FERC to Address Several PURPA Issues In Coming Weeks and Months

Over the last several weeks, a variety of entities have filed Petitions for Declaratory Order (PDO) or Enforcement Petitions relating to PURPA that may prove interesting to watch. Sunrun asked FERC to make an exception for the need to self-certify (through Form 556) QFs under common ownership that total in aggregate more than 1 MW of capacity if all the QFs are located with one mile of one another, but only if such aggregation includes only QFs that are under 20 kW residential solar systems where the customer has a purchase option.  (Sunrun often leases solar systems with an option to buy, thus its desire to avoid the complexities of trying to determine when the 1 MW minimum for self-certification is met.)  This PDO may prove less controversial than some of the others recently filed. Redlake Falls challenged a Minnesota PUC decision regarding what a utility’s avoided cost was at the time the legally-enforceable obligation (LEO) was formed, in a dispute that involves which rate proposed by various entities best represents avoided cost at the time the LEO was established.  This is not the type of PURPA Enforcement case that FERC is likely to bring an enforcement action itself, but a request was made for a PDO, so some non-binding guidance may be issued. The two-decade battle between the Swecker family and Midland Power Cooperative and its supplier (Central Iowa Power Cooperative) continues unabated. This case cannot been deemed controversial, as the very same PURPA arguments have now been made and rejected repeatedly by any number of venues.  The most interesting issue to watch in the latest proceeding is whether Midland will finally obtain a suspension of the Sweckers’ rights to bring enforcement actions against Midland and CIPCO that raise the same avoided cost rate scheme. Finally, in perhaps the most interesting case of the lot, NorthWestern petitioned FERC for a declaratory order determining that:

• in periods when a utility has excess generation and cannot back down its generation, the avoided cost paid by the utility for energy to QFs should be zero; and
• nothing in PURPA, including the rule against “non-discrimination” in pricing of avoided cost, permits setting a QF purchase rate above the utility’s avoided cost.

NorthWestern’s petition is prompted by a Final Order issued by the Montana PSC that NorthWestern must pay for QF energy at an avoided cost set at the forecasted market price for energy even during periods when NorthWestern cannot use the QF energy to serve its load, and that such a rate (above the avoided cost) is justified to avoid undue discrimination. NorthWestern had proposed to the Montana PSC that: (1) a QF should be paid an avoided cost rate based upon the forecasted market price only when NorthWestern was “short” on energy; (2) a QF should be paid an avoided cost rate based upon the variable costs NorthWestern would avoid by purchasing from the QF when NorthWestern was “long” on energy but could back down its generation; and (3) a QF should be paid at an avoided cost rate of zero when NorthWestern was “long” on energy and could not back down sufficient generation to accept any of the QF’s energy, because NorthWestern could not avoid any costs by purchasing from the QF. In its petition for declaratory order, NorthWestern states that “the MPSC ruled that, when considered in its totality, the Commission’s Order No. 69 does not hold that a utility must only pay a QF for energy that the utility can actually use to serve its total system load.” NorthWestern argues that, where a QF “seek[s] to have a utility purchase more energy or capacity than the utility requires to meet its total system load,” Order No. 69 provides that “the purchase rate should only include payment for energy or capacity which the utility can use to meet its total system load.” In contrast, the Montana PSC found that its requirement that NorthWestern must pay QFs a forecasted market rate was necessary in order “to comply with the Commission’s requirement that avoided cost pricing must prevent undue discrimination against QFs.” NorthWestern asks the Commission to clarify that the this reasoning is not a sufficient basis for permitting a QF rate that exceeds a utility’s avoided cost, arguing that PURPA’s “guiding principles of justness and reasonableness and non-discrimination cannot be used to overcome the prohibition on a rate above avoided cost.”