(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.