that an administrator抯 fees are to be paid by the project, and if necessary, deducted from the amount owed to the project under its OREC invoice. Other requirements governing the appointment of the escrow administrator are detailed in COMAR 20.61.06.09(A) (M).

Further, the Commission has also established the rules intended to facilitate and ensure the secure and transparent transfer of revenues and ORECs among the parties. These rules were promulgated and adopted by the Commission as part of its Rulemaking 51 docket, and are now reflected in Commission regulations. Specifically, COMAR 20.61.06.10 addresses generally the delivery of an OREC invoice to the escrow administrator, as well as the subsequent payment and transfer of ORECs between the qualified offshore wind project and the OREC purchasers. The invoicing of OREC purchasers and a detailed description of the escrow administrator抯 responsibilities are included in COMAR 20.61.06.11. Other relevant regulations governing the transparent transfer of revenues may include: COMAR 20.61.06.12 (payment of PJM Revenues and Trust for Benefit of Ratepayers); COMAR 20.61.06.14 (Refunds Distributed by Electric Companies); and COMAR 20.61.06.15 (Transfer and Expiration of Excess Electricity Service Attributes), among others.

For additional information or explanation regarding an individual COMAR provision related to offshore wind, a party may find it informative to review the annotated version of the Maryland Offshore Wind Regulations submitted by Staff as part of the Rulemaking 51 docket. While the Staff recommendations and explanations offered therein are not binding, a party may find this additional information (along with the rulemaking hearing transcript) instructive. This document can be accessed through the Commission抯 Rulemaking 51 docket, item #1, labeled "OSW comments."
(Posted 7/7/16)

#Q14:
Please provide a definition for the term "Annual Applicable Load Energy" as used on page A8-4 of Levitan & Associates' "Recommended Criteria and Process for the Evaluation and Selection of Offshore Wind Applications."
For purposes of calculating the Residential and Non-Residential Rate Impacts of an OREC application, the Annual Applicable Load Energy (AALE) is the expected retail energy load that would be subject to the OREC Renewable Portfolio Standard, as defined in COMAR 20.61.01.06. The AALE value for 2014 was 60.9 million MWh.
(Posted 10/16/15)

#Q13:
Can the developer who submits the first application for a potential offshore wind ("OSW") project update its application after it is determined to be administratively complete, and during the 180-day application period (the 180-day period when other OSW applications can be submitted by competing applicants)? The "Description of the Procedural Process for Consideration of a Potential Maryland Offshore Wind Project" prepared by the Commission appears to be silent on this issue.
A developer can supplement its application after it is determined to be administratively complete and during the 180-day application period. The ability to provide supplemental information in an application is contemplated under COMAR 20.61.06.02 B:

If an OSW applicant is unable to provide any of the information or materials described in ЁD through N of this regulation at the time it submits an application, the application shall clearly identify information or materials, or both, that it is unable to provide and provide a clear plan that demonstrates how and when the OSW applicant will provide the information or materials, or both, that are unavailable before the close of the application period.

(Posted 10/16/15)

#Q12:
COMAR 20.61.06.02(G)(4) requires an application to include information on the "service life" and "design life" of the selected wind turbines. As these are not standard terms within the industry, please further clarify what information is required by the cited language.
The service life refers to the intended operating life of the project whereas the design life refers to the period of time that a component is designed to operate for. Typically, wind turbines are designed for a 20 year design life, but many developers and project owners (particularly in the offshore wind industry) assume that projects will operate for 25 years or more. As a result, the industry is trending toward longer design lives. Information provided in the application should document the design life of the proposed wind turbines and the intended service life. To the extent that the service life is longer than the design life, information should be provided regarding technologies and approaches that will be employed to achieve such a service life.
(Posted 9/29/15)

#Q11:
Per the reply to Question 8, it is our understanding that the PSC will refer to Axum Energy estimates in evaluating the merits or accuracy of a 2-part OREC price proposal. Can or should an applicant commission its own more recent study using current PJM Interconnection data? Would the Commission consider relevant the applicant抯 study, the Axum Energy report, or both? Is there a preferred course of action the applicant should take?
Bidders do not have to develop their own interconnection estimates nor are bidders required to submit an interconnection request to PJM prior to submitting their OREC application to the PSC. In no case will a bidder抯 interconnection study be used by the PSC during its evaluation.

Bidders have the option of developing their own interconnection estimates if they want to submit a 1-part bid, in which case the OREC bid prices would not be subject to any adjustment.

Bidders submitting a 2-part bid should utilize the Axum Energy estimate as the basis for the second part of the 2-part bid price. Upon completing the PJM interconnection process, the OREC price bid will be adjusted upward or downward pro rata with the interconnection cost specified in the Interconnection Service Agreement. The adjusted OREC bid price must still satisfy the OWEA price and rate caps.

