(P.S. 1519)

ACT NO. 82

JULY 19, 2010

To create the “Puerto Rico Energy Diversification through Sustainable and Alternative

Renewable Energy Policy Act;” lay down rules to foster the generation of renewable

energy, in accordance with short-, medium-, and long-term compulsory goals, known as

the Renewable Portfolio Standard; create the Puerto Rico Renewable Energy

Commission as the identity in charge of overseeing compliance with the Renewable

Portfolio Standard hereby established and clarify its duties; clarify the duties of the

Administration of Energy Affairs in relation to the Commission and the Renewable

Portfolio Standard; and other related purposes.

PRELIMINARY RECITALS

Puerto Rico, as many other jurisdictions, is facing an energy crisis that affects us all. That

is why we need to establish concrete measures to deal with this problem and foster the

diversification of energy production in Puerto Rico, establishing long-term energy conservation

and stability. To achieve such diversification, we need to draw up a new energy strategy for

Puerto Rico, along with rules to foster the generation of sustainable renewable energy, in

accordance with short-, medium-, and long-term compulsory goals, through a Renewable

Portfolio Standard.

Puerto Rico currently produces nearly seventy percent (70%) of its electric power from

oil. The cost of oil increases every year, and estimates are that it will continue to increase.

Moreover, the excessive use of oil-derived energy sources contributes to the volatility of energy

prices in our jurisdiction and to the climate change phenomenon that greatly concerns Puerto

Ricans. Though climate change is a global phenomenon, our current energy policy undoubtedly

contributes to it. Thus, the Government of Puerto Rico has the obligation to create the necessary

conditions for future generations to be able to progress and develop in a healthy environment,

while creating both the necessary tools to stabilize energy prices and new sources of economic

development.

The Government’s obligation to foster Puerto Rico’s sustainable development is not a

new matter. On the contrary, it is set forth in the very Constitution of Puerto Rico adopted in

1952. Section 19 of Article VI of the Constitution provides that: “[I]t shall be the public policy of

the Commonwealth of Puerto Rico to conserve its natural resources as efficiently as possible and

to develop and utilize them to their full potential for the general benefit of the community...”

Although this constitutional principle has served as a basis for various government programs and

measures, a lack of concrete objectives to guide us toward achieving this goal has left Puerto

Rico lagging behind in terms of energy policy. The reality is that we are not exploiting or

developing our natural resources to their full potential for the overall benefit of our community.

The reasons for this are not unknown.

Puerto Rico’s energy policy has remained one-dimensional over the past sixty (60) years.

This is one of the reasons energy costs on the island are among the highest and most volatile, in

comparison with other jurisdictions. Puerto Rico has no control over the price of fossil fuels.

Thus, our economy is subject to the constant fluctuation of world market prices and to the flight

of local capital to purchase such fuels. In fact, it is estimated that the current cost of electric

power in Puerto Rico is twice as high as the average cost of electricity in the rest of the United

States, and that the average Puerto Rican pays approximately twenty (20) cents per kilowatt-hour

(kWh). Furthermore, it has been determined that this increase in the cost of electricity that Puerto

Rico has experienced is primarily due to a rise in the cost of petroleum-derived fossil fuels.

The high cost and instability of energy is not only detrimental to our quality of life and

our environment, but also to our economic competitiveness, as it increases the cost of doing

business in Puerto Rico. It is estimated that every dollar increase in the price of fossil fuel per

barrel results in a flight of capital of seventy million dollars ($70,000,000) from our economy

every year. The fact that our great dependence on oil makes the economy of the Nation to which

we belong dangerously vulnerable, given energy instability, flight of capital, climate change, and

a greater risk of attacks from U.S. enemies is of concern to other states also. That is why the

President of the Unites States, Barack Obama, has pledged to invest $150 billion dollars in

sustainable renewable energy technology over the next decade. It is estimated that this will

generate five (5) million direct and indirect jobs for the U.S. economy in upcoming years. In

Puerto Rico’s case, we estimate that if we increase sustainable and alternative renewable energy

production, pushing new legislation such as this one, we will be able to create a robust, new

renewable energy industry and thousands of new direct and indirect jobs.

Renewable Portfolio Standard

At present, twenty-nine (29) states, along with Washington DC, have adopted the concept

of the renewable portfolio standard, while five (5) other states have set “renewable energy goals”

that they have pledged to fulfill. Compulsory goals to reduce the use of conventional energy and

increase the use of renewable energy are known as a “Renewable Portfolio Standard,” or “RPS.”

In fact, the United States Congress is evaluating legislation that, if passed, would establish a

nationwide renewable portfolio standard. Pursuant to this, and in order to take the preventive

measures necessary to ensure compliance on our part, this Act establishes a system of goals

similar to those currently proposed in the Renewable Portfolio Standard that may be imposed by

the federal government. In order to achieve an energy policy rooted in the principles of

sustainable development, many countries have adopted policies that promote the use of

sustainable and alternative renewable energy sources and establish the specific percentages of

renewable energy that companies selling electricity must produce or consume.

In keeping with this trend, this Act creates for the first time in Puerto Rico a Renewable

Portfolio Standard and lays down specific requirements and percentages of electricity from

sustainable and alternative renewable energy sources that the Puerto Rico Electric Power

Authority (PREPA) and other retail energy providers must provide over the next twenty-five (25)

years. The purpose being to achieve a twenty percent (20%) sustainable renewable energy

production in Puerto Rico and to dramatically reduce our dependence on fossil fuels for energy

consumption. Furthermore, this shall open the path for the “Puerto Rico: Green Island” initiative,

which seeks to establish and implement Puerto Rico’s new energy policy, the fundamental aim

of which is energy source diversification and conservation. This shall guarantee affordable,

viable, reliable, stable and sustainable energy production in our jurisdiction, while creating

“green jobs” and helping to preserve the environment.

To this end, the members of the Energy Policy Committee (“EPC”) created by Governor

Luis G. Fortuño, through Executive Order of July 21, 2009 (Administrative Bulletin No. OE-

2009-23) reached a unanimous agreement on a proposed renewable portfolio standard and

defined the minimum percentage of renewable energy to be produced in Puerto Rico over the

next decades. The EPC did this in compliance with its assigned task of preparing and

recommending to the Governor a proposed renewable portfolio standard with specific goals and

metrics to diversify energy sources. Thus, the EPC agreed that the percentages of sustainable

renewable energy to be produced in Puerto Rico shall be twelve percent (12%) by 2015 and

fifteen percent (15%) by 2020. This is without a doubt an unprecedented achievement for Puerto

Rico.

