In Windham Solar, et al., FERC declined to initiate an enforcement action, but took the unusual step, on its own initiative, of issuing a declaratory order. 157 FERC ¶ 61,134 (Nov. 22, 2016) (Windham). FERC declared that the Connecticut Public Utilities Regulatory Authority (CT PURA) violated FERC’s regulations under the Public Utility Regulatory Policies Act of 1978 (PURPA) when it limited avoided cost rates only to the amount of the real-time energy price in ISO-New England. FERC stated that its PURPA regulations provide qualifying facilities (QFs), such as Windham, with the option of being paid an avoided cost energy rate that is forecast as of the time the legally enforceable obligation is incurred. See 18 C.F.R. § 292.304(d)(2)(ii) (2016).
FERC also disagreed with the CT PURA’s conclusion that Eversource had no need for capacity. The CT PURA had taken the position that, because Eversource’s capacity needs are met by ISO-New England Inc.’s forward capacity auction, its avoided cost rates should include no capacity payment. FERC found “to the extent that Eversource’s capacity needs can be satisfied by Windham’s QFs rather than through the capacity auction, the avoided cost rates available to Windham should include an estimate of Eversource’s avoided cost of capacity” and that “Eversource’s reliance on ISO-New England Inc.’s forward capacity auction does not mean that Eversource has no need for capacity.” Id. at P 7. FERC also noted that “there is no indication that Eversource would be unable to realize the appropriate value of any capacity it acquires from a QF by simultaneously offering that capacity into the auction with its bids to purchase capacity from the auction.” Id.
Windham is likely to challenge the CT PURA scheme in federal district court, as its affiliates have done in similar circumstances. This order may also spur challenges to the QF prices set by any other states where avoided cost rates are based on ISO energy prices.