Whether an applicant submits a 1-part or 2-part OREC price bid, the winning applicant will be required to submit a PJM interconnection application and receive PJM approval in order to interconnect to the PJM transmission system. The timing of the PJM interconnection application is left entirely to the discretion of the applicant. The application requirements, along with other interconnection information, can be found in PJM Manual 14A.
(Posted 9/29/15)

#Q10:
Subsection 4.3 of the Application provides: "Proposed capital structure identifying equity investors, sources of debt, any other sources of capital, and written demonstration of equity and debt funding commitments." What will be required to satisfy "...written demonstration of equity and debt funding commitments." Given the preliminary stage it is unlikely to get unconditional commitments from funders. Specfically, what level of written commitment is required from funding sources in the application to satisfy this criterion?
Per COMAR 20.61.06.02 (K) (3), the applicants should submit letters of intent or commitment letters from equity and debit funding sources adequate to fully fund the project. Such letters typically are not unconditional commitments but do indicate the equity investor抯 or debt lender抯 financial strength, funding capability, and interest in funding the project. Per COMAR 20.61.06.02 (K) (5), each applicant is also required to submit documentation demonstrating that the applicant has applied for all current eligible state and federal grants, rebates, tax credits, loan guarantees, or other programs available to offset the cost of the project or provide tax advantages.
(Posted 7/21/15)

#Q9:
As indicated in the Instructions for the OREC Price Bid Form, the 2-part price schedule covers only transmission upgrades. Are interconnection costs included in the first component of the 2-part price, and thus not subject to a true up?
That is correct. Only transmission upgrade costs are included in the second component of the 2-part bid. Interconnection costs, along with all other project costs, are included in the first component, which is not subject to a true-up.
(Posted 7/13/15)

#Q8:
For purposes of the initial bid price, will the PSC's estimation of costs be based on the January 30, 2015 Axum Energy report or an original report prepared after the initial application is submitted? If the Axum Energy report will be used, how will the PSC account for projects that have been added or withdrawn from the PSC queue in the interim?
The PSC抯 estimated system upgrade costs are based on the January 30, 2015 Axum Energy report. The Axum Energy estimates were $18.09 million for a 250-MW plant and $19.23 million for a 400-MW plant in mid-2014 dollars. These costs are adjusted for real escalation and inflation in the OREC Price Bid Form to the applicant抯 proposed Target CO Date.

The PSC will not update this cost estimate after the initial application is submitted. Once the applicant completes the PJM interconnection process, the second component of the 2-part OREC Price Schedule will be trued-up based on any change between the estimated and actual upgrade costs contained in the applicant抯 Interconnection Service Agreement, which will take into account projects that have been added to or withdrawn from the PJM queue as well as other changes to the PJM bulk power system. The total costs of the 2-part OREC Price Schedule, after any true-up, will still be subject to the levelized $190/MWh (2012 $) price cap, the $1.50/month (2012 $) residential rate cap, and the 1.5% non-residential rate cap.
(Posted 7/13/15)

#Q7:
To complete the economic benefit analysis required under Md. Pub. Util. Code 7-704.1(c)(3)(i)-(vii), please advise if the Commission has a preference for a particular version of IMPLAN Software. As there are many versions of the software, guidance on a preferred version would be helpful.
Applicants are free to utilize any economic input-output model for their estimates of indirect and induced job, local spending, and tax benefits that would accrue to Maryland. Levitan & Associates, Inc. (LAI) will review the estimated benefits submitted in each application. In addition, LAI will utilize the IMPLAN model to develop an independent estimate of those benefits based on each applicant抯 estimates of direct spending during development, construction, and operations. Utilizing one model, expected to be IMPLAN version 3, will promote a consistent evaluation among competing projects.
(Posted 6/15/15)

#Q6:
Where in the Maryland Offshore Wind Energy Act of 2013 does it cover the local content and establish the IMPLAN method of calculating "Local Benefits"?
Local Content Benefits
The Maryland Offshore Wind Energy Act of 2013 (the "Act") refers to a number of benefits that should accrue to the state and its residents. (The Act can be downloaded here.) Section 7-704.1(C)(3) of the Act enumerates power market benefits of lower energy and capacity prices and environmental benefits of lower power plant emissions for Maryland ratepayers. This section of the Act also enumerates "local content" benefits that relate to in-state jobs, goods, and services during the development, construction, and operating phases of the project:
  • (I): …THE IMPACT OF THE OFFSHORE WIND PROJECT ON INCOME, EMPLOYMENT, WAGES, AND TAXES IN THE STATE WITH PARTICULAR EMPHASIS ON IN–STATE MANUFACTURING EMPLOYMENT;
  • (II) DETAILED INFORMATION CONCERNING ASSUMED EMPLOYMENT IMPACTS IN THE STATE, INCLUDING THE EXPECTED DURATION OF EMPLOYMENT OPPORTUNITIES, THE SALARY OF EACH POSITION, AND OTHER SUPPORTING EVIDENCE OF EMPLOYMENT IMPACTS;
  • (VI) AN ANALYSIS OF ANY IMPACT ON BUSINESSES IN THE STATE; AND
  • (VII): OTHER BENEFITS, SUCH AS INCREASED IN–STATE CONSTRUCTION, OPERATIONS, MAINTENANCE, AND EQUIPMENT PURCHASE;
Section 7-704.1(D)(1) of the Act specifies the criteria the Commission must use to evaluate proposed projects, which includes local content benefits having to do with (VII) engaging small businesses, (VIII) and (IX) utilizing skilled labor, and (X) employment compensation.  Section 7-704.1(D)(4) of the Act also requires the Applicant to "make serious, good-faith efforts to solicit and interview...minority investors".