The aforementioned proposal, as well as the other components of this Act, shall be

implemented by the Puerto Rico Renewable Energy Commission, and the Administration of

Energy Affairs shall act at the operational arm of the Commission and shall implement the

Commission’s decisions, determinations, orders, resolutions and regulations. The Commission

shall be comprised of seven (7) members, namely, the Executive Director of the Administration

of Energy Affairs, the Secretary of the Department of Economic Development and Commerce,

the Chairman of the Government Development Bank, the Secretary of the Treasury, the

Chairman of the Planning Board, one (1) representative of academia and one (1) representative

of the private sector. The representatives of academia and the private sector shall be nominated

by the Governor of Puerto Rico, with the advice and consent of the Puerto Rico Senate, and shall

have a four (4) year tenure. The Commission shall be chaired by the Executive Director of the

Administration of Energy Affairs. All of the aforementioned officials shall be appointed ad

honorem.

As in the case of many other states, adopting a Renewable Portfolio Standard will benefit

Puerto Rico in more than one way. Such a standard will allow us to establish an energy policy

less susceptible to fuel cost fluctuations, which would otherwise be impossible as long as fossil

fuels and oil derivatives continue to dominate our energy production. Using more renewable

energy sources to produce electricity and foster greater conservation will allow us to better

stabilize our energy prices. It will also allow us to import less oil for our energy consumption,

and thus reduce the tragic flight of capital from our economy. Furthermore, this will lead to the

creation of more jobs in Puerto Rico. One of the major costs associated with the production of

electricity through renewable sources is the cost of the equipment and the costs associated with

the maintenance and operation thereof. The fact that these costs are more predictable and stable

allows us to guarantee more stable prices over long periods of time.

Moreover, reducing our dependence on petroleum-derived fuels to produce energy entails

benefits that go beyond our economy. The production of electricity through alternative and

sustainable renewable energy sources yields benefits that are of great value for all of our citizens.

It reduces air pollution and mitigates the adverse effects of pollution on the health of our citizens.

In addition, renewable energy production creates clean energy, green jobs and greater social and

environmental benefits for the wellbeing of Puerto Rico.

Renewable Energy Certificates

Another mechanism that will be used to implement Puerto Rico’s new energy policy is

Renewable Energy Certificates (“RECs”). As defined in this Act, a REC represents the

equivalent of one (1) megawatt hour (MWh) of electricity generated by a source of sustainable or

alternative renewable energy (issued and registered in accordance herewith) and, in turn,

comprises all the environmental and social attributes of such energy. RECs shall be one of the

instruments utilized to verify that retail energy providers comply with the provisions of this Act.

Another objective of this new Act is to give residents of Puerto Rico the opportunity to

participate in the REC- and renewable-energy market currently existing in the rest of the United

States. RECs shall be marketable and negotiable in Puerto Rico and abroad. Therefore, REC

issuance has an economic value for anyone acquiring, marketing or negotiating them.

Furthermore, the need to comply with certain sustainable renewable energy percentages to

produce electricity is another mechanism used to foster the establishment of businesses that

produce electricity through renewable sources, which will create jobs and boost a new market for

the economic development of Puerto Rico.

This Act is also adopted in preparation for, and anticipation of, the legislative bills being

considered by the United States Congress, which are expected to result in the establishment of a

federal Renewable Portfolio Standard and a system to reduce and control carbon dioxide (CO2)

and other Green House Gas (GHG) emissions. Pursuant to this, but as opposed to the national

renewable portfolio standard currently being considered by the United States Congress, the

Renewable Portfolio Standard created by this Act provides for the use of sustainable and

alternative renewable energy sources to fulfill its purposes. Sources classified under this Act as

“sustainable renewable energy sources” are energy sources that will be needed to show

compliance with the national renewable portfolio standard, if passed by the U.S. Congress.

Sources classified under this Act as “alternative renewable energy sources” are additional

sources of energy that may be used to show compliance with the Renewable Portfolio Standard

in Puerto Rico, and not with the renewable portfolio standard that may be passed by the United

States Congress in the future. The only reason a distinction is made herein between what is

considered to be a sustainable renewable energy source and what is considered to be an

alternative renewable energy source is to establish a difference between energy produced from

sources that can be used to show compliance with both renewable portfolio standards and energy

produced from sources that can only be used to show compliance with the Puerto Rico

Renewable Portfolio Standard. In short, energy production from any of these sources is in

keeping with Puerto Rico’s energy policy, and the distinction between the two only seeks to

classify energy sources that can be counted in Puerto Rico to show compliance with a national

renewable portfolio standard, should one be enacted in the future.

BE IT DECREED BY THE PUERTO RICO LEGISLATURE:

CHAPTER 1

PRELIMINARY PROVISIONS

Article 1.1.-Short Title.-

This Act shall be known as the “Puerto Rico Energy Diversification through Sustainable

and Alternative Renewable Energy Policy Act.”

Article 1.2.-Statement of Policy.-

The Government of Puerto Rico hereby establishes as public policy that we must

diversify our sources of electricity and energy technology infrastructure, by reducing our

dependence on energy sources derived from fossil fuels, such as oil; reduce and stabilize our

energy costs; control the volatility of the cost of electricity in Puerto Rico; reduce the flight of

capital caused by fossil fuel imports; preserve and improve our environment, natural resources

and quality of life; and promote energy conservation and social well-being, through several

mechanisms, including the establishment and achievement of goals within a mandatory timetable

and through economic and tax incentives to stimulate efforts to generate electric power through

sustainable and alternative renewable energy sources. In order to achieve this, the Government of

Puerto Rico hereby adopts a Renewable Portfolio Standard in the form of a compliance schedule

that shall apply to any and all retail energy providers in Puerto Rico.

Article 1.3. -Interpretation.-

The provisions of this Act shall be interpreted liberally, so as to implement the public

policy set forth in Article 1.2 and ensure compliance with the Renewable Portfolio Standard

created hereunder.

