PROVIDENCE — It’s been more than two years since lawmakers passed one of the most ambitious renewable energy pledges in the nation, but now the law appears to have been sabotaged from the start.

ecoRI News has learned that thanks to a last-minute carveout added in the final weeks of the 2022 legislative session, Rhode Island is likely to miss its critical 2033 goal of having all electricity sold to homes and businesses coming from renewable energy sources under the Renewable Energy Standard (RES).

Officials at the state Public Utilities Commission last fall opened a docket and flagged an “unusually” high number of contracts between the state’s independent electricity suppliers and their Rhode Island contacts that were signed in mid- to late June 2022, just weeks before the new requirements of the renewable energy standard were slated to go into effect on July 1. PUC staff members noted in a public meeting in November that many of the contracts identified would take effect long after they were initially signed, with some not starting until 2029, and long-term contracts not ending until 2033.

When asked by ecoRI News, the PUC declined to give a number of how many contracts it found that may be exempt from the RES, pending a final report to be issued by the commission on the renewable energy standard for 2023.

Under the 2022 law, contracts signed after July 1, 2022, require that a certain percentage of electricity must come from renewable sources, starting with an additional 4% in 2023. The year after, suppliers would be required to source an additional 5% in renewable energy; in 2025 that amount increases by another 6%; and so on until the state reaches 100% renewable electricity by 2033.

Instead of adhering to that standard, contracts signed before July 1, 2022, require only that an additional 1.5% of renewable energy annually be purchased until the end of the term of that contract, far lower than the guidelines required under the 2022 law.

Purchasing renewable energy — while a key part of the state’s climate goals — costs more money than purchasing it from conventional fossil fuel sources like natural gas. The allure of cheaper electricity contracts in the short- or long-term would have been difficult to turn down, despite it flying in the face of climate goals.

PUC officials at their November meeting expressed concern over the contracts, wondering out loud if they were within the spirit of the law, and ultimately acknowledging Rhode Island may not meet the goals set out in the RES.

“Having gone through the contracts, and there were a lot of them, we will not hit the 100% Renewable Energy Standard for the state as a whole by 2033,” Cynthia Wilson-Frias, chief legal counsel for the PUC, said at a public meeting on Nov. 21. “We may hit 100% under the contracts that are not exempted, but we will not meet the goals of the state.”

The exemptions are thanks to a loophole tucked away at the end of the revised RES law. Section F of the law reads, “Retail electricity sales pursuant to a non-regulated power producer’s supply contract that was executed prior to July 1, 2022, shall be required to obtain an additional one and one-half percent (1.5%) of retail electricity sales each year and are exempted from the requirements of subsections (a)(6) through (a)(14) of this section until the end date of the term of the non-regulated power producer’s supply contract.”

At first glance, it seems like an obvious and reasonable grandfather clause, allowing pre-existing contracts signed before the passage of the law to keep their original terms. Such clauses aren’t uncommon in the lawmaking process, and at the time the law was amended in a Senate committee, it went relatively unnoticed by lawmakers, environmental groups, and watchdog agencies.

The carveout notably doesn’t apply to Rhode Island Energy. The non-regulated power producers under state law are third-party companies that sell electricity to municipalities, universities, hospitals, and even individual households. The institutions and organizations that consume large amounts of power are going to see the greatest benefit for going with a provider other than Rhode Island Energy, because they are likely to get a lower rate than the regular rate from the utility company.

Who benefited from the exempt contracts was a difficult question to answer. Almost all electricity contracts signed and submitted to the PUC are considered confidential and sealed, inaccessible to the public, with many companies citing proprietary business information as a reason for the secrecy.

ecoRI News learned, via public records requests, that two quasi-public agencies signed exempt contracts in the last week of June 2022: the Rhode Island Airport Corp. and the Rhode Island Convention Center Authority. They signed long-term contracts with Direct Energy LLC, a Houston-based electricity retailer and subsidiary of NRG Energy Inc., an energy company also based in Houston.

Neither the Convention Center Authority, RIAC or Direct Energy LLC responded to requests for comment on this story.

According to contracts obtained by ecoRI News, the Convention Center Authority signed contracts for both the Convention Center in Providence and the Dunkin’ Donuts Center, the former name of what is now known as the Amica Mutual Pavilion.

Rhode Island Convention Center Authority executive director Daniel McConaghy signed contracts for both the Rhode Island Convention Center building and the Dunkin’ Donuts Center on June 30, 2022. The contract start date for the Convention Center was two years after it was signed, in July 2024, and it runs for a term of 72 months, or six years, ending in 2030. The estimated annual electricity usage is just above 6.5 million kilowatt-hours (kWH). The contract for the Dunkin’ Donuts Center lists its start date as May 2024, and it also runs for a term of 72 months, ending in 2030. That estimated annual usage is about 2 million kWh.