In establishing the process for evaluating and selecting offshore wind projects, the Commission's advisor, Levitan & Associates, Inc. ("LAI") recommended that these local content aspects of application be evaluated qualitatively. In its Report, Recommended Criteria and Process for the Evaluation and Selection of Offshore Wind Applications, of April 4, 214 to the Commission Staff, LAI explained:

Our proposed qualitative evaluation is oriented around (i) identifying project weaknesses and risks to maximize the likelihood that a project will actually achieve commercial operation and (ii) identifying any project features that contribute to net economic, environmental, or health benefits to Maryland, but cannot readily be expressed in strict monetary terms.  This category includes the applicant’s plan to (i) engage small business, (ii) solicit minority investors, (iii) utilize skilled labor, and (iv) compensate employees and subcontractors consistent with state wage rules. 

Thus the Commission will look for evidence of local content benefits in each application and weigh them qualitatively in its evaluation and selection process.

Estimating Indirect Local Content Benefits
The applicant is expected to identify the direct local content benefits of in-state expenditures on employment, taxes, and local spending on goods and services, as well as the indirect benefits that can be estimated by utilizing an economic input-output model. There are a number of industry-standard economic input-output models available, including IMPLAN, RIMS, REDYN, and REMI, that can be utilized. We do not require applicants to utilize any particular model.

In its Report, LAI emphasized the need to evaluate competing applications on a fair and consistent basis:

...the Commission should identify industry-standard models and determine key modeling parameters…for calculating economic impacts due to changes in employment, taxes, and local spending.

Although the Act requires applicants to provide their own results of power market and economic modeling analyses, we again recommend that the Commission conduct an independent analysis of in-State economic impacts using an industry-standard economic input-output model in order to assure a fair and consistent evaluation and comparison among projects.

LAI will confirm the reasonableness of the claimed direct local content benefits for each application and will utilize an industry-standard economic input-output model to confirm the reasonableness of the indirect local content benefits. Utilizing one model will provide consistent results among the competing applications.  At this point in time, LAI expects to utilize IMPLAN to confirm the reasonableness of each application's claimed indirect local content benefits. The following links provide two examples of how LAI has used IMPLAN in the past: (Posted 6/8/15, Revised 6/10/15)

#Q5:
COMAR 20.61.06.02(I) requires an applicant to indicate whether the project抯 nameplate capacity is larger than what is required to provide the proposed OREC amount. In determining whether the nameplate capacity actually exceeds what is requested in the OREC amount, should potential excess generation in the project that is related solely to reliability, for example, back-up generation, be included in calculating the project抯 overall nameplate? In general, what is to be included by the applicant in determining the project抯 nameplate capacity?
The purpose of this provision is to ensure that the Maryland ratepayers are not covering the cost risk for transmission upgrades under a 2-part bid for more than is required to deliver the annual OREC contract quantity (in MWh), i.e. the Proposed OREC Amount.

Under COMAR 20.61.06.02(G), each applicant will submit the project抯 total nameplate rating of the wind turbines, the expected conversion and losses up to the delivery point, and the expected generation confidence level associated with the Proposed OREC Amount. Per the Levitan & Associates, Inc. report "Recommended Criteria and Process for the Evaluation and Selection of Offshore Wind Applications," the expected generation for a project will be based on the expected median, i.e. P50, confidence level. However, an applicant may present their calculation of expected generation based on P75 or P90 or some other confidence level as long as they demonstrate that their proposed transmission upgrade cost allocation methodology is "fair and in the interest of the ratepayers.

As an example, a project with a nameplate capacity of 200 MW, a P50 capacity factor of 40%, and losses of 2% between the generator terminals and the delivery point, may expect to deliver 686,784 MWh annually into the PJM grid. If a developer wants to build a larger project to ensure that this quantity of ORECs is delivered every year, the application must 搃nclude a methodology for determining a reasonable allocation of the transmission upgrade costs to be included in the OREC price.