Article 1.4. -Definitions.-

For purposes of this Act, the following terms or phrases shall have the meanings set forth

below, except when clearly stated otherwise, and terms used in the singular shall include the

plural and vice versa:

1) “Renewable Energy Purchase Agreements” - means agreements to purchase electricity

produced by a source of sustainable or alternative renewable energy source. These

agreements may, but shall not necessarily, include the purchase of RECs, as defined, that

are the product of the energy generated by the sustainable or alternative renewable energy

producer, either for a stipulated amount or pursuant to a pre-established, indexed fee for a

pre-established long-term period.

2) “Administration” - means the Administration of Energy Affairs.

3) “Environmental and Social Attributes” - means, for purposes of this Act, all the qualities

and properties of RECs that are inseparable and include benefits to nature, the

environment and society, resulting from the generation of sustainable or alternative

renewable energy, but excluding energy attributes, as defined. For purposes of this Act,

“environmental and social attributes” includes, but is not limited to, the reduction of air

pollutants, such as carbon dioxide and other gas emissions that produce the greenhouse

effect.

4) “Energy Attributes” - for purposes of this Act, refers to the benefits of producing

electricity (measured in units or fractions of a megawatt-hour (MWh)), through a

sustainable or an alternative renewable energy source, including the use or consumption

of electricity, the stability of the grid, and the capacity to produce and contribute to

Puerto Rico’s electrical power system.

5) “Authority” - means the Puerto Rico Electric Power Authority.

6) “Renewable Biomass” - means any organic or biological material derived from

organisms that have the potential to generate electricity, such as wood, waste, and alcohol

fuels. This includes natural biomass, which occurs naturally without human intervention,

and residual biomass, which is the by-product or waste generated by farming, forestry

and livestock activities, as well as the solid waste produced by the food and agriculture

industry, and the wood processing industry; for purposes of this Act, it also includes any

biomass similar to the biomasses described above, as may be designated by the

Administration.

7) “Renewable Portfolio Standard” - means the mandatory percentage of sustainable or

alternative renewable energy required of any retail energy provider, as established in

Chapter 2 of this Act.

8) “Renewable Energy Certificate” or “REC” - is a personal asset that is a tradable good or

security that can be bought, sold, assigned and transferred between individuals for any

lawful purpose, and as a whole, indivisible asset, it is equivalent to one (1) Megawatt-

hour (MWh) of electricity generated by a source of sustainable or alternative renewable

energy and, in turn, comprises all the environmental and social attributes defined herein.

9) “Commission” - means the Puerto Rico Renewable Energy Commission created in this

Act.

10) “Smart Meter” - means a telemetering device that measures energy production and/or

consumption more accurately and in greater detail than a conventional meter and

communicates detailed information through a wired (or wireless) network to the

Authority and/or the renewables registry, for purposes of tracking, billing or

communicating energy data.

11) “Municipal Solid Waste” - means non-hazardous solid waste generated in single-family

and multi-family residences, camping or recreational areas, offices, industries, businesses

and similar establishments, as a result of basic human and animal activities, specifically

including garbage, human sanitary waste, and other similar waste, as designated by the

Puerto Rico Solid Waste Authority.

12) “Executive Director” - means the Executive Director of the Administration of Energy

Affairs.

13) “Qualified Hydropower” - means the energy produced by: (i) an increase in efficiency or

in production capacity, achieved at a hydroelectric facility built prior to the effective date

of this Act, or (ii) a hydroelectric facility built after the effective date of this Act.

14) “Alternative Renewable Energy” - means energy derived from the following sources:

a. conversion of municipal solid waste;

b. combustion of gas derived from a landfill system;

c. anaerobic digestion;

d. fuel cells; and

e. any other energy that the administration may define in the future as alternative

renewable energy.

15) “Distributed Renewable Energy” – means sustainable or alternative renewable energy

that supplies electricity to a retail energy provider through a net metering program and

that has up to a one (1) megawatt (MW) capacity.

16) “Sustainable Renewable Energy” - means energy derived from the following sources:

a. solar energy;

b. wind energy;

c. geothermal energy;

d. renewable biomass combustion;

e. combustion of gas derived from renewable biomass;

f. combustion of biofuels derived exclusively from renewable biomass;

g. qualifying hydroelectric energy;

h. marine and hydrokinetic renewable energy, as this term is defined in Section 632 of

the “United States Energy Independence and Security Act of 2007,” Pub.L. 110-140,

42 U.S.C. § 17211);

i. oceanic thermal energy;

j. any other clean or renewable energy subsequently defined as renewable energy by the

Administration, through regulations or an order.

17) “Green Energy” - the term “green energy” jointly includes the terms “sustainable

renewable energy” and “alternative renewable energy.”

18) “Sustainable Renewable Energy Source" - means any source of electricity that produces

electrical power by using sustainable renewable energy, as defined in this Act.

19) “Alternative Renewable Energy Source” - means any source of electricity that produces

electrical power by using alternative renewable energy, as defined in this Act.

20) “Force Majeure” – means an event that cannot be foreseen, and if foreseen, cannot be

avoided, and includes exceptional events caused by nature itself, such as: earthquakes,

floods and hurricanes (i.e., “Acts of God”), and events that are caused by the actions of

Man, for example, riots, strikes, and wars, among others.

21) “Operator” - means any person who controls or manages a sustainable renewable energy

source, an alternative renewable energy source or a retail energy provider.

22) “Reconciliation Period” - means the sixty (60) day period following the last day of the

calendar year that just concluded, during which a retail energy provider may acquire

RECs to meet the standards imposed by the Renewable Portfolio Standard applicable to

said calendar year.

23) “Person” - means any individual, partnership, company, association, corporation, public

corporation or entity under the jurisdiction of the Commission or the Administration. The

term “person” specifically includes, but is not limited to, any sustainable renewable

energy producer, alternative renewable energy producer, retail energy provider,

distributed renewable energy producer and the Authority.

24) “Cell Fuel” - means any electrochemical system in which energy from a chemical

reaction is converted directly into electricity.

25) “Distributed Renewable Energy Producer” - means any operator of a distributed

renewable energy source, as defined in this Act.

