Members of CLC - CVEC

June 23, 2014

To: All Municipal Members of the Cape Light Compact and Cape & Vineyard Electric Cooperative; Other Interested Parties

Re: Attorney General's Motion to Compel Testimony from the Cape Light Compact After CLC's Stonewalling Response Under DPU 14-69
Dear All,

The Massachusetts Office of the Attorney General -- Office of Ratepayer Advocacy, has filed a Motion to Compel testimony from CLC with the DPU on June 20, 2014, in response to CLC's insistence that none of the AG's questions about CLC are relevant to CLC's Petition for Approval by the DPU of the proposed CLC Revised Aggregation Plan.

The Motion can be accessed here under the DPU docket 14-69 for the CLC proceedings:

http://web1.env.state.ma.us/DPU/FileRoomAPI/api/Attachments/Get/?path=14-69%2fAG_MotionCompel_and_Brief.pdf

A copy of the Cape Light Compact's initial stonewalling response to the AG's first set of information requests is attached and also available under DPU docket 14-69 here: http://web1.env.state.ma.us/DPU/FileRoom/dockets/bynumber

One of the central questions from the AG -- which is front and center in the AG's new Motion to Compel testimony from CLC -- is whether the mil adder surcharge for the Power Supply Reserve Fund (recently redefined and rechristened by CLC as the "Operational Adder") "is a valid fee or an improper tax."

The mil adder surcharge was included in CLC's original Aggregation Plan as a back stop provision to provide a limited and finite financial surety against unforeseen adverse events (such as a failure by the power supplier to perform under the terms of the power supply contracts).  This why all proceeds were to be deposited in the Power Supply Reserve Fund and the receipts were to be collected for a limited time period.

CLC changed these original terms through amendments to its power supply contracts and inserted new language through which CLC granted to itself the authority to use these funds for the original purpose or for any other purpose, at the discretion of the CLC Governing Board, creating an unrestricted pool of funds.  Then as CLC decided to move forward with the formation of CVEC, CLC secretly doubled the amount of funds it collected from ratepayers, from approximately $500,000 per year to approximately$1 million per year.

CLC has used the mil adder funds (now the "Operational Adder") for a wide variety of purposes, including: 1) the transfer to CVEC of $3.7 million in cash; 2) the provision of a $100,000 cash escrow to guarantee various CVEC obligations; 3) a revolving line of credit to CVEC in the amount of $100,000 to fund the working capital shortfalls created by a timing mismatch in receipts and payments of net metering credits on CVEC / Municipal Member PV projects; 4) the payment of legal fees for wind energy projects in Orleans and Yarmouth; 5) the payment of legal fees for the Town of Sandwich; 6) the speculative purchase of Renewable Energy Credits from several parties, including the Town of Falmouth (generated by the Falmouth wind turbines); and other uses.

The Cape Light Compact had also approved the use of these mil adder funds to support CVEC's declared (but ultimately abandoned) "litigation strategy" of applying to the Department of Public Utilities for a permit exemption for the Brewster Wind project.  It was CVEC's declared intention in the spring of 2011 to obtain a local permit exemption from the DPU in order to overcome the denial by the Brewster Planning Board of a special permit to install two 410 foot wind turbines in Brewster and to construct the project against the will of the local planning board.  CVEC estimated the prospective cost of these legal proceedings to be several hundred thousand dollars.  

The CVEC "litigation strategy" to overcome the permit denial of the Brewster Planning Board was abandoned when the Brewster BoS failed to win support from voters for its proposal that the BoS be granted authority to install wind turbines "by right" on the same parcel of  land, without a special permit, effectively bypassing the Brewster Planning Board.   This proposed Warrant Article failed to pass at a Brewster Town meeting in April of 2011. 

As an alternative, the Town of Brewster decided to pursue a massive PV project on the same sight with additional financial support provided by the Cape Light Compact, from mil adder funds collected from CLC ratepayers, using CVEC as a conduit, after these funds had been provided by CLC to CVEC in the form of a series of unrestricted, non-recourse cash donations to CVEC.

Much of the information requested by the Office of the Attorney General is also "relevant to whether the Cape Light Compact's aggregation program provides equitable treatment of customers and whether the Cape Light Compact's revised municipal aggregation plan fully and accurately describes the Cape Light Compact's power supply program."

It is clear from CLC's reluctance, and/or outright refusal, to provide information in response to the Attorney General's first set of Information Requests that the CLC does not want explore these questions in detail.

Of course, these are precisely the questions that members of the public and various public bodies, including the Assembly of Delegates and the Special Committee of Inquiry on the Cape Light Compact and the Cape & Vineyard Electric Cooperative, have attempted to explore in response to a disturbing flow of information that makes it evident that the treatment of various classes of ratepayers in the CLC aggregation has been grossly inequitable.

The response of the DPU will provide a key indication as to whether the DPU is willing to accept the stubborn insistence by CLC that its Aggregation Plan is nothing more than a static document -- an initial application for a permit -- and that CLC is essentially not accountable to anyone, other than to the CLC Governing Board.