Non-wind back-up generation capacity and any associated transmission upgrade costs are irrelevant to the OREC evaluation and selection process.
(Posted 5/28/15)

#Q4:
Section 1-8 requires complete information about 揵ankruptcies, defaults; disbarments, investigations, indictments against the OSW applicant or any subcontractor. Given that it would be onerous for an OSW applicant to verify that all information from a contractor is accurate, would an affidavit by an OSW applicant attesting to 揵est efforts to confirm the accuracy of a subcontractor抯 information be sufficient to satisfy the requirement? Also, is the obligation to disclose subcontractors information ongoing or does it only apply to subcontractors engaged at the time of the filing?
The applicant is responsible for ensuring that relevant information is provided concerning the applicant抯 project team, including bankruptcies, defaults, disbarments, investigations, and indictments. The applicant should therefore instruct its subcontractors, i.e. any companies that are currently engaged under contract to the applicant on its proposed Maryland offshore wind project, to provide all of the information requested in 1-7, 1-8, and 1-9. In order to provide the signed and notarized statement in 1-1 ensuring the accuracy of the application, the applicant should take appropriate measures it believes are necessary. If asked, the applicant should be able to describe those measures it has taken to confirm the accuracy of such information concerning the other members of its project team.

Per COMAR 20.61.06.18 Reporting Requirements, a selected offshore wind project must file annual reports with the Commission each year subsequent to issuance of the OREC order containing updated application information. The selected offshore wind project must also report any material change to the qualified offshore wind project to the Commission within 30 days of the date of that decision. This reporting requirement refers to 揃. Any material change to the qualified offshore wind project including, but not limited to: (1) the capacity of the project; (2) the turbine model; (3) the design of the foundation or support structure; (4) the project COD; and (5) the decommissioning plan. If changes in subcontractors will result in a material change to the qualified offshore wind project, then the applicant must comply with the COMAR 20.61.06.18 Reporting Requirements and notify the Commission within 30 days. Changes to the subcontractors information requested in 1-7, 1-8, and 1-9 that do not result in a material change to the qualified offshore wind project should be reported to the Commission in the annual reports required each year subsequent to issuance of the OREC order, until the project achieves commercial operation.
(Posted 4/14/15)

#Q3:
Section 1-9 of the checklist requires, 揫c]omplete information about previous similar work performed by contractor or subcontractor. Does the term 揷ontractor refer to the OSW applicant, the primary construction entity, or someone else?
The terms 揷ontractor or 搒ubcontractor in 1-9 refer to any companies that are currently under contract to the applicant with respect to its proposed Maryland offshore wind project. This may include contractors engaged to assist with the application as well as contractors engaged to assist with the future implementation of the proposed offshore wind project.
(Posted 4/14/15)

#Q2:
Section 1.1 requires a statement binding the application until the expiration date. What is the expiration date? Specifically, the statute indicates that the open application period is to be "no less than 90 days" (Sec. 7-704.1(2)(ii)) while the associated regulation states the open application period is 180 days, subject to extension (COMAR 20.61.06.01B(4)). Please clarify whether the expiration date referred to in Section 1.1 is 90 or 180 days (or extended) from the Commission抯 notice that it is accepting applications for other OSW projects? Alternatively, if the expiration date referred to is the expiration of a subsequent review period that takes place after the close of the open application period, please advise as to how long the Commission will have to review all qualified projects? In this regard, any clarity as to the Commission抯 overall general timeline for reviewing the applications received and the relevant expiration dates discussed in the application checklist would be appreciated.
Section 1-1 of the Application Checklist requires "A signed notarized statement by an officer of the OSW applicant binding the application until the expiration date and ensuring accuracy of application materials and completion of the project by COD." The term "Expiration date" is defined in the Proposed Maryland Offshore Wind Regulations as "...the earlier of the date on which the Commission notifies the OSW applicant that its application has not been accepted and 181 days after the close of the application period, which may be extended by mutual consent of the Commission and the OSW applicant."

Therefore, once the first application for a Qualified Offshore Wind Project is determined to be Administratively Complete, LAI will post this information and that date on the Maryland Offshore Wind website. We will also post (i) the end date, 180 days hence, of the Application Period and (ii) the Expiration date, 181 days after the end of the Application Period, when applicants will be notified if their application has been approved, conditionally approved, or denied. The Expiration date may be extended by mutual consent as explained above.
(Posted 3/27/15)

#Q1:
Will the PSC and the developer use IMPLAN for economic evaluation?
Yes, the PSC will use IMPLAN to ensure a consistent economic evaluation among the projects. However, the developers can use any software they want for their economic evaluation.
(Posted 2/3/15)