26) “Sustainable Renewable Energy Producer” - means an operator of a sustainable

renewable energy source that generates and sells electricity and has a capacity greater

than one (1) megawatt (MW) of electricity.

27) “Alternative Renewable Energy Producer” - means an operator of an alternative

renewable energy source that generates and sells electricity and has a capacity greater

than one (1) megawatt (MW) of electricity.

28) “Retail Energy Provider” - means the Electric Power Authority and any other retail

energy provider that sold more than fifty thousand 50,000 megawatt-hours (MWh) of

electricity to consumers in Puerto Rico during the preceding calendar year. For purposes

of determining whether a person is a retail energy provider, the Puerto Rico retail energy

sales of any affiliate of such person shall be also be taken into account. Any company

that controls or manages, is controlled or managed by, or is subject to common control or

management by, a retail energy provider shall be considered an “affiliate.” The term

retail energy provider does not include an energy producer whose energy is destined for

resale, a sustainable renewable energy or alternative renewable energy producer, or a

distributed renewable energy producer.

29) “Renewables Registry” - means the North American Renewables Registry (“NAR”),

which manages an electronic platform that issues serialized Renewable Energy

Certificates (“RECs”) for sustainable and alternative renewable energy sources where

registered sources can create and manage their individual accounts, and count and

transfer RECs, or any other registry established or authorized by the Commission to

count and transfer RECs in Puerto Rico.

CHAPTER II

RENEWABLE PORTFOLIO STANDARD

Article 2.1. -Applicability.-

This chapter, along with the orders, resolutions and regulations issued or promulgated by

the Puerto Rico Renewable Energy Commission or the Administration of Energy Affairs in order

to enforce the purposes established herein shall apply to any person required to comply with the

Renewable Portfolio Standard, whether under federal or local laws and/or regulations, retail

energy providers, sustainable renewable energy producers, alternative renewable energy

producers, and distributed renewable energy producers, as defined hereunder, and to any person

who buys, sells, or otherwise transfers a Renewable Energy Certificate (“REC”) issued in

accordance with the provisions of this Act.

Article 2.2. -Creation of the Puerto Rico Renewable Energy Commission.-

(a) The Puerto Rico Renewable Energy Commission (the “Commission”) is hereby

created as the entity in charge of enforcing, managing and overseeing the Renewable

Portfolio Standard established hereunder. The Commission shall be comprised of

seven (7) members, of which five (5) shall represent the government sector, one (1)

the academia and one (1) the private sector. The five (5) members who shall represent

the government shall be the Executive Director of the Administration of Energy

Affairs (“Executive Director”), the Secretary of the Department of Economic

Development and Commerce, the Chairman of the Puerto Rico Government

Development Bank, the Secretary of the Treasury and the Chairman of the Planning

Board. Each of these officials may delegate to an authorized representative the

Commission’s responsibility to participate in meetings and make decisions. The

Commission shall be chaired by the Secretary of the Department of Economic

Development and Commerce. Each of the officials mentioned in this paragraph shall

be appointed ad honorem.

The representative of academia must be well-known in the field of renewable energy

and the academic world and will be appointed by the Governor of Puerto Rico, with

the advice and consent of the Puerto Rico Senate. The appointment shall be for a four

(4) year term during which the member shall perform his duties ad honorem.

The representative of the private sector must have ample knowledgeable in the field

of renewable energy and will be appointed by the Governor of Puerto Rico with the

advice and consent of the Puerto Rico Senate. The appointment shall be for a four (4)

year term during which the member shall perform his duties ad honorem.

(b) Quorum for a plenary session of the Commission shall consist of five (5) Commission

members. All actions carried out by the Executive Director or any of the members

shall be subject to review by the full Commission. The Commission’s final decisions

and/or resolutions shall be taken, issued by a majority of the quorum and shall be

subject to review by the Puerto Rico Court of Appeals.

(c) Unless otherwise provided by regulation, the Executive Director shall preside over all

Commission meetings; be in charge of all administrative operations; and represent the

Commission in all matters pertaining to legislation and legislative reports. Unless

otherwise provided by regulation, the Executive Director shall also represent the

Commission when conferences or communication with other heads of agencies of the

Government of Puerto Rico are required.

(d) Commission members may not enter into any type of a contractual relationship with

persons that are under the jurisdiction of the Commission, or entities in Puerto Rico

or abroad affiliated with such persons. Members of the Commission may not, once

their duties have ceased, represent any person or entity before the Commission in

relation to any matter in which he participated in his capacity as member of the

Commission and, for two (2) years after leaving office, when dealing with any other

matter. Members of the Commission and their authorized representatives shall always

act in accordance with the Government Ethics Act, Act No. 12 of July 24, 1985, as

amended, and any regulations enacted there under.

(e) The Commission shall have the power to enact any regulations necessary to govern its

internal operations, and other activities under its jurisdiction.

(f) The Commission’s orders, resolutions, regulations, decisions and determinations shall

be implemented by the Administration, which shall act as the operational arm of the

Commission.

Article 2.3. -Renewable Portfolio Standard.-

(a) For every calendar year between 2015 and 2035, any and all retail energy providers

must submit to the Commission evidence of their compliance with the Renewable

Portfolio Standard applicable under subsection (b) of this Article.

(b) For every calendar year between 2015 and 2035, the Renewable Portfolio Standard

applicable to any and all retail energy providers shall consist in the following

minimum percentage:

Year Compulsory Renewable Energy Percentage (%)

2015 to 2019 ………………………. 12.0%

2020 to 2027……………………….. 15.0%

For the period between 2028 and 2035, providers shall establish a progressive plan

stipulating the annual percentages for this period, which must reach twenty (20) percent

by 2035.

(c) For every calendar year between 2015 and 2035, the minimum sustainable or

alternative renewable energy percentage applicable to any and all retail energy

providers shall be the percentage established for every calendar year, as expressed in

subsection (b) of this Article. The compulsory amount of sustainable or alternative

renewable energy applicable to a retail energy provider in a given year is obtained by

multiplying the percentage for the year, as listed in subsection (b) of this Article, by

the total amount of electric power, expressed in megawatt-hours (MWh) sold by the

retail energy provider in the same calendar year.