RIAC president and CEO Iftikhar Ahmad also signed electricity contracts for RIAC’s facilities on June 30, 2022. That contract was slated to begin in December 2022 for a term of 84 months, or seven years, making its end date December 2029. The contract estimates RIAC’s annual electricity usage to be around 14.8 million kWh.

Documents obtained by ecoRI News show the city of Warwick finance director Peder Schaefer signed a contract with Boston-based Constellation New Energy on June 21, 2022. The term of the contract was for a three-year period, beginning in December 2022 and ending in December 2025. The city uses an estimated annual 11.3 million kWh of electricity a year.

As with residents and businesses, the motivation for signing a contract with a date prior to the effective date of the new renewable energy standard was financial. In a memo dated June 9, 2022, written by Schaefer and sent to Patricia Peshka, the city’s purchasing agent, Schaefer recommended the city sign a three-year contract with Constellation New England, noting that by locking in the supplier’s price, the city can avoid paying a higher price through the more volatile electricity retail market. It would also help the city temporarily exempt itself from the new renewable energy standard that then was still under consideration in the General Assembly.

“Approval of a new contract before July 1 is likely to grandfather protection on additional renewable energy standards surcharges that are pending before the General Assembly,” Schaefer wrote.

In a statement to ecoRI News, Schaefer defended the contract, noting the city bundles its electricity through the League of Cities and Towns and that Constellation is the league’s preferred provider.

“While it is true that we (and other municipalities) were incentivized to enter into a new three year contract before July 1, 2022 to take advantage of the grandfathering, the fact of the matter is that we use renewable energy credits from three solar farms (2 of them in Warwick) to pay the Constellation bill and we have credits (which we pay for at 87.5 cents on the dollar) available that match or even exceed our usage,” Schaefer wrote in a statement provided to ecoRI News.

Constellation New Energy did not provide ecoRI News with a comment before press time.

The three public entities aren’t the only end-use customers that signed a contract taking advantage of the loophole. Brown University Health, the not-for-profit hospital group formerly known as Lifespan that owns and operates Rhode Island Hospital and Hasbro Children’s Hospital, submitted comments under a docket opened by the PUC last fall.

The PUC had opened a docket to examine if those exempt contracts should really be considered exempt, and attorneys for the hospital group submitted comments protesting the docket, saying its contracts signed in the time frame outlined by the PUC should be held exempt under the law.

“The statute places no restrictions on the timing of energy contracts entered into before July 1, 2022,” wrote Barbara Chupp, vice president and deputy general counsel for Brown University Health, and Glenn Friedmann, associate general counsel. “The Brown University Health hospitals’ agreements were negotiated in good faith and executed to secure stability in energy costs, forming part of a prudent lawful hedging strategy. Brown University Health hospitals did not seek a regulatory loophole but rather followed a legitimate and legal purchasing approach, grounded in sound financial planning and responsive to market conditions.”

Chupp and Friedmann indicated any attempt by the PUC to negate the hospital group’s contracts could “expose the state to significant legal and financial liability,” citing class-action lawsuits filed in Nevada.

NRG Energy Inc., Constellation New Energy, and Calpine Energy Solutions LLC each also submitted comments, citing a plain text reading of the statute grandfathered their contracts under the new renewable energy standard.

It’s a view shared by commission staff at the PUC, who admit that their hands are tied when it comes to enforcing the new renewable energy standard on exempt contracts. Wilson-Frias, during the November meeting, noted that a plain text reading of the statute would ultimately prevail in the courts, despite any state action.

“Legally I think you’re stuck,” Wilson-Frias told commissioners at the November meeting over the docket. “Legally I think the plain language does control and the comments were not out of line.”

State environmental groups, meanwhile, have expressed outrage over the loophole to ecoRI News, noting the massive impacts the contracts may have on Rhode Island’s ability to reach the goals of the Act on Climate law.

“It’s outrageous that many Rhode Island institutions are avoiding their part to protect our future and our environment by receiving special treatment. These institutions must be held to the same standards as individual families and small businesses who have complied with our state’s Renewable Energy Standard,” said Jamie Rhodes, director of clean buildings at the Conservation Law Foundation. “Our climate laws must apply to everyone, including our city and town governments, as well as hospitals. Achieving a future powered by clean, renewable energy requires everyone to step up and do their part.”