STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES

I/M/O the Verified Petition of Rockland Electric Company for

Approval of an SREC-Based Financing Program PURSUANT TO N.J.S.A. 48:3-98.1

VERIFIED PETITION

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STATE OF NEW JERSEY BOARD OF PUBLIC UTILITIES

IN THE MATTER OF THE VERIFIED ) PETITION OF ROCKLAND ELECTRIC ) COMPANY FOR APPROVAL OF AN ) VERIFIED PETITION SREC-BASED FINANCING PROGRAM ) AND AN ASSOCIATED COST ) BPU Docket No. RECOVERY MECHANISM ) Rockland Electric Company (“Petitioner”, “RECO”, or the “Company”), a

corporation of the State of New Jersey, having its principal offices at 82 East Allendale

Avenue, Suite 8, Saddle River, New Jersey, respectfully petitions the New Jersey Board

of Public Utilities (“Board” or “BPU”) pursuant to N.J.S.A. 48:3-98.1, et seq. for

approval of a small scale Solar Renewable Energy Certificate (“SREC”)-based financing

program and an associated cost recovery mechanism as follows:

INTRODUCTION

1. Petitioner is a public utility engaged in the distribution of electricity and

the provision of electric Basic Generation Service (“BGS”) for residential, commercial

and industrial purposes within the State of New Jersey. Petitioner provides service to

approximately 72,000 electric customers in an area having a population in excess of

200,000 persons, which extends from eastern Bergen County at the Hudson River to

western Passaic County and small communities in Sussex County, New Jersey.

Petitioner’s customer base includes approximately 63,000 residential customers.

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2. Petitioner is subject to regulation by the Board for the purposes of setting

its retail distribution rates and to assure safe, adequate and reliable electric distribution

service pursuant to N.J.S.A. 48:2-1 et seq.

3. Pursuant to the requirements of the Electric Discount and Energy

Competition Act, N.J.S.A. 48:3-49 et seq. (“EDECA”), the Board has adopted renewable

portfolio standards (“RPS”) rules, N.J.A.C. 14:8-2.1 et seq., that among other things,

require that a specified portion of the electricity supplied to New Jersey customers by

each supplier or provider be supplied from solar electric generation systems. Under RPS

rules, suppliers and providers may comply with the solar requirements by submitting

SRECs1 or by paying a Solar Alternative Compliance Payment (“SCAP”)2, or a

combination of both methods. In 2006, the Board directed its Staff to commence a

stakeholder process to explore models that would enhance the ability of energy suppliers

and providers to meet the RPS targets for solar electric generation and to support the

continued growth of New Jersey’s solar market. As a result, the Board voted at its

September 12, 2007 agenda meeting to: (i) establish a rolling eight year SACP schedule

at levels that were higher than pre-existing SACP levels, (ii) establish a two year SREC

trading life, (iii) establish a 15-year SREC qualification life during which each solar

electric generation system can continue to generate SRECs, and (iv) put controls in place

to limit the overall costs of solar incentives. The Board’s memorialized the foregoing

actions in its Order dated December 6, 2007 in Docket No. EO06100744.

4. At agenda meeting on September 12, 2007, the Board also directed the

OCE to initiate a proceeding to explore whether additional mechanisms could be

1 An SREC represents the solar renewable energy attributes of one megawatt-hour of generation from an eligible solar generation facility certified by the Board’s Office of Clean Energy (“OCE”). 2 SACAP sets the expected upper limit on the price of an SREC in the market.

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established to support the financing of solar generation projects by providing greater

assurances about the cash flow to be expected from such projects. The Board noted that

factors in the availability of such financing not only include the assurances of long-term

maximum prices for SRECs, as established by the rolling eight year SACP schedule, but

also the degree of certainty about the minimum cash flow from such projects. The term

“SREC-based financing” has been used to describe the provision of additional cash flow

certainty to a project in exchange for the SRECs generated by a project.

5. Following that proceeding, in an order dated August 7, 2008 in Docket

No. EO06100744 (“August 7 Order), the Board, among other things, ordered RECO to

submit a petition under N.J.S.A. 48:3-98.1(b) for its participation in an SREC-based

financing plan submitted by either Jersey Central Power & Light Company (“JCP&L”) or

Atlantic City Electric Company (“ACE”) pursuant to the criteria of the August 7 Order.

RECO submitted a Motion for Reconsideration of the August 7 Order arguing that its

proposed Residential Solar Loan Program in BPU Docket No. EO08090703 would be

more effective in developing market support of solar projects in its service territory and,

therefore, RECO only should be required to offer the loan program. Alternatively, RECO

requested, among other things, clarification that it has the option of implementing its own

long-term SREC contract program or joining in the programs of ACE or JCP&L. In its

December 8, 2008, Order on Motion for Reconsideration in Docket No. EO06100744

(“December 8 Order”), the Board rejected the Company’s request to provide only a

Residential Solar Loan Program, but determined that RECO was not prohibited from

pursuing a solar loan program, as well as an SREC-based financing program. The

December 8 Order further provided that RECO could proceed with its own SREC-based

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financing program or it could opt to participate in the program submitted by ACE or

JCP&L. In either case, RECO’s filing is due January 31, 2009.

RECO’s SREC-Based Financing Proposal

Program Duration

6. This Verified Petition sets forth RECO’s proposal to support SREC-based

financing of solar generation projects, by entering into Board-approved long-term

agreements for the purchase of SRECs from solar project developers, at prices set

through a competitive process. This proposed program will cover the partial energy year

ending May 31, 2009 and the full years 2009-2011, i.e., June 1, 2009 through May 31,

2012, pending Board approval.3

Program Goals

7. RECO will set SREC purchase goals as prescribed in the August 7 and

December 8 Orders to purchase output (i.e., SRECs) from qualified solar projects

representing RECO’s target percentages of the State’s new incremental SREC allocations

under the RPS rules that are associated with RECO’s energy deliveries through the

covered reporting years. Reporting Year 2009 (i.e., June 1, 2009 through May 31, 2010)

will set a target goal of 60% of the new incremental SREC allocation. Reporting year

2010, (i.e., June 1, 2010 through May 31, 2011) will set a target goal of 50% of the new

incremental SREC allocation. Reporting year 2011, (i.e. June 1, 2011 through May 31,

2012) will set a target goal of 40% of the new incremental SREC allocation. These

percentages, which will be applied to estimates of statewide kilowatt-hours to be

delivered as accepted by the OCE, also will encompass the stated percentage of the

3 Notwithstanding this Petition, RECO reserves all, and does not waive any, of its rights should the Board extend the period for entering long-term contracts beyond the Reporting Years specified in the August 7 Order or otherwise materially amends the requirements of the August 7 and December 8 Orders.

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SREC needs of third party suppliers. Based on current estimates, RECO projects that it

will contract for approximately 3.8 MW of solar projects, to be phased in over the period

ending May 31, 2012. This estimate takes into account the existing inventory of SREC

generating projects, including additional SREC generating projects anticipated by the

OCE under existing solar programs. The MW targets to be solicited by the Company

each year will be updated based on an annual review of the actual inventory of solar

projects, concurrent with the Board’s annual review of the SACP.

Solar Project Selection and Award Process

8. As the result of a Request for Proposals (“RFP”) process, proposals will

be solicited for acceptance into the Company’s SREC-based financing program.