(d) As necessary in order to comply with a renewable portfolio standard imposed by

federal legislation and/or regulations, the Commission may limit, through regulations,

the percentage of alternative renewable energy that a retail energy provider can use to

show compliance with the Renewable Portfolio Standard applicable to every calendar

year.

(e) For purposes of showing compliance with this Article, the amount of electricity sold

during a calendar year by a provider of energy produced at a non-qualified

hydroelectric facility shall not count as part of the total volume of electricity sold by

the retail energy provider for that year.

(f) Everything pertaining to setting wheeling fees shall be done in accordance with the

provisions of Act No. 73 of 2008.

Article 2.4. -Powers and Duties of the Commission.-

The Commission shall be in charge of implementing this Act, for which it may use

resources and personnel of the Administration. The Commission shall have any and all powers

necessary and convenient to fully comply with the purposes of this Act, specifically including,

but not limited to, the following:

(a) Requiring that a sustainable or alternative renewable energy source be registered in

the renewables registry.

(b) Requesting and obtaining from any person under its jurisdiction any information

necessary and relevant to fully carry out and implement the objectives of this Act,

including Electric Power Authority meter readings for purposes of registration in the

renewables registry.

(c) Requiring, through regulations, that any and all retail energy providers, sustainable or

alternative renewable energy producers be registered with the Commission.

(d) Establishing, through regulations, REC documentation, registration and verification

requirements.

(e) Developing and implementing strategies designed to directly or indirectly fulfill the

objectives of this Act, including that of fulfilling the goal to reduce and stabilize

energy costs and control the volatility of electricity prices in Puerto Rico, in order to

benefit citizens in general.

(f) Limiting, through regulations, the percentage of alternative renewable energy that a

retail energy provider can use to show compliance with the Renewable Portfolio

Standard, as necessary to ensure compliance with any compulsory goal or renewable

portfolio standard imposed by federal legislation and/or regulations.

(g) Filing, on its own behalf, lawsuits, claims or causes of action before the Court of First

Instance, or any other administrative body of the Commonwealth of Puerto Rico,

against any individual or legal entity that fails to comply, or interferes, with the

requirements, purposes and objectives of this Act.

(h) Issuing cease and desist orders against anyone, so as to enforce the requirements,

purposes and objectives of this Act, including, but not limited to, the Renewable

Portfolio Standard, and resorting directly to the Commonwealth of Puerto Rico Court

of First Instance to require such compliance.

(i) Contracting or subcontracting, for any lawful purpose aimed at complying with the

public policy established hereunder and performing specialized tasks, without

abdicating its governmental function and responsibility, the professional services of

consultants, economists, renewables registries, lawyers, among others, so as to

receive assistance in performing its governmental function.

(j) Submitting reports on the implementation of the public policy established hereunder

to the Puerto Rico Legislature.

(k) Enacting, amending or repealing regulations, in accordance with the provisions of this

Act and the procedures laid down in Act No. 170 of August 12, 1988, as amended,

known as the “Uniform Administrative Procedure Act.”

(l) Exercising any formal, informal and/or adjudicative quasi-judicial powers necessary

or convenient to fulfill its duties, including the power to impose fines, upon proper

notification and after holding the pertinent hearing, as well as any other

administrative relief, as long as it fully meets the requirements set forth in Act No.

170 of August 12, 1988, as amended, known as the “Uniform Administrative

Procedure Act.”

(m) Taking any action necessary to ratify the imposition and/or ensure the fulfillment of

any other compulsory goal in accordance with a Renewable Portfolio Standard

imposed by federal legislation and/or regulations.

Article 2.5. -Powers and Duties of the Administration.-

In addition to the powers delegated to the Administration by other laws, the

Administration shall have the following powers in order to fully comply with the purposes of this

Act:

(a) Buying, selling, and otherwise legally transferring REC ownership.

(b) Enacting regulations to add, eliminate or reclassify energy sources as sustainable or

alternative renewable energy sources, so that they are in keeping with the compulsory

goals or renewable portfolio standards imposed by federal laws and/or regulations.

(c) Issuing declaratory resolutions to determine whether a proposed energy source would

qualify as a sustainable renewable energy source or an alternative renewable energy

source.

(d) Requiring that persons interested in building energy sources file a declaratory

resolution application.

(e) Developing and offering financing options and special incentives for the development

of sustainable and alternative renewable energy sources.

(f) Developing and offering financing options and special incentives to allow providers to

exceed the applicable Renewable Portfolio Standard prior to the period scheduled

hereunder.

(g) Preparing systematic analyses of sustainable renewable energy programs and

evaluating analyses made by other government agencies, and recommending

programs designed to fulfill the objectives of this Act.

(h) Designing and recommending specific proposals for electricity conservation.

(i) Assisting persons, agencies and public and/or private corporations under its

jurisdiction in implementing electricity conservation and efficiency programs.

(j) Requesting any information pertaining to electricity conservation measures designed,

implemented, used or proposed by a retail energy provider to achieve electricity

conservation.

(k) Certifying sustainable or alternative renewable energy projects and making

recommendations about the location, equipment and structures used in production,

transmission lines, and any other component of a green energy system to be

developed.

(l) Enacting, amending or repealing regulations, in accordance with the provisions of this

Act and the procedures laid down in Act No. 170 of August 12, 1988, as amended,

known as the “Uniform Administrative Procedure Act.”

(m) Implementing the decisions, determinations, orders, resolutions and regulations of

the Commission.

(n) Entering into agreements with entities that have similar aims as the ones set forth

hereunder and that have experience and human resources, technicians and

laboratories specialized in the energy field, so as to assist and advise the

Administration in performing its duties.

Article 2.6. Declaratory Resolutions.-

At the request of one or more persons interested in building an energy source, the

Administration shall issue declaratory resolutions to determine and declare whether an energy

source proposed by the person or group of persons would be classified as a sustainable

renewable energy or alternative renewable energy source once built. In addition, the

Administration may require, by order, a person interested in building an energy source to file a

declaratory resolution application. The Administration shall ensure that goals to reduce and

stabilize energy costs and control the volatility of electricity prices in Puerto Rico are strictly

fulfilled to the benefit of the citizens of Puerto Rico.

Municipalities may establish renewable energy projects and, if interested, they may ask

the Administration to declare them as a renewable energy source, in accordance with the terms of

this Act.

