FERC Denies Rehearing of Order Finding that QF Curtailment Policy Violates PURPA
On June 20, 2013, FERC issued an order denying requests for rehearing (“Order Denying Rehearing”) of its September 20, 2012 Order (“September 20 Order”) regarding Idaho Power Company’s (“Idaho Power”) proposal to curtail purchases from Qualifying Facilities (“QFs”) that met certain characteristics. On rehearing, FERC reiterated that if Idaho Power’s proposal were to be approved by the Idaho Public Utilities Commission (“Idaho PUC”), it would be inconsistent with the Public Utility Regulatory Policies Act of 1978 and FERC’s regulations. (See September 23, 2012 edition of the WER.)
As proposed, Idaho Power’s Schedule 74 would have permitted Idaho Power to curtail its purchases from QFs with 10 MW or more of nameplate capacity “if, due to operational circumstances, purchases from the Applicable QF would require [Idaho Power] to dispatch higher cost, less efficient resources to serve load or to make Base Load Resources unavailable for serving the next anticipated load.” In the September 20 Order FERC held that “a utility that is party to [Power Purchase Agreements (“PPAs”)] with QFs whose long-term avoided-cost rates were determined at the time legally enforceable obligations were incurred, may not curtail during light loading periods.” Additionally, FERC found that, “as a matter of law, changes over time, such as light loading periods, are considered in the calculation of avoided cost rates in a long-term bilateral PPA that provides for an avoided-cost rate determined at the time the legally enforceable obligation is incurred.”
On October 22, 2012, Idaho Power and PacifiCorp filed separate requests for rehearing of FERC’s September 20 Order. Idaho Power stated in its rehearing request that: (1) FERC’s action was premature and improperly impeded on the Idaho PUC process; (2) FERC was overly broad in finding that fixed avoided-cost rates in long-term PPAs per se accounted for light loading periods; and (3) FERC’s determination rewrites a PPA to include elements that were never originally negotiated by the parties and thus, improperly favors the interests of QFs over that of ratepayers and utilities. Meanwhile, PacifiCorp also challenged FERC’s finding that all fixed avoided-cost rates in long-term PPAs account for light loading periods instead of using a more nuanced case-by-case approach. Additionally, PacifiCorp requested that FERC clarify if the September 20 Order affirmatively presumed that all long-term fixed avoided-cost rate PPAs have considered the fluctuations in the value of electric energy.
In its Order Denying Rehearing, FERC reiterated that all PPAs incorporating avoided-cost rates that are calculated at the time the legally enforceable obligations are incurred have inherently incorporated fluctuations in the rate, including operational circumstances during light loading periods. FERC asserted that this determination is a finding as a matter of law and is consistent with established FERC policy. FERC dismissed Idaho Power’s other specifications of error, stating that FERC’s action was not an enforcement action but merely a declaratory statement of FERC policy. Furthermore, FERC stated that it did not alter the PPAs in question because they were long-term fixed avoided-cost rate PPAs which necessarily included determinations related to price fluctuation at the time of execution.
To view the full order, click here.