Selection will be based on the lowest net present value (“NPV”) cost of the proposed

agreement for qualified projects. Pursuant to the August 7 Order, RECO will classify

these into two project size categories, (i) projects to be less than or equal to 50 kW and

(ii) projects to be greater than 50 kW. The August 7 Order does not specify any required

allocation for project selection between these categories. RECO therefore will make

selections based on the NPV regardless of project size and will not set-aside special

consideration for projects in any particular size category.

9. Projects will be solicited for periods of 10-15 years through an RFP

process. For qualified, winning projects, subject to Board approval, RECO will seek to

enter into Solar Renewable Energy Certificate Purchase and Sale Agreements (“SREC

PSA”) for the term proposed. RECO will utilize standard agreements in the form to be

approved by the Board and will not negotiate the agreements individually, in a process

similar to that employed for the Supplier Master Agreements in the Basic Generation

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Service (“BGS”) proceedings. Attachment 6 contains RECO’s sample SREC PSA. It is

critical to RECO’s participation in the financing program that this agreement contains a

regulatory release provision which would relieve RECO from its SREC purchase

obligations if RECO’s right to recover associated costs and other amounts approved by

the Board is modified or terminated in the future.

10. RECO intends to join with JCP&L and ACE to utilize an independent RFP

manager. This will provide increased consistency for the market and uniformity of

process. Through this RFP manager, RECO will solicit proposals from solar project

owners or developers on a semi-annual schedule. Solicitation will take the form of an

RFP. Solar project owners and developers will respond with proposals including their

OCE-approved SREC application with the proposed project description (e.g., project

owner, size, locations, technical specifications, anticipated number of SRECs to be

generated annually through the proposed term, and the proposed SREC purchase price).

11. Once received, proposals will be evaluated for selection based on the

lowest NPV. A review of proposal documentation to verify projects are qualified will be

completed and RECO will seek Board approval for those projects which meet the

program qualifications up to the program target goal. Upon Board approval, RECO will

enter into SREC PSAs with the solar project owners and developers selected.

12. RECO proposes a less restrictive cap than provided in the August 7 Order

with regard to awarding contracts to single entities or related entities, due to RECO’s

relatively low SREC requirements. Nonetheless, the Company will endeavor to

distribute awards to multiple entities if possible depending on the portfolio of proposals

that are received. In determining the NPV of RECO’s obligations under a proposed

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agreement, RECO will use a discount rate equal to its after-tax overall weighted cost of

capital as determined in its last base rate case, i.e., 7.83.

13. RECO will supply the Board with reports on the results of each bidding

solicitation, including the NPV analysis for each qualified proposal. The report will

include the number of bidders, range of project sizes, and range of pricing. RECO will

seek prompt Board approval of the selected projects, or other direction, so that RECO can

then enter into SREC PSAs with the selected project owners or developers. Projects that

are not selected will be notified after the Board has issued approvals for the selected

projects.

14. RECO will make every effort to select winning projects from various

entities as indicated by the August 7 Order. However, RECO notes that the incremental

SREC requirement assigned to RECO is relatively small. Accordingly, limiting awards

to an entity or related entities based on a percentage of RECO’s requirements might

prevent goal attainment if sufficient alternate projects are not received. Therefore, RECO

proposes that, where possible within any bidding cycle, RECO will recommend

selections so that no one entity as defined by the August 7 Order, totals more than 20% of

the total of any MW solicited in any RFP. However, if this is not possible, RECO will

award based on NPV, distributing the total awards to the greatest number of different

entities possible.

15. Upon Board approval and award, RECO and the developer or owner will

execute the SREC PSA. Once executed, RECO will register the project’s SRECs with

the PJM Environmental Information Service – Generator Attribute Tracking System

(“GATS”), or successor entity performing that function.

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16. Solar projects that have received, or will receive a rebate from the

Customer On-site Renewable Energy (“CORE”) program in 2001 through 2008 are not

eligible for RECO’s SREC-Based Financing Program.

17. RECO will require separate meters for each project that has a RECO

SREC PSA, in order to measure the solar system output. RECO will install, own and

read (or telemeter) these meters. RECO will procure and install these meters at the

customer’s sole expense. The customer must obtain any necessary electric permits

required by the authorities having jurisdiction. RECO will apply the current charge for

these items at the time they are installed. RECO will treat the cost of the meter as a

contribution in aid of construction. The Board’s regulations concerning electric meters

will apply to all RECO-owned meters. RECO will provide the system owner with output

information.

18. Electronic communications will not be necessary for residential and non-

hourly metered commercial customers. Customers on an hourly rate that requires interval

metering also will be required to have an interval meter that registers the gross output of

the solar PV system. Such customers will continue to be responsible for any

communications costs associated with the meters. Remote meter reading devices will be

required for customers that currently have their meters read remotely and for those

projects which RECO determines that the remote reading is necessary.

19. RECO proposes to use existing administrative systems, either through the

OCE or joint electric distribution company (“EDC”) systems, to the extent it is possible

and cost effective do so. RECO will work with the other New Jersey EDCs, JCP&L,

ACE, and Public Service Electric and Gas Company (“PSE&G”), so that RECO’s SREC-

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based financing program will be consistent and complementary with those of the other

EDCs, to the extent feasible. RECO understands that JCP&L and ACE have filed

petitions and is seeking to work with them to establish a coordinated solar project

solicitation process utilizing the same requirements and procedures to the extent

practicable.

20. RECO will sell all SRECs that are purchased under the SREC-based

financing program through the same auction process that has been approved for PSE&G

in Docket No. EO07040278, PSE&G’s Solar Loan Program, consistent with the August 7

Order.

Cost Recovery Mechanism

21. Net revenues received from the auction process for the sale of SRECs sold

through the SREC-based financing program will be applied to the costs to be recovered

through the program. Petitioner proposes to recover the net monthly revenue

requirements associated with the Program through a RGGI Surcharge. The RGGI

Surcharge has been approved by the Board for the recovery of costs associated with the

Company’s Demand Response Program filed in BPU Docket No. EO08050326. A RGGI

Surcharge also has been proposed by the Company for the recovery of costs associated

with its proposed Energy Efficiency Pilot Program in BPU Docket No. EO08090702 and

for costs associated with the Company’s proposed Residential Solar Loan Program in

BPU Docket No. EO08090703. The RGGI Surcharge will be calculated annually on a

cents per kWh basis and for costs associated with the SREC-based financing program

will be applied to all of RECO’s electric distribution customers. The charge would be

published in a separate tariff leaf. The RGGI Surcharge would be set initially to recover

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estimated annual expenditures as approved by the Board and would be reconciled on an

annual basis. Collections under the SREC-based financing program component of the

RGGI Surcharge will commence on June 1, 2009.

22. Operating the SREC-based financing program, particularly entering into

long-term SREC PSAs, exposes RECO to potentially significant regulatory and business

risks. RECO therefore proposes to retain 50% of the positive difference between the (i)

SACP that would otherwise be due from the energy suppliers for the SRECs purchased

under the program and, (ii) the amount RECO pays to projects under the purchase

agreements proposed under this program. The benefit of the other 50% will be realized

by customers through BGS or other suppliers’ energy pricing.

23. Further details concerning cost recovery, accounting and tariff issues are

set and forth in Ms. Quin’s and Mr. Atzl’s testimony attached to this filing, as Exhibits

JJQ-1 and WAA-1, respectively.