Article 2.7. –REC Issuance and Certification.-

The Commission shall require that RECs be issued to sustainable and alternative

renewable energy producers by using a renewables registry, as defined in this Act. For REC

issuance, sustainable and alternative renewable energy producers shall maintain an agreement

with the pertinent retail energy provider or grid managing entity to read production through

meters. The retail energy provider or grid manager shall send to the renewables registry

production data for every sustainable or alternative renewable energy producer, in accordance

with the provisions of the regulations adopted by the Commission.

Any retail energy provider that also produces sustainable and/or alternative renewable

energy shall be required to prove to the renewables registry that these functions are independent

from one anther.

Article 2.8. REC Characteristics and Market.-

(a) It is hereby declared that a REC is a personal asset that is a tradable good or security

that can be bought, sold, assigned and/or transferred between persons for any lawful

purpose.

(b) The RECs annually issued by a renewables registry hereunder shall indicate the total

megawatt-hours (MWh) of energy generated from a sustainable or an alternative

renewable energy source, the year in which the energy was generated, and the name

of the source that generated the energy. The title to any issued REC shall belong to

the energy source that generated the electricity until such title is sold, assigned or

otherwise lawfully transferred. Once a REC is presented to show compliance with the

Renewable Portfolio Standard, the Commission shall withdraw and cancel such REC.

(c) A REC market is hereby established to facilitate compliance with the Renewable

Portfolio Standard set forth hereunder. Any REC owner shall have the right to

negotiate, market, advertise, sell and otherwise lawfully transfer or assign his title to

the REC. The Office of the Commissioner of Financial Institutions of Puerto Rico

shall not have jurisdiction to regulate this market in any way.

Article 2.9. –REC Processing by the Commission and the Administration. -

The Commission and the Administration may establish, for every processed REC, a

reasonable processing fee to be paid by the REC owner. Such processing fee may be included in

the value of every processed REC. Any income derived from processing fees shall be used to

perform any and all necessary and appropriate actions to ensure the fulfillment of the aims and

purposes of this Act.

The minimum value of an REC shall be the value provided on the national market at the

time the REC is legally traded.

Article 2.10. - Counting and Controlling Sustainable and Alternative Renewable Energy

Production.-

(a) The Commission shall count and control any and all energy produced from

sustainable and alternative renewable energy sources located in Puerto Rico in the

most efficient manner technically and financially feasible, including the cyber

network to which these sources will be connected, when physically and technically

possible, through smart meters installed in the interconnected systems of the

Authority or other retail energy provider in Puerto Rico, and/or through payments by

the Authority or other retail energy provider in Puerto Rico to sources with which

they have renewable energy purchase agreements. The Commission shall keep track

and oversee that the Authority and any retail energy provider complies with the

Renewable Portfolio Standard set forth hereunder as efficiently as possible.

(b) The Commission may require, through regulations, that any and all retail energy

providers, sustainable renewable energy producers and alternative renewable energy

producers register with the Commission.

(c) Annual Compliance Reports. - Every retail energy provider must submit to the

Commission’s review and approval an Annual Compliance Report. The Annual

Compliance Report must be filed on or before March 31 of the calendar year

following the calendar year for which the retail energy provider is subject to comply

with the Renewable Portfolio Standard. The Annual Compliance Report must provide

the following, as minimum:

(i) The total amount of megawatt-hours (MWh) distributed by the retail energy

provider during the previous calendar year;

(ii) the amount of megawatt-hours (MWh) that the retail energy provider generated at

or acquired from a sustainable or an alternative renewable energy source during

the previous calendar year;

(iii) the RECs, issued and registered in the renewables registry, presented in

compliance with part or all of the Renewable Portfolio Standard applicable to the

current calendar year, if applicable;

(iv) the distributed renewable energy that the retail energy provider has purchased to

comply with part or all of the Renewable Portfolio Standard applicable to the

current calendar year, in accordance with Article 2.11 of this Act, if applicable;

(v) the amount of megawatt-hours (MWh) that the retail energy provider estimates it

will distribute during the current calendar year;

(vi) the amount of megawatt-hours (MWh) that the retail energy provider estimates it

will have to generate or acquire in order to comply with the Renewable Portfolio

Standard applicable to the current calendar year;

(vii) the amount of megawatt-hours (MWh) of sustainable or alternative renewable

energy that the retail energy provider estimates will be supplied to it pursuant to

an energy purchase agreement in effect at the time the Compliance Report is filed;

(viii) the total number of RECs temporarily preserved for future use that the retail

energy provider will submit to comply with part or all of the Renewable Portfolio

Standard applicable to the current calendar year, as provided in Article 2.11, if

applicable;

(ix) the cost estimated by the retail energy provider to comply with the Renewable

Portfolio Standard applicable to the current year, separately detailing the cost

associated with the purchase of sustainable or alternative renewable energy, and

the cost associated with the purchase of environmental and social attributes

associated with such energy;

(x) the cost incurred by the retail energy provider to comply with the Renewable

Portfolio Standard applicable to the previous calendar year, separately detailing

the cost associated with the purchase of sustainable or alternative renewable

energy, and the cost associated with the purchase of environmental and social

attributes associated with such energy; and

(xi) any other information or documentation that the Commission may require by

order or regulations.

(d) As a transitory provision the information required under subsections (i), (ii), (v) (vi)

(vii) and (ix) of this Article must be provided to the Commission through the

Administration by every retail energy provider on or before March 31, 2015.

(e) The Commission may establish fees to be charged upon the filing of Annual

Compliance Reports.

Article 2.11. -Compliance with the Renewable Portfolio Standard.-

(a) Retail energy providers may comply with the Renewable Portfolio Standard created

hereunder by submitting to the Commission any of the following or a combination

thereof:

(i) a REC issued and registered in the renewables registry in the retail energy

provider’s name for every megawatt hour (MWh) of electricity generated from

sustainable or alternative renewable energy sources in Puerto Rico, and/or;

(ii) in the case of a retail energy provider that counts the electricity produced by, and

purchased from, distributed renewable energy producers located in Puerto Rico

through a net metering program, and when it is impossible to obtain RECs that

represent such electricity, a report showing that the retail energy provider has

complied with the Renewable Portfolio Standard by purchasing renewable energy,

along with all the environmental and social attributes associated with the

production of such energy, in accordance with Subsection (e ) of this Article.

