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FERC Initiates Second PURPA Enforcement Action against Idaho PUC

On March 15, 2013, FERC granted a petition for enforcement by petitioners Grouse Creek Wind Park, LLC and Grouse Creek Wind Park II, LLC (together “Grouse Creek”) and announced FERC would again go to court to enforce the Public Utility Regulatory Policies Act of 1978 (“PURPA”) against the Idaho Public Utilities Commission (“Idaho PUC”).  FERC’s enforcement action concerning Grouse Creek will take place in conjunction with its enforcement action in a similar proceeding, Murphy Flat (see December 3, 2012 edition of the WER).

On December 3, 2010, the Idaho Commission issued Order No. 32131, announcing it would open an investigation into whether it should lower the published avoided cost rate eligibility cap for a qualifying facility (“QF”) from 10 average megawatts (“aMW”) down to 100 kW, but it did not immediately reduce the eligibility cap to 100 kW.  The Idaho Commission also gave notice that it would make a decision on the eligibility cap after its investigation and that its decision would be effective, retroactively, on December 14, 2010.

In this case, Grouse Creek executed two Firm Energy Sales Agreements (“Agreements”) with Idaho Power and submitted them to the Idaho PUC on December 29, 2010 for acceptance.  The Agreements stated that the relevant wind power projects at issue would not exceed 10 aMW on a monthly basis.  While Grouse Creek’s filing was pending, the Idaho PUC issued Order No. 32176 on February 7, 2011, reducing the eligibility cap for wind and solar QFs to receive published avoided costs rates from 10 aMW to 100 kW.  The Idaho PUC implemented the reduced cap effective retroactively to December 14, 2010.

On June 8, 2011, the Idaho PUC rejected the Agreements between Grouse Creek and Idaho Power on the grounds that they were over the eligibility cap set by Order No. 32176.  In its June 8, 2011 order, the Idaho PUC set out a “bright line rule” that a Firm Energy Sales Agreement or Power Purchase Agreement must have been executed (or signed by both parties) before the effective date of the change in eligibility criteria (December 14, 2010).  In the case of Grouse Creek, the parties did not have an agreement until December 28, 2010.

In this first step of its appeal process, Grouse Creek sought reconsideration of the Idaho PUC’s June 8, 2011 order, and eventually appealed the Idaho PUC’s denial of reconsideration to the Idaho Supreme Court.  On remand to the Idaho PUC, the Idaho PUC again rejected the Agreements on the grounds that Grouse Creek did not trigger a legally enforceable obligation (“LEO”) prior to December 14, 2010.  The Idaho PUC explained that the QF has two options to obtain avoided cost rates: (1) enter into a contract; or (2) absent utility participation, file a complaint with the Idaho PUC where the Idaho PUC will make a determination about whether a LEO arose.  In its September 7, 2012 order on remand, the Idaho PUC found that a LEO did not exist because the parties had determined to enter into an agreement.  The Idaho PUC found Grouse Creek’s earlier filing of a complaint irrelevant because the parties negotiated and executed a contract after the December 14, 2010 deadline set out by Order No. 32176.  Grouse Creek appealed the Idaho PUC’s most recent rejection to the Idaho Supreme Court, and arguments will be heard in August 2013.

In addition to its appeal to the Idaho Supreme Court, on January 15, 2013, Grouse Creek filed with FERC a petition for enforcement to overturn the Idaho PUC’s rejection of the Agreements.  Grouse Creek argued that the Idaho PUC’s orders rejecting its Agreements are inconsistent with PURPA and the Commission’s prior decision in Cedar Creek.  In its March 15 order, FERC determined to bring an enforcement action against the Idaho PUC pursuant to its enforcement authority in section 210(h) of PURPA.  The Commission based its determination on: (1) the Idaho PUC’s reliance on a “bright line rule” concerning the date a power purchase agreement or firm energy sales agreement must be signed; (2) the Idaho PUC’s “additional barriers” to the establishment of LEOs in its September 7, 2012 decision concerning Grouse Creek; and (3) FERC’s previous orders in Cedar Creek and Rainbow Ranch.  FERC reiterated its earlier findings from Cedar Creek that by “limiting the circumstances under which a legally enforceable obligation arose” and requiring a fully executed contract, the Idaho PUC established a condition precedent to a LEO.  FERC found that this condition precedent is inconsistent with PURPA and FERC’s regulations implementing PURPA.  FERC also rejected the Idaho PUC’s limitations on LEOs by requiring a QF to formally file a meritorious complaint with the Idaho PUC prior to obtaining that LEO.

FERC rejected arguments by the Idaho PUC and Idaho Power concerning deference to the ongoing Idaho Supreme Court proceeding.  FERC renewed its support for Grouse Creek to pursue two “separate and distinct” paths.  Commissioner Tony Clark issued a dissent, renewing his objections from Murphy Flat, and expressing concern regarding a “parallel federal process on behalf of a plaintiff with an ongoing case in the State Supreme Court of Idaho.”

A copy of FERC’s order is available here.