24. Attached to this Verified Petition are the following pre-filed testimony and

attachments:

• Exhibit JJQ-1 Testimony of Jane J. Quin

• Exhibit WAA-1 Testimony of William A. Atzl

• Attachment 1 Cross reference sheet showing where RGGI filing

requirements under N.J.S.A. 48:3-98.1 and August 7 Order

are addressed

• Attachment 2 RECO Comparative Balance Sheets 2006-2007

• Attachment 3 RECO Comparative Income Statements 2006-2007, Q3 -2008

• Attachment 4 RECO Comparative Balance Sheet at September 30, 2008

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• Attachment 5 Statement of Revenues 2006-2007, Q3-2008

• Attachment 6 Proposed form of SREC PSA

• Attachment 7 Proposed Tariff

• Attachment 8 Accounting Entries

• Attachment 9 Cost of Capital

CONCLUSION AND REQUESTS FOR APPROVAL

For all the foregoing reasons, RECO respectfully requests that the Board retain

jurisdiction of this matter and review and expeditiously issue an Order approving this

Petition specifically finding that:

1. The SREC-based finance program, as set forth in

this Petition, is reasonable and prudent and

complies with the requirements of the Board’s

August 7 Order and December 8 Order,

respectively;

2. RECO is authorized to recover all costs requested

herein associated with the SREC-based financing

program through a RGGI Surcharge;

3. The proposed rates and charges, as set forth

herein, are just and reasonable and RECO is

authorized to implement the rates proposed herein

on or about March 1, 2009; and

4. The proposed RGGI Surcharge, set forth in the

proposed amendment to RECO’s Schedule for

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Electric Service, P.U.C.-ELECTRICITY, a copy

of which is attached to the Petition as Attachment

7, is approved.

COMMUNICATIONS

. Communications and correspondence related to this petition should be

sent as follows:

James C. Meyer, Esq. Riker, Danzig, Scherer, Hyland & Perretti LLP Headquarters Plaza One Speedwell Avenue P.O. Box 1981 Morristown, NJ 07962-1981 (973) 538-8464 jmeyer@riker.com and John L. Carley, Esq. Assistant General Counsel Consolidated Edison Company Of New York, Inc. Law Department, Room 1815S 4 Irving Place New York, NY 10003 (212) 460-2097 carleyj@coned.com and

Exhibit JJQ-1 ROCKLAND ELECTRIC COMPANY

TESTIMONY OF JANE J. QUIN

Q. Please state your name and business address. 1

A. Jane J. Quin, 390 W. Route 59, Spring Valley, New York 10977. 2

Q. By whom and in what capacity are you employed? 3

A. I am Director – Customer Energy Services for Orange and Rockland Utilities, Inc. 4

(“Orange and Rockland”), the parent company of Rockland Electric Company 5

(“RECO” or the “Company”). 6

Q. Please briefly outline your educational and business experience. 7

A. I received a Bachelor of Arts degree from the University of Michigan in 1977 and 8

a Juris Doctorate degree from the University of Tulsa, College of Law, in 1985. 9

My first employment was as an associate with the energy group of the Hall, Estill 10

law firm in Tulsa, Oklahoma in 1985. I was subsequently employed as a senior 11

associate with the energy group of the Baker & Botts law firm in Washington, 12

D.C. from 1989 to 1993. I joined Orange and Rockland in 1994 as Attorney 13

responsible for the Company’s gas regulatory matters. In 1999, I accepted a 14

position with the legal department at Consolidated Edison Company of New 15

York, Inc. (“Con Edison”) after the merger of Orange and Rockland and Con 16

Edison, Inc. I represented both Orange and Rockland and Con Edison in gas and 17

electric regulatory matters, including retail access issues, as Senior Attorney and 18

Associate Counsel. In May 2005, I accepted the position of Director – Retail 19

Access and Energy Services for Orange and Rockland. My title subsequently 20

changed to Director – Customer Energy Services. I have participated in the 21

preparation of testimony and exhibits in rate cases and regulatory proceedings in 22

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New York, New Jersey, and Pennsylvania and at the Federal Regulatory Energy 1

Commission. I previously testified before the New York State Public Service 2

Commission (“NYPSC”) in Case No. 05-G-1494, Case No. 06-E-1433 and Case 3

No. 07-E-0949, before the New Jersey Board of Public Utilities (“Board”) in 4

Docket No. EO08050326, Docket No. EO08090703 and Docket No.EO08090702 5

and before the Pennsylvania Public Utility Commission in Docket No. P-6

00062205 and Docket No. R-2008-2046520. 7

SUMMARY OF TESTIMONY 8

Q. What is the scope of your testimony? 9

A. In my testimony, I will be discussing the Company’s proposal to initiate an 10

SREC1-Based Financing Program (“SFP”). The Company is submitting this 11

Petition pursuant to the Board’s Order dated August 7, 2008 issued in Docket No. 12

EO06100744 (“SREC-Based Financing Order” or “Order”). Pursuant to the 13

SREC-Based Financing Order, RECO proposes an interim mechanism to support 14

New Jersey’s continued transition of “the solar renewable energy market from 15

rebates to market-based incentives.” RECO’s proposal is for a long-term 16

contracting plan designed to support financing for a projected 3.8 MW of solar 17

energy projects, reflecting the Board-ordered percentages of RECO’s “new 18

incremental SREC allocation” (Order at 16) for Reporting Years 2009/10 through 19

2011/12. The purpose of this testimony is to provide a detailed description of and 20

explanation regarding the Company’s proposed program. 21

1 A Solar Renewable Energy Certificate (“SREC”) represents the solar renewable energy attributes of one megawatt-hour of generation from an eligible solar generation facility certified by the Board’s Office of Clean Energy (“OCE”).

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Q. Why is RECO making this filing? 1

A. The Board has determined that regulated EDC support is needed to facilitate the 2

transition to market-based mechanisms that will support solar project 3

development at a pace capable of meeting solar requirements set forth in New 4

Jersey’s renewable portfolio standards (“RPS”), N.J.A.C. 14:8-2.1 et seq. RECO 5

is responding to the Board’s Order requiring EDCs, specifically including RECO, 6

to present proposals as to how they can provide interim support for that transition. 7

Q. Does this filing comply with the Board’s May 12, 2008 Order issued in 8

Docket No. EO08030164 (“RGGI Order”)? 9

A. Yes. Attachment 1 to this Petition contains a summary of the filing requirements 10

set forth in the RGGI Order, including a reference to where in its filing RECO 11

complies with those requirements, as applicable. 12

Q. In developing this filing, did RECO work with other EDCs? 13

A. Yes. RECO received the plans submitted by Jersey Central Power & Light 14

Company (“JCP&L”) and Atlantic City Electric Company (“ACE”) which were 15

provided as a result of the SREC-Based Financing Order. Follow-up discussions 16

have occurred between the parties and RECO anticipates that those discussions 17

will continue. 18

Q. Did RECO consider input from the solar community? 19

A. As with JCP&L, RECO’s proposal is largely modeled after a proposal presented 20

by Sun Farm Networks. Additionally, RECO has participated in discussions with 21

interested parties regarding the ACE and JCP&L SREC financing proposals. 22

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Q. Please describe the fundamental element of the SREC-based financing 1

proposal. 2

A. RECO, in coordination with JCP&L and ACE, will solicit MW blocks of eligible 3

projects and will enter into long-term agreements for the purchase of SRECs 4

generated by those projects. 5

Q. With whom will RECO contract? 6

A. RECO will enter into SREC purchase and sale agreements (“SREC PSAs” or 7

“PSAs”) with customers who will own a solar project or with 8

contractor/developers (collectively, “project developers”), who will own such a 9

project located on a customer’s premises. Project developers must have 10

appropriate agreements with the customer on whose premises the system is 11

located, addressing such issues as the project developer’s right to locate the 12

project on the premises, the right to the output of the project, including the 13

