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PSE&G Petitions BPU for Approval of Its Solar Loan III Program

August 7, 2012

Earlier this year, in an attempt to incentivize the construction of new solar projects, the New Jersey Board of Public Utilities (“BPU”) invited New Jersey’s four distribution companies to develop programs for extended term solar renewable energy certificate (“SREC”) programs. On July 31, 2012 PSE&G became the first of the distribution companies to file for approval of its proposed extended term SREC program known as the PSE&G Solar Loan III Program (the “Program”). If approved, the Program will provide solar developers with access to construction funds as well as a way to manage downside SREC risk.

The key components of the Program, as proposed, are as follows:

  • The Program will consist of 10-year loans, which can be repaid using either SRECs or cash. The interest rate will be 11.852%. The Program is open to all projects in the PSE&G service territory.
  • Each loan will include an application fee equal to $20 per kilowatt (“kW”), not to exceed $7,500, and an administrative fee equal to 4% of the total amount of the loan.
  • The three year Program is divided into the following four market segments:

i. 9.75 megawatts (“MW”) of residential projects.

ii. 14.625 MW of non-residential projects of less than 150 kW.

iii. 68.125 MW of non-residential projects larger than 150 kW and no greater than 2 MW.

iv. 5 MW of grid supply projects on municipal landfills and brownfields.

  • The value of the SRECs credited to the loan balance will be based on a solicitation for competitive bids from potential borrowers prior to the commencement of the loan. Potential borrowers will be asked to bid their proposed SREC floor price (the “Floor Price”), which initially shall not exceed $310 per SREC. The maximum Floor Price for each solicitation is subject to adjustment based on solicitation interest. The winning bidders will be eligible for a loan (subject to all eligibility requirements of the Program) and shall receive a credit against the outstanding balance of their loan equal to the greater of the then market price or the Floor Price for each SREC generated by the project, less a $10 per SREC processing fee. PSE&G will conduct an annual “true-up” requiring the borrower to pay the difference between the amounts received from the borrower (in either cash or SRECs) and 90% of the loan payments actually due for such year.
  • In an effort to reduce the near term supply of SRECs, the SRECs obtained by PSE&G in connection with the Program will be held until Energy Year 2016 (which commences on June 1, 2015), at which time they will be sold into the market.
  • Following repayment of the loan, PSE&G will retain an option to purchase any SRECs generated by a non-residential project at 50% of its then market value.
  • The size of the loan will be based on projected income generated from the accepted bid Floor Price.

For more information, please contact:
Stephen A. Kisker
Chair, Renewable Energy and Sustainability Group | (973) 530-2074 |
Robert H. Crespi
Member of the Firm | (973) 530-2060 |
John G. Valeri, Jr.
Member of the Firm | (973) 530-2030 |
Michelle A. Schaap
Member of the Firm | (973) 530-2026 |