Overview
As the industry continues to await action from FERC on PURPA in Docket AD16-16 or through a new rulemaking, various parties have submitted comments or pleadings in that docket and in other cases, that effectively take the position that QFs should not be accountable for knowing the laws and regulations to which they are subject. This same mindset may repeat itself when FERC adopts a Final Rule DER aggregation
As to PURPA, in August 2018 comments submitted by North American BioFuels (BioFuels), the company proposed making it a requirement that the purchasing utility to have received a copy of the Form 556 (or the equivalent) before the utility starts purchasing power from a QF. That is, BioFuels proposes to shift the burden to the utility to ensure that a QF is in compliance with the law before buying power. And, BioFuels seeks an amnesty period for QFs currently not in compliance with FERC’s requirements. In October 2018, BioFuels enhanced its proposal with a legal paper suggesting that FERC has acted unlawfully in applying its standard time-value refund penalty for late-filed tariffs and agreements to QF-eligible entities who fail to timely file their self-certification form. In a similar vein, QFs continue to argue to FERC in individual cases that the time-value refund penalty should not be imposed on them. FERC generally has held steady in rejecting such pleas for relief in cases such as IGS ORIX Solar I. Some QFs, such as York Haven, are taking these arguments further, arguing that QFs should be able to recover all of their fixed costs, thus effectively eliminating the time-value refund penalty.
Given that FERC provided notice to the QF community by issuing a rulemaking in 2005, these “remedies” are hardly necessary. FERC has no broader way to communicate to the public than a rulemaking. The time between the rulemaking being issued and the Final Rule (Order No. 671) being made effective that adopted the QF self-certification approach was about six months, plenty of time for a compliance process that BioFuels admits for renewable QFs is as “easy as pie” and takes only about 30 minutes. Moreover, in the cases imposing the time-value refund penalties, FERC otherwise has excused late-filing QFs from the myriad other burdens of acting as public utilities for what has in some cases been years (i.e., MBR Tariff filing, EQR, etc.). The “It should not be a QF’s responsibility to read FERC rulemakings” attitude reflects is troubling. “Ignorance of the law IS an excuse!” is a very poor policy when it comes to electricity, which, although a product that provides light, is a product that cannot be taken lightly. When laws and regulations concerning electricity are not followed, the results can be lethal.
The Commission’s DER aggregation rulemaking proceeding provides another opportunity where entities providing power may try and avoid the legal consequences of their decisions. For example, if a battery-powered (i.e., non-QF) DER sells power to an aggregator who then sells the power through an ISO/RTO market, until and unless FERC regulations are changed, that DER is required to have a tariff on file at FERC. And, it is the DER seller that must understand and know the relevant law. The aggregator may perform the task on the DER seller’s behalf, but the DER is making a wholesale sale in interstate commerce and should be aware of and responsible for all legal consequences.
All entities, whether or not QFs, that plan to engage in the business of providing electricity, whether at retail or wholesale, need to understand that they are entering an industry that is heavily regulated both for safety and commercial reasons. Owners of distribution and transmission systems must be aware of devices that can export power onto their systems are being connected to their systems for purposes of ensuring both human safety and grid reliability. Device owners or operators that are sending energy to the grid thus should be subject to penalties if they fail to research and understand the laws, regulations, tariffs, etc. that apply to them, or to hire counsel to assist them with compliance. Additionally, entities operating markets need to understand where electricity is coming from and what load exists to fairly allocate payments and costs.
Any sale of energy, at retail or wholesale, may have federal implications, due to the Federal Power Act, the Public Utility Holding Company Act, and/or PURPA. When the Commission does take up the DERs rulemaking and PURPA, arguments that DERs and QFs should be pardoned for remaining ignorant of the law should be soundly rejected.