SRECs, and absolving RECO from any responsibility associated with the 14

relationship between the project developer and the customer. 15

Q. How will you determine how many MW to solicit? 16

A. The Board (Order at 16) directed RECO, JCP&L and ACE to enter into contracts 17

to procure 60% of the EDC’s new incremental SREC allocation plus shortfalls as 18

prescribed in the Order, through the end of the first full Reporting Year in which 19

the EDCs are entering into long-term contracts pursuant to the Order. That 20

percentage will decline to 50 percent for the second full Reporting Year, and 40 21

percent for the third full Reporting Year. Attached as Schedule JJQ-1 is a 22

summary of statewide estimated SREC requirements for the 2009/10 to 2011/12 23

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period as projected by the OCE, to which RECO’s percentage share of statewide 1

electricity deliveries has been applied. The values shown in the Schedule reflect 2

the MW of installed solar generating capacity required to supply SRECs for each 3

year. RECO supports an annual statewide reporting process led by OCE that will 4

result in a recommended schedule of solicitations for the EDCs’ SREC Financing 5

programs. 6

Q. How are RECO’s commitments to purchase SRECs established under the 7

proposal? 8

A. The solicitation process for establishing commitments to purchase SRECs from 9

approved projects will involve close coordination with processes administered by 10

the OCE related to SREC project review and approval. Any project RECO can 11

consider for an SREC PSA must be certified by the OCE as eligible to generate 12

SRECs. 13

To manage its project solicitations, RECO will contract with a project solicitation 14

manager who will solicit project proposals, and rank eligible projects according to 15

the net present value (“NPV”) of the proposed pricing to fill the MW block 16

solicited. RECO, JCP&L and ACE plan to contract jointly with the solicitation 17

manager to maximize consistency of processes in their respective territories for 18

the benefit of the solar development industry and to reduce administrative costs. 19

Attached hereto as Schedule JJQ-2 is an initial outline of the documentation 20

required for the solicitation of proposals. Final materials will be developed 21

following Board approval of the program. 22

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RECO would then forward recommended awards to the Board and, following 1

timely regulatory approval, award SREC PSAs to selected projects. Projects that 2

are not accepted will be rejected, providing project sponsors the opportunity to 3

revise their proposal and resubmit it for the next solicitation round. 4

Q. How frequently does RECO anticipate soliciting proposals? Will the 5

solicitations be conducted concurrent with JCP&L and ACE solicitations? 6

A. While experience may support more frequent solicitations in the future, RECO 7

initially plans to conduct solicitations every six months so as to allow time for: (1) 8

communication of each solicitation to customers and the solar development 9

industry; (2) proposal development; (3) review of proposals and development of 10

recommended awards: (4) a non-appealable regulatory approval of SREC PSAs 11

pursuant to each solicitation and (5) notice to projects that are not accepted. 12

Other factors related to the timing, frequency and MW of solicitations include: (1) 13

clarity of 2009 (or other annual) policies, procedures and documentation 14

requirements related to rebates for smaller projects and SREC certification from 15

the OCE; (2) time required for project developers to market projects and develop 16

proposals meeting State and solicitation requirements in sufficient numbers and 17

MW; (3) time required to process and communicate results of prior solicitations 18

by other EDCs; and (4) time required for the review and approval process by the 19

Board. RECO plans to coordinate solicitations with JCP&L and ACE. 20

Q. Will project pricing proposals be confidential? 21

A. Proposals will be kept confidential until the point at which they have been 22

selected and filed with the Board for approval, at which time proposed pricing 23

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and terms for the awarded projects will be posted. Proposals that are not selected 1

will continue to be kept confidential. 2

Q. Will project pricing be based on the proposed price, or priced at an auction 3

clearing price of some sort? 4

A. Given the limited scope and scale of these solicitations, the limited number of 5

solicitations and project-specific financing requirements, this process does not 6

lend itself to an auction process or the concept of a clearing price. Instead, SREC 7

PSAs will be priced as proposed by the customer or project developer in response 8

to the Company’s solicitation. 9

Q. What will be solicited in the solicitation process? 10

A. The Company will solicit MW blocks of pricing proposals for SREC generating 11

projects that have been qualified on a prospective basis by the OCE, and that are 12

eligible for long-term commitments pursuant to the SREC-Based Financing 13

Order. Project proposals will include a fixed price for the term of the SREC 14

purchase agreement. Customers or project developers can elect a term of between 15

10 and 15 years for their proposals. 16

Q. In the solicitation, what documentation will be required? 17

A. Specific documentation requirements are under development at this time in 18

coordination with the evolving documentation requirement of the OCE for 2009 19

rebates and/or SREC applications, and will be finalized following program 20

approval. Preliminary proposal requirements for projects would include the 21

application forms required for SREC eligibility and potentially OCE approval of 22

projects as eligible for SREC-based financing. 23

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Other required documentation or information related to the proposal include: 1

(1) the “segment” identification as defined in the Order (at 13) (i.e., either (a) up 2

to 50 kW or (b) greater than 50 kW, but not greater than 500 kW); (2) class of 3

service (e.g., residential, non-residential secondary, non-residential primary, non-4

residential transmission); and (3) clear delineation of the affiliations of the project 5

host and project developers to guide awards. Although the SREC-Based 6

Financing Order provides for a “20%” developer cap”, (i.e., no entity or 7

combination of affiliated entities can obtain more than 20% of the EDC’s long 8

term contracts – calculated based on KW – in any one year) due to the unique size 9

and nature of RECO’s territory, RECO seeks exception to limiting awards based 10

on a percentage of the overall KW awarded. Given RECO’s relatively low target, 11

this requirement may become unnecessarily burdensome and cause RECO to miss 12

its targeted award levels. 13

Q. What projects will be ineligible for SREC PSAs? 14

A. The Company will not consider projects that are ineligible under the SREC-Based 15

Financing Order. The Order (at 13,15,16) excludes; (1) projects that are greater 16

in capacity than 500 kW; and (2) “legacy” projects that received or will receive 17

rebates under the CORE rebate program during the period 2001 though 2008. 18

The Company notes that, as a point of clarification, it will exclude consideration 19

of projects with any existing photovoltaic (“PV”) capacity at the site, and 20

preclude SREC financing hereunder for future construction or expansion of PV 21

capacity at sites receiving payments under these SREC PSAs. This is a 22

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simplifying administrative requirement designed to avoid confusion and potential 1

disputes. 2

Q. How will projects be ranked and awarded? 3

A. After reviewing proposals for meeting basic eligibility requirements, the 4

Company (through its solicitation manager) will rank projects according to the 5

lowest proposed pricing over the proposed term of agreement. Pricing for all 6

projects will be ranked from low to high according to the NPV per MWh of each 7

proposal using a pre-announced utility discount rate, specifically RECO’s after-8

tax overall weighted cost of capital, which is 7.83% as approved in the 9

Company’s most recent base rate case. RECO will include the approved discount 10

rate, with each solicitation to maximize the transparency of the process. The total 11