(b) Every REC presented under Subsection (a)(i) of this Article shall certify that the

electricity produced by the sustainable or alternative renewable energy source was

produced and sold in Puerto Rico. Every REC presented to show compliance with the

Renewable Portfolio Standard shall be withdrawn and canceled by the Commission

and, once withdrawn and canceled, cannot be presented again in a subsequent

calendar year.

(c) Reconciliation Period. - A retail energy provider may, during the reconciliation

period, acquire RECs to comply with the Renewable Portfolio Standard applicable to

the previous calendar year, in which case the retail energy provider may not present

the same REC to show compliance with the Renewable Portfolio Standard applicable

to the current calendar year.

(d) REC Temporary Preservation. - Subject to the provisions of this subsection, retail

energy providers may temporarily preserve any REC’s in their possession for future

use. Retail energy providers may begin to temporarily preserve RECs starting in

calendar year 2013. Once temporarily preserved, an REC may not be sold or

otherwise transferred. A temporarily preserved REC may be used to show compliance

with the Renewable Portfolio Standard applicable to the two (2) subsequent calendar

years, counting from the date on which the REC was preserved. A temporarily

preserved REC later presented during the first subsequent calendar year shall

represent one (1) megawatt hour (MWh) of electricity produced by a sustainable or an

alternative renewable energy source operator. A REC presented during the second

subsequent calendar year shall represent half (0.5) of a megawatt hour (MWh) of

electricity produced by a sustainable or an alternative renewable energy source

operator. For example, a retail energy provider may present a REC issued in calendar

year 2015 (referred to as “REC-2015”) to demonstrate compliance with the

Renewable Portfolio Standard applicable to that calendar year. Should the provider

have RECs-2015 in excess of the amount required to comply with the Renewable

Portfolio Standard applicable in calendar year 2015, the provider may temporarily

preserve such excess RECs-2015 and present them to show compliance with the

Renewable Portfolio Standard applicable in calendar year 2016, in which case every

preserved REC-2015 shall represent, for purposes of compliance with calendar year

2016, one (1) megawatt hour (MWh) of electricity produced by a sustainable or an

alternative renewable energy source operator. Should the provider have RECs in

excess of the amount required to comply with the Renewable Portfolio Standard

applicable in 2016, the provider may continue to preserve these RECs-2015 to

demonstrate compliance with the Renewable Portfolio Standard applicable in 2017, in

which every REC-2015 that the provider keeps preserved shall represent, for purposes

of compliance with calendar year 2017, half (0.5) of a megawatt hour (MWh) of

electricity produced by a sustainable or an alternative renewable energy source

operator.

(e) Reports on the Purchase of Renewable Energy Produced by Distributed Renewable

Energy Producers. - As an alternative to presenting RECs to show compliance with

the Renewable Portfolio Standard set forth in this Act, retail energy providers may

submit a report, subject to the Commission’s review and approval, demonstrating that

they have complied with the Renewable Portfolio Standard by actually purchasing

sustainable or alternative renewable energy from distributed renewable energy

producers, along with all the environmental and social attributes associated with such

renewable energy, in accordance with the regulations to be approved by the

Commission for such purpose, during the calendar year for which the report is

submitted. Nevertheless, this compliance option shall only be available if the retail

energy provider proves that it is not feasible or viable to require that the renewable

energy produced by distributed renewable energy producers be individually registered

and counted in the renewables registry, pursuant to the meaning given this term

herein and that, therefore, it is impossible to present to the Commission RECs

representing such energy. The report to be submitted to the Commission under this

subsection shall include as a minimum: (i) the name and mailing and home addresses

of the distributed renewable energy producer that produced the energy that, according

to the retail energy provider, complies with the Renewable Portfolio Standard

established hereunder, (ii) the amount of energy acquired from the distributed

renewable energy producer, including meter readings or a reference to the site where

such readings can be accessed on the Internet; (iii) the energy purchase agreement for

the purchase of such energy or a reference to the site where this can be accessed on

the Internet, and (iv) the following certification, provided that the Commission may

modify the language of this certification from time to time, when it deems this

necessary and establishes the modification by regulation: “I certify that the retail

energy provider that I represent, bought and distributed the amount of energy

specified on the document attached to this certification for the calendar year under

review and that, as a result of such purchase and distribution, the retail energy

provider that I represent, fully or partially complied with its legal obligation under the

Puerto Rico Energy Diversification through Sustainable and Alternative Renewable

Energy Policy Act. I hereby acknowledge that knowingly providing false or incorrect

information could result in civil and criminal penalties.” Should the report submitted

under this subsection be approved by the Commission, the Commission shall certify

that the retail energy provider has fully or partially complied with the Renewable

Portfolio Standard applicable to that provider during the calendar year under review,

as applicable.

Article 2.12.-Reports and Procedure to Determine Compliance with the Renewable

Portfolio Standard; Non-Compliance Adjudication and Fines.-

(a) In accordance with Article 2.10(c) of this Act, all retail energy providers must submit

an Annual Compliance Report to the Commission to demonstrate compliance with

the Renewable Portfolio Standard applicable to every calendar year. After evaluating

this Annual Compliance Report, the Commission must issue a resolution determining

whether the provider has complied or failed to comply with the Renewable Portfolio

Standard applicable to the calendar year under review.

(b) Should the Commission determine that the retail energy provider has complied with

the Renewable Portfolio Standard applicable to the calendar year under review, the

Commission shall issue a resolution to that effect within thirty (30) days of the date of

receipt of the Annual Compliance Report, and, if applicable, the Commission shall

require that the retail energy provider transfer to the Commission the number of

RECs needed to comply with the applicable Renewable Portfolio Standard, and shall

proceed to withdraw and cancel every transferred REC. Likewise, the Commission

must determine whether the retail energy provider is authorized to temporarily

preserve RECs to demonstrate compliance with the Renewable Portfolio Standard

applicable to subsequent calendar years. Furthermore, the Commission shall

determine the number of RECs and/or the amount of megawatt-hours (MWh) that the

retail energy provider is authorized to temporarily preserve to show compliance with

the Renewable Portfolio Standard applicable to subsequent calendar years.