MW of the proposals accepted cannot exceed the total solicited MW. RECO 12

would then forward recommended awards to the Board and, following regulatory 13

approval, award SREC PSAs to the selected and Board-approved projects. 14

Q. Since projects can propose terms of between 10 and 15 years, how will 15

pricing for different terms be compared? 16

A. By comparing project pricing according to the NPV per MWh, pricing for all 17

proposed projects for any number of years between 10 and 15 will be directly 18

comparable. The Company notes, however, that, in general, shorter-term 19

contracts at a given price reduce long-term pricing risk for customers, which will 20

cause the shorter-term contract to prevail in the ranking. 21

Q. The Board Order defines project segments for eligibility under the program. 22

How will project segments be used? 23

10

A. While the Order defined project segments as “projects less than or equal to 50 kW 1

and projects greater than 50 kW and less than or equal to 500 kW” (“small” and 2

“larger”, respectively), it did not provide clear direction as to whether, or how, an 3

appropriate allocation to the defined segments should be made. In addressing this 4

question, the Board would need to balance competing policy interests of 5

minimizing the cost to meet solar RPS requirements vs. participation by all 6

market segments. 7

RECO’s proposal is designed to solicit projects that would be ranked and awarded 8

according to the NPV of their pricing. That design supports the goal of achieving 9

RPS requirements through proposals that reflect the least costs to customers. 10

Participation of the different segments, therefore, would depend on project 11

pricing, which will depend, in part, on availability of rebates and the federal 12

Investment Tax Credit (“ITC”) and on the demographics of the Company’s 13

service territory, which is primarily residential. 14

Q. What levels of participation do you anticipate for Reporting Years 2009-15

2012? 16

A. The minimum number of customers required to meet the MW target of 3.8 MW 17

(assuming participation at a maximum project size of 500 kW) would be 18

approximately eight customers. More realistically, we would anticipate a wide 19

range of project sizes, with potential for hundreds of projects participating. 20

Please note that solar projects tracked through 2008 in RECO’s service territory 21

are predominantly small projects. 22

11

Q. Will the Board ultimately determine whether pricing is competitive and 1

prudent? 2

A. Yes. The determination as to the prudence of pricing for rounds of solicitations 3

will ultimately rest with the Board, as RECO will submit proposals for the 4

Board’s review and approval, including a finding that RECO’s entering into the 5

recommended agreements is prudent. The Board will rely, in part, on the 6

transparency of the anticipated solicitation process. The initial outline of the 7

solicitation materials is provided as Schedule JJQ-2, and the Board will have 8

access to final documents upon their release. 9

Moreover, RECO will make a filing with the Board setting forth the 10

recommended proposals for award, with supporting documentation. The filing 11

will consist of: (1) a report from the solicitation manager including solicitation 12

documents, a description of the process, and a summary of the recommended 13

awards; (2) a ranked summary listing of key parameters (e.g., proposal 14

identification, segment, kW, price, term, NPV, customer name, developer 15

name/affinity), in-service date, for all proposals recommended for award 16

including identification of the customer and project developer (if any); (3) a 17

ranked summary listing of key parameters associated with projects not 18

recommended for award based on price (e.g. proposal identification, segment, 19

kW, price, term, NPV); (4) a summary listing of key parameters associated with 20

projects disqualified for various reasons (e.g., developer cap, legacy system, 21

deficient proposal); and (5) a summary of the MW, estimated SRECs and 22

12

estimated payments associated with the recommended SREC PSAs for the round 1

of solicitation in question, and cumulative total for the program. 2

Q. When does RECO plan to offer the program to customers? 3

A. RECO will introduce the program as soon as practicable following Board 4

approval, and as authorized by necessary Board Orders, and will market and 5

operate the program for three PJM Reporting Years: 2009-2010, 2010-2011 and 6

2011-2012. 7

Q. How will the SREC-based solicitation process be communicated to the 8

market? 9

A. RECO will work closely with the OCE and other EDCs to coordinate 10

communications to the solar industry, through meetings and other industry 11

venues. Information about the solicitations will be distributed electronically, and 12

posted to both the www.NJCLEANENERGY.com website, and a site for the 13

RECO solicitations. Frequently asked questions (“FAQs”) document will be 14

developed for solar contractors and/or project developers to use in communicating 15

this new option to customers and/or financing organizations. The Company will 16

continue to communicate directly with industry professionals to encourage their 17

participation in the program. Bill inserts also will be employed to increase 18

customer awareness and direct them to the website for additional information. 19

Q. Will RECO assess satisfaction with the program? 20

A. Yes. RECO plans to work with the OCE, JCP&L, and ACE to conduct informal 21

interviews with participants in 2009 and 2010 to assess their satisfaction as well 22

as solicit suggestions for program improvements. The Company plans to 23

13

implement reasonable suggestions that it finds feasible through Reporting Years 1

2010/11. 2

Q. What is the form of SREC PSA that customers or project developers will 3

enter into with RECO? 4

A. The proposed form of SREC PSA, which sets forth the rights and obligations of 5

the parties (i.e., the customer project developer and RECO) is provided as 6

Attachment 6 to this Petition. As part of the approval process for this Petition, 7

RECO requests that the Board approve the form of the SREC PSA, after which it 8

will be a non-negotiable agreement. This process is similar to that employed in 9

connection with the Supplier Master Agreements in the Basic Generation Service 10

(“BGS”) proceeding. As a result, customers and project developers must submit 11

with their applications a commitment to complete and execute the approved 12

SREC PSA within 48 business hours of award. 13

Q. Can projects receiving long-term SREC PSAs expand capacity? 14

A. No. SREC PSAs will include a limit on the number of SRECs to be purchased 15

under the agreement based on the SREC generating capacity of the proposed 16

project. 17

Q. What happens to projects with less than 15-year terms after the term 18

expires? 19

A. Customers or project developers who execute SREC PSAs with terms less than 15 20

year would be free to sell SRECs into the open market after expiration of the term 21

of the SREC purchase agreement. 22

14

Q. What provisions in the PSA ensure that the projects receiving SREC 1

purchase commitments under the program will be built? 2

A. The Company cannot ensure that projects receiving commitments will be built. 3

However, to maximize the likelihood of construction, after contract award, RECO 4

proposes to require, in addition to execution of the SREC PSA, that “winning” 5

project developers pay a deposit for each project. For any project that is 6

completed successfully within twelve months of the execution of the SREC PSA, 7

the deposit will be returned to the project developers following generation of the 8

project’s initial SREC. Projects that are not completed within twelve months of 9

the execution of the SREC PSA would forfeit the deposit, which would be 10

credited to the program as an offset to program costs. The SREC PSA also 11

includes a provision relieving the Company of its purchase obligation in the event 12

projects are not completed within 12 months. The Company will establish an 13

appropriate deposit calculation formula based on discussions with Staff and other 14

interested parties. 15

Q. Under what other circumstances can the PSA terminate? 16

A. If recovery of some of all of the costs associated with the program is disallowed; 17

the PSA includes provisions for renegotiation of the PSA to reflect the allowed 18

cost recovery. If cost recovery is terminated in full, or if other amounts 19

previously approved for recovery by RECO are disallowed, or if the project’s 20

SRECs no longer qualify for meeting RPS requirements, then the PSA would 21

terminate in its entirety. 22

Q. Please describe how the executed SREC PSAs will be administered. 23

15

A. RECO administrative tasks will include metering the gross output of projects, 1

registering SRECs with PJM’s Generation Attribute Tracking System (“GATS”), 2

and paying customers or project developers on a quarterly basis for the SRECs 3

their projects deliver over the term of the SREC PSA, or until the project 4

otherwise ceases to operate. 5

Q. How will the generation of SRECs be recorded and tracked? 6

A. A RECO meter will record the electrical output of the solar project. Customers 7

will be required to install the appropriate meter enclosure adjacent to the existing 8

RECO meter. RECO will, at the customer’s or project developer’s cost, provide 9

and install the meter to record the SREC generation of the solar project. SRECs 10

will be tracked using the PJM GATS platform. Details related to specific 11

responsibilities of the SREC sellers and RECO for registration of the projects 12

with GATS, transfer of title, etc. are in the process of being developed, with input 13

from PJM. 14

Q. Why should RECO meters be used? 15

A. RECO will be registering and paying for the amount of SREC generation 16

recorded. RECO’s objectives in requiring use of its meters for this purpose are to 17

maximize accuracy of measurement and verification of the quantities of SRECs. 18

Q. Will any of the work associated with the program be outsourced? 19

A. RECO plans to outsource solicitation services under the program, which at this 20

writing it hopes to do on a coordinated basis with JCP&L and ACE. RECO also 21

will utilize the SREC auction process approved for PSE&G in BPU Docket No. 22

16

EO07040278. RECO currently expects that all other work will be conducted 1

internally. 2

Q. What work, that will not be outsourced, will be required to support the 3

approved SREC PSAs? 4

A. Several new processes will be required to: (1) establish accounts with PJM GATS 5

(including processes for reporting, transfer of title and settlements); (2) establish 6

meters and “information technology” processes for tracking the gross kWh output 7

of contracted solar systems; (3) acquire and record meter readings with necessary 8

coding to enable reports supporting administration; (4) register meter readings 9

and SRECs with PJM GATS; and (5) administer project agreements. 10

Q. Will RECO need to add staff to support the work associated with these 11

projects? 12

A. This has not been determined at this point. Nonetheless, RECO foresees more 13

significant resources applied early in the program to establish the program 14

infrastructure. Once established, the staff hours dedicated to the program may be 15

reduced. The staffing requirements will be driven primarily by the number of 16

participants and transaction requirements associated with the agreements, which 17

at this time remain unclear. 18

RECO will track and report internal and outsourced administrative, 19

marketing/sales, training, payments to customers or project 20

developers/contractors, as well as net auction revenues, including inspections and 21

quality control, program implementation and evaluation costs. A preliminary 22

estimate of administrative costs is provided as Schedule JJQ-4; however, given 23

17

the uncertainties previously described, those projections are subject to revision 1

based on experience gained over time. 2

Q. How will SRECs be sold? 3

A. As directed in the SREC-Based Financing Order (at 16), RECO will sell the 4

SRECs it purchases through the statewide auction process developed in 5

connection with PSE&G’s solar loan program in Docket No. EO07040278. 6

Q. How will revenues from the sale of SRECs compare to the costs for purchase 7

of SRECs under the agreements? 8

A. RECO estimates of pricing for SRECs purchases or sales would be purely 9

speculative at this time. Pricing for sale of SRECs in the near term will be 10

influenced primarily by the SACP and availability, or lack thereof, of supply. 11

Q. What is the process for resolving any customer complaints concerning the 12

program? 13

A. RECO will attempt to resolve disputes with participating customers and/or project 14

developers informally in the first instance. Disputes that involve the 15

administration of agreements under the program that cannot be resolved 16

informally will be resolved through the Board’s existing process for customer 17

complaints. Disputes under the SREC PSA will be resolved in accordance with 18

the terms and conditions therein. 19

Q. What is the exit plan when the solicitation program expires? What is the exit 20

plan when the SREC PSAs expire? 21

A. RECO will continue to administer the SREC PSAs over their lives, but will cease 22

the soliciting of proposals for new agreements when the solicitation program 23

18

expires. An exit plan for transitioning RECO SREC tracking systems and 1

processes upon expiration of agreements, which is at least ten years in the future, 2

remains to be developed. 3

Q. Please describe the benefits of the proposed program, including a description 4

of the barriers these commitments will address to support development of 5

solar generating projects? 6

A. The Board has determined that market-based supports for project development to 7

this point have fallen short of supporting portfolio requirements. The Board 8

directed (Order at 7) the EDCs to undertake renewable energy improvements by 9

facilitating SREC-based financing of solar electric generation projects, in a 10

manner than supports the transition to a market-based long term financing for 11

solar generating projects. The proposed interim solicitation process is designed to 12

address that barrier. 13

Q. What impact will the proposed program have on the competitive market for 14

project development and financing services? 15

A. The Board expects that the competitive market for solar project development and 16

financing will continue to develop in response to these solicitations, by enabling 17

solar project financing through purchased power agreements and other financing 18

arrangements. Contractors and project developers’ projects will be able to add 19

SREC-based financing as a component of their offering to customers. The 20

Company expects that the solicitations will increase customer and project 21

developer confidence, experience, and participation in SREC-based financing. 22

Q. Are there any environmental benefits associated with the program? 23

19

A. Yes. The Board’s premise for directing EDC intervention in this manner to enter 1

into SREC PSAs is that the renewable energy (and SRECs) associated with the 2

contracted projects are otherwise unlikely to develop in a timely manner. While 3

RECO does not have a basis for projecting a specific impact that its intervention 4

will have, the impact could be up to the emissions associated with 3,800 MWh 5

per year. As market-based processes for quantifying the value of environmental 6

benefits are still being developed, RECO has not placed a value on the range of 7

potential impacts. 8

Q. How does the program compare with OCE Clean Energy programs? 9

A. Clean Energy programs provide various types of support, including rebates for 10

smaller systems and certification of SREC generating projects, but they do not 11

involve SREC-based purchase commitments. In that sense, the proposed long-12

term SREC PSA program is complimentary, but distinct from other existing Clean 13

Energy programs. 14

Q. Will this program be coordinated with OCE programs? 15

A. Yes. RECO plans to begin discussions with the OCE and Clean Energy Program 16

Renewable Manager to coordinate communications and processes. The Company 17

expects that process will continue to develop in sync with the JCP&L and ACE 18

SREC Financing programs. 19

Q. How does the program compare with other utility programs? 20

A. We are unaware of any comparable utility initiatives in the country like the 21

proposed program. The program does not provide more common forms of 22

support, such as rebates or loans, or for direct construction of renewable facilities. 23