(c) Should the Commission understand that the retail energy provider has failed to

comply with the applicable Renewable Portfolio Standard, it shall issue an initial

noncompliance notification specifying the reason for the noncompliance and allow a

thirty (30) day period from the date of notification for the retail energy provider to

provide a response to the notification.

(d) Response to Initial Notification of Noncompliance. - The retail energy provider must

present a response to the initial notification of noncompliance within thirty (30) days

of the date of notification. The retail energy provider in question may justify such

noncompliance by demonstrating in detail the reasonable and good faith efforts it

made to comply with the Renewable Portfolio Standard. In order to prove that it has

reasonable and good faith reasons to justify such noncompliance, the retail energy

provider must demonstrate to the Commission’s satisfaction that its failure to comply

was due to one or more of the following reasons: (i) force majeure as defined by this

Act, (ii) unpredictable substantial loss of the renewable resource; (iii) labor

disturbances and strikes; (iv) violations of contractual clauses of a renewable energy

purchase agreement by a contracting party (other than the retail energy provider); (v)

insufficiency of sustainable or alternative renewable energy producers; (vi) the

excessive cost of acquiring electricity generated by a renewable energy producer; and

(vii) any other justification accepted by the Commission in regulations on the subject

that are in keeping with the public policy outlined in this Act.

(e) If the Commission issued an initial notification of noncompliance, it must determine

whether the response to the initial notification of noncompliance meets the criteria set

out in Subsection (d) of this Article and issue a written, final decision and resolution,

containing findings of fact and of law, which it must remit to the retail energy

provider in question.

1) Should the Commission determine that the retail energy provider proved its

compliance with the Renewable Portfolio Standard, the procedure set forth in

subsection (b) of this Article shall be followed.

2) Pursuant to the provisions of Subsection (d) of this Article, should the Commission

determine that the retail energy provider was able to justify its noncompliance

with the Renewable Portfolio Standard, it shall issue a final resolution that shall

include, among any other information deemed relevant by the Commission: (i) a

statement that the retail energy provider has demonstrated to the Commission’s

satisfaction all of the reasonable and good faith efforts it made to try to comply

with the Renewable Portfolio Standard for the calendar year under review and that

the response to the initial noncompliance notification meets the criteria laid down

in Subsection (d) of this Article; (ii) a reasonable corrective action plan to comply

with the Renewable Portfolio Standard applicable in subsequent calendar years;

and ( iii) a moratorium on the imposition of any fines against it.

3) Should the Commission determine that the retail energy provider was unable to

adequately justify its noncompliance, the Commission’s final resolution shall

include, among other information deemed relevant by the Commission: (i) a

statement that the retail energy provider has failed to demonstrate to the

Commission’s satisfaction the reasonable and good faith efforts it made to try to

comply with the Renewable Portfolio Standard for the calendar year under review

and that the response to the initial notification of noncompliance does not meet

the criteria laid down in Subsection (d) of this Article; (ii) provide a reasonable

corrective action plan to comply with the Renewable Portfolio Standard

applicable in subsequent calendar years; and (iii) provide for the imposition of

fines against the retail energy provider. When the Commission determines that a

retail energy provider has failed to comply with the Renewable Portfolio

Standard, the Commission must submit to the Governor and the Legislature a

report along with a copy of the retail energy provider’s administrative record, no

later than (30) days after the final resolution is issued, without prejudice of any

subsequent process appropriate under the law.

(f) Fines Imposed. - After the pertinent administrative processes, if the Commission

determines that a retail energy provider has failed to comply with the Renewable

Portfolio Standard applicable in the calendar year under review, it shall issue a

resolution specifying the amount of megawatt-hours (MWh) for which the retail

energy provider has failed to comply with the applicable Renewable Portfolio

Standard, the administrative fine, and an order for the provider to pay the

administrative fine imposed within no more than thirty (30) days.

(g) No fine or penalty imposed by the Commission shall be for an amount less than what

it would cost the retail energy provider to comply with the Renewable Portfolio

Standard by purchasing RECs, multiplied by a factor of two (2). The retail energy

provider must pay the fine imposed by the Commission under this article within a

period no greater than thirty (30) days of the notification to that effect. Any delay in

paying an administrative fine shall be subject to the interest and penalties determined

by the Commission through regulations. Administrative fines must be paid in the

manner specified by the Commission in the notice of fine.

Article 2.13. -Repeal.-

(a) Act No. 246 of August 10, 2008, better known as the “Commonwealth of Puerto Rico

Global Warming Mitigation Policy Act.”

CHAPTER III

GENERAL PROVISIONS

Article 3.1. -Penalties for Providing False Information.-

Anyone who knowingly offers, provides or sends false or incorrect information on any

document, report, application, statement and/or certification required under this Act with intent

to defraud shall be guilty of a fourth-degree felony, and if convicted, may be sentenced to a

minimum of six (6) months and a maximum of five (5) years in prison, in addition to paying a

$10,000 fine for each violation.

Article 3.2. -Conflicts.-

Should there be a conflict between the provisions of this Act and the provisions of any

other law or regulation, the provisions of this Act shall prevail with respect to any matters

addressed herein. Notwithstanding, nothing in this Act shall impair the powers vested in the

Authority under Section 6 (l) of Act No. 83 of May 2, 1941, as amended, and the powers vested

in the Authority under said subsection shall apply to any cost associated with the purchase of

sustainable or alternative renewable energy, the purchase of RECs (including the environmental

and social attributes) associated with such energy and including any other cost required to

comply with this Act.

Article 3.3. -Regulations under this Act.-

Any regulations enacted hereunder shall be subject to the provisions of Act No. 170 of

August 12, 1988, as amended, known as the “Uniform Administrative Procedures Act” of Puerto

Rico. The lack of regulations enacted hereunder shall not preclude the application of this Act.

Article 3.4. -Severability Clause.-

If any part, paragraph or section of this Act is declared invalid, null or unconstitutional by

a competent court, the judgment to that effect shall only affect the part, paragraph or section so

declared invalid, null or unconstitutional.

Article 3.5. -Effectiveness.-

This Act shall take effect immediately upon its enactment.