20

Q. How does the program support the New Jersey Energy Master Plan 1

(“NJEMP”)? 2

A. The NJEMP has aggressive goals for the increased reliance in solar power as an 3

energy source. As indicated in the introduction section of this testimony, the 4

Board has found that solar power supply has not developed at a pace supporting 5

New Jersey’s RPS and would benefit from EDC support. The proposed program 6

is designed to enable financing and development of solar projects at a pace 7

directed by the Board, thus supporting the goals of the NJEMP. 8

Q. Does RECO propose to receive shareholder incentives for the successful 9

performance of the program? 10

A. Yes. 11

Q. Why does RECO believe that incentives are necessary and appropriate? 12

A. EDCs have no affirmative incentive to enter into these agreements, and some 13

significant disincentives. RECO, as an EDC, has a negligible obligation to 14

procure any SRECs and limited no opportunity to gain economic benefits from 15

SREC purchases, since portfolio obligations are primarily the responsibility of 16

energy suppliers. On the contrary, EDC intervention could have some impact on 17

perceived EDC regulatory risk, distribution revenues, resources, and (to some 18

extent) financial balance sheets. Regulatory actions affirming the prudence of 19

these agreements and an opportunity for incentives will be fundamental to 20

addressing potential perceived risks and barriers to EDC support for SREC-based 21

financing. 22

Q. Please describe the basis for the proposed incentives. 23

21

A. To compensate for potential perceived risks associated with the long-term SREC 1

PSAs into which RECO would enter as a means of helping New Jersey meet its 2

energy goals, and consistent with N.J.S.A. 48:3-98.1, RECO proposes to retain 3

50% of the positive difference between (i) the SACP that would have otherwise 4

been due from the energy suppliers with respect to the SRECs purchased under 5

the program, and (ii) the amount RECO pays to solar projects under the long-term 6

agreements proposed herein, with the benefit of the other 50% expected to be 7

realized by customers through BGS or other suppliers’ energy pricing. 8

In other words, by entering into long-term SREC PSAs, RECO will reduce the 9

shortfall in SREC supply and the resulting payments of SACPs (and therefore 10

energy pricing behavior) by suppliers. Without EDC intervention, energy 11

supplier pricing will include costs at the SACP level until the SREC supply is 12

available at a competitive cost. EDC contracts enable financing for project 13

development that, consistent with Board findings in the SREC-Based Financing 14

Order, would otherwise fall short of capacity to meet RPS requirements. 15

Customers will benefit directly from solar capacity that supports lower electric 16

supplier pricing. 17

Q. What data will you collect to track benefits from the program? 18

A. The solicitation and auction processes will require tracking the prices, volume and 19

program cost impacts of SRECs procured and sold through the program. The 20

solicitation approval process will require reporting on the number of participants 21

and projects, SREC purchase pricing, project size and the volume of project 22

SREC deliveries. As previously indicated, there will be annual statewide reviews 23

22

of the inventory of projects delivered under the program, and SRECs required to 1

meet New Jersey’s RPS requirements. 2

Q. Does this conclude your testimony? 3

A. Yes, it does. 4

5

Schedule JJQ-1

SRECs from Existing/Projected Installed Projects 5/2009* 142,000RECO Share of State Energy Sales 2.2%JCP&L Share of State Energy Sales 28.5%ACE Share of State Energy Sales 12.8%

YearSREC

Reqmt*Increase in

MWh

Board Ordered % of Incremental

SREC Reqmts

Targets from Order MWh

2008 / 2009 Shortfall

MWhTotal Target

MWh

Appx MW Needed to

Deliver MWh

MW to be Contracted by RECO

A B C D E F G H I

(= annual change in B) (=C * D)

(=G ÷ 1,000 SRECs per PV MW)

(= F * %Share)

2009/10 192,529 52,243 60% 31,346 71,715 103,061 103 2.272010/11 269,692 73,028 50% 36,514 0 36,514 37 0.802011/12 353,615 79,425 40% 31,770 0 31,770 32 0.70

* From 7/11/2008 Staff Straw Proposal RECO Total 3.77–105 MW from CORE (~57 MW installed to date) –20 MW from PS Loans –17 MW from NJ SREC-only pilot

SREC Requirement Projections from "Staff Straw Proposal" dated 7/11/2009

Schedule JJQ – 2

RECO SREC-based Financing Program SREC Proposal Requirements

1. Project Proposal Summary

• Project Identification • Location • RECO customer information • Design output • Proposed price • Proposed term • Developer and developer affiliations • Market segment (< / > 50 kW) • Class of service • Build schedule • Project commissioning date • Contact information

2. Agreement to sign standard SREC Purchase Agreement (PSA) within designated

time frame

3. Signed Customer Acknowledgement identifying: • Title to SRECs • Relationship with Project Developer • RECO’s relationship to project

4. Completed SREC-Only Project Registration Form (with required attachments)

Schedule JJQ-3

Solicitions Planned 2009-2012(MW)

Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total2009 0.5 0 1 0 1.52010 1 0 0.5 0 1.52011 0.5 0 0.27 0 0.772012 0 0 0 0 0

Total 3.77RECO proposes to conduct SREC solicitations bi-annually in sync withJCP&L and ACE solicitations.

Schedule JJQ-4

RECO SREC-Based Financing Proposal Cost Projections*Annual Budget

($ in 000)Line

# Incremental O&M Expenses & Capital Investment 2009 2010 2011 2012

1 Admin & Program Development (Utility Costs) 105$ 53$ 53$ 53$ 263$

2 Marketing & Sales (includes Call Center, Bill Inserts & Website)** 16 8 8 8 40

3 Training - 4 Customer Rebates, Grants & Other Direct Incentives* - - - - -

5 Contracted Processes, Inspections and Other Quality Control*** 50 50 50 50 200

6 Evaluation - - - - - 7 Total Estimated O&M Expenses = Sum(L1…L6) 171 111 111 111 503 8 Annual Investment - - - - - 9 Total Estimated Program Costs (L7 + L8) 171$ 111$ 111$ 111$ 503$

* Net costs for purchase and sale of SRECS depend on timing and prices from market-based processes. No estimates are provided.

** Includes first year bill insert development, bill inserts in 2nd & 3 year, plus web maintenance*** Costs will be based on vendor proposals, that are not yet available.

Cumulative Program Spending

Exhibit WAA-1

Rockland Electric Company Testimony of

William A. Atzl, Jr.

Q. Please state your name and business address. 1

A. My name is William A. Atzl, Jr. and my business address is 4 Irving Place, New York, 2

New York 10003. 3

Q. By whom are you employed and in what capacity? 4

A. I am employed by Consolidated Edison Company of New York, Inc. (“Con Edison”) 5

as Director – O&R Rates. In this position, I manage the rate department for Orange 6

and Rockland Utilities, Inc. (“Orange and Rockland”) and its subsidiaries Rockland 7

Electric Company (“RECO” or “the Company”) and Pike County Light & Power 8

Company. 9

Q. Please provide your educational background and professional experience. 10

A. In 1983, I graduated from the State University of New York at Stony Brook with a 11

Bachelor of Engineering degree in Mechanical Engineering. In 1989, I graduated 12

from Pace University, White Plains, New York with a Master of Business 13

Administration degree in Management Information Systems. I am a Licensed 14

Professional Engineer in the State of New York. My first employment was with Long 15

Island Lighting Company in 1983 where I held the position of Assistant Engineer in 16

the New Business Department. In 1984, I joined Orange and Rockland as a 17

Commercial and Industrial Representative in the Commercial Operations 18

Department. At Orange and Rockland I also held the positions of Commercial and 19

Industrial Engineer, Program Administrator - Demand-Side Management, Manager - 20

Demand-Side Management Operations, Manager - Energy Services and Pricing, and 21

Manager – Regulatory Affairs. In October 1999, I joined Con Edison and held the 22

position of Department Manager – Electric and Gas Rate Design – O&R prior to my 23

present position. 24

Exhibit WAA-1

William A. Atzl, Jr.

- 2 -

Q. Have you ever previously sponsored testimony before the New Jersey Board of 1

Public Utilities (“Board”) or any other state utility commission? 2

A. Yes, I have testified in numerous regulatory proceedings before the Board, the New 3

York State Public Service Commission and Pennsylvania Public Utility Commission. 4

Q. What is the purpose of your testimony in this proceeding? 5

A. The purpose of my testimony is to describe the Company’s proposed mechanism to 6

recover the net costs associated with its proposed SREC1-Based Financing Program 7

(“SFP”). The Company is making its proposal pursuant to the Board’s Order issued 8

August 7, 2008, in Docket No. EO06100744 (“SREC-Based Financing Order”). 9

Q. How will net costs associated with the SFP be determined? 10

A. Pursuant to the SREC-Based Financing Order, the Company will enter into long-term 11

contracts to purchase SRECs from solar project customers and/or developers. It is 12

anticipated that contract payments would be made on a periodic basis in accordance 13

with the specific terms of each contract. The Company would expense these costs 14

as incurred. The Company will resell the SRECs through the same auction process 15

established in the Board-approved Public Service Electric and Gas Company solar 16

loan program (BPU Docket No. EO07040278, Order dated April 16, 2008). The net 17

auction proceeds (defined as the value realized from the sale, less transaction costs) 18

will be recorded as revenue in the normal manner. 19

In addition to contract payments and net auction proceeds, net costs associated with 20

the SFP will include: 21

1 A Solar Renewable Energy Certificate (“SREC”) represents the solar renewable energy attributes

of one megawatt-hour of generation from an eligible solar generation facility certified by the Board’s Office of Clean Energy (“OCE”).

Exhibit WAA-1

William A. Atzl, Jr.

- 3 -

• Costs associated with retaining the services of a third-party to conduct the SREC 1

solicitation process. 2

• Incremental costs associated with the administration of SREC contracts entered 3

into through the solicitation process. This would include any required contractor 4

labor or incremental internal labor. 5

• Incremental costs associated with the participation in the statewide SREC 6

auction process, including any required contractor labor or incremental internal 7

labor. 8

• Costs associated with any required improvements to the Company’s 9

billing/customer information management system required to implement the SFP. 10

These costs could include capital, as well as incremental operating costs. 11

• Shareholder performance incentives. 12

All revenue and expenses associated with the SFP will be analyzed to determine the 13

net costs. The net costs will be deferred in a regulatory asset/liability account. The 14

regulatory asset/liability account also will include the shareholder incentive and 15

interest on the average over/under deferred balance. 16

Q. How will the net costs of the Company’s SFP be recovered from customers? 17

A. The Company proposes to recover the net costs associated with the SFP through a 18

RGGI Surcharge mechanism. Attachment 7 to the Company’s Petition provides a 19

proposed RGGI Surcharge tariff leaf describing the proposed mechanism. The SFP 20

component of the RGGI Surcharge (“SFP Component”) will be set annually based on 21

the Company’s forecasted net costs associated with the SFP, adjusted for any prior 22

over- or under-recoveries including interest, and a forecast of the Company’s kWh 23

deliveries to customers for the period in which the SFP Component will be in effect. 24

Exhibit WAA-1

William A. Atzl, Jr.

- 4 -

The resulting rate in cents per kWh will then be increased to reflect Sales and Use 1

Tax. 2

Q. Has the Company proposed a RGGI Surcharge mechanism in another Board 3

proceeding? 4

A. Yes. The Company proposed the implementation of a RGGI Surcharge to recover 5

costs associated with its Demand Response Program, filed with the Board on August 6

1, 2008, and its Residential Solar Energy Loan Program and Energy Efficiency Pilot 7

Program, both filed with the Board on August 28, 2008. Costs and recoveries 8

through the RGGI Surcharge associated with the SFP and each of these other 9

programs will be tracked and reconciled separately. 10

Q. How is the SFP Component designed? 11

A. The SFP Component will be designed on a cents per kWh basis, applicable equally 12

to all of the Company’s service classifications and adjusted on an annual basis. The 13

difference between the actual net costs associated with the SFP and recoveries 14

through the SFP Component will be deferred, with interest, for future recovery. 15

Interest will be included in the deferred balance for both an over-collection and for an 16

under-collection. Interest will be calculated as outlined in the Board’s Order dated 17

October 21, 2008, in Docket No. ER08060455, approving the 2008/2009 Universal 18

Service Fund and Lifeline rates. This is also consistent with the interest rate 19

methodology approved by the Board in its November 26, 2008 Order in Docket Nos. 20

ET06090630, ET07040244 and ET08040274 approving RECO’s Societal Benefits 21

Charge. 22

The initial determination of the SFP Component will be made based on a forecast of 23

net costs, excluding shareholder incentives, for the first twelve months of the 24

program. Annual updates will be based on forecasted net costs, excluding 25

Exhibit WAA-1

William A. Atzl, Jr.

- 5 -

shareholder incentives, for the succeeding twelve month intervals, plus true ups for 1

any prior period over- or under-collections and any prior year shareholder incentives. 2

For instance, assuming that the SFP Component becomes effective beginning June 3

1, 2009, the first twelve month period would begin on June 1, 2009 and run through 4

May 31, 2010. The SFP Component for this initial period would be based on a 5

forecast of net costs, excluding shareholder incentives, to be incurred during the 6

period. Filings for subsequent years would be made each March 1 based on a 7

forecast of net costs, excluding shareholder incentives, to be incurred during the 8

twelve month period beginning the following June 1, a true up of costs and 9

recoveries for the previous twelve month period, and any shareholder incentives for 10

the previous twelve month period. In the event that the initial SFP Component 11

becomes effective after June 1, 2009, the Company proposes that the initial SFP 12

Component would be designed such that it would remain in effect until May 31, 2010. 13

In subsequent years, the Company proposes that the SFP Component would 14

become effective on June 1 to coincide with the PJM Planning Year. 15

Q. Can you estimate the impact on customers’ electric bills resulting from the SFP? 16

A. No. The net costs to customers will be driven primarily by proposed pricing for 17

SREC purchases and the auction price for SREC sales. Internal and contractor 18

costs will be based on the number of participants and transaction requirements 19

associated with the agreements, which at this time are unknown. 20

Q. Does this conclude your direct testimony? 21

A. Yes. 22

ROCKLAND ELECTRIC COMPANY Attachment 7P.U.C. NO. 2 ELECTRICITY REVISED LEAF NO. 15 SUPERSEDING REVISED LEAF NO. 15

GENERAL INFORMATION

No. 30 REGIONAL GREENHOUSE GAS INITIATIVE (“RGGI”) SURCHARGE The RGGI Surcharge shall be applied to the kWh usage on the bills of all customers served under this Schedule. The RGGI Surcharge shall recover net program costs and any refund or recovery of prior period over- or under-collection balances, related to the Company’s SREC Based Financing Program. The RGGI Surcharge to be effective on and after the date indicated below shall be set at X.XXXX cents per kWh including sales and use tax (“SUT”). The difference between the actual monthly net costs associated with the SREC Based Financing Program and RGGI Surcharge recoveries will be deferred, with interest, for future recovery. Interest, calculated as determined by the Board in its Order dated October 21, 2008 in Docket Number ER08060455, will be included in the deferred balance for both an over-collection and for an under-collection. On March 1 of each year, the Company shall file with the Board the RGGI Surcharge to be effective for the twelve-month period commencing the following June 1. The RGGI Surcharge shall be set to recover any prior period over- or under-recovered balances, including interest, and to provide current recovery of the forecasted net program costs associated with the SREC Based Financing Program over the twelve-month period commencing the following June 1.

ISSUED:

EFFECTIVE:

ISSUED BY: John D. McMahon, President Saddle River, New Jersey 07458