The Federal Energy Regulatory Commission’s decision against the Idaho Public Utilities Commission blows new life into at least 17 Idaho wind power projects.
The federal commission oversees electric and natural gas delivery policy. It ruled earlier this month that the Idaho commission’s rejection of a contract between Cedar Creek Wind and Rocky Mountain Power for two projects near Shelly was “inconsistent” with regulations and rules governing projects under what is known as PURPA, the Public Utility Regulatory Policies Act.
The federal panel did not take an enforcement action. Instead, it left it to Cedar Creek to bring its own legal action to seek state approval.
On Wednesday, Cedar Creek and the Idaho PUC asked the Idaho Supreme Court to suspend Cedar Creek’s ongoing appeal of the PUC decision to give the wind company and Rocky Mountain – an Eastern Idaho subsidiary of Pacificorp – a chance to seek a settlement.
It’s unusual for the federal panel to step into the middle of a state commission’s regulatory process. The state commissions are designed to regulate utilities that have a monopoly over necessities such as electricity, natural gas, telephone service and municipal water, and are given wide deference over how they do it.
But Congress passed PURPA in 1978 to open up the electricity market to small producers.
The law requires utilities to purchase the power at a cost equal to what it would cost the utility to build a plant to supply that power. That rate is called the “avoided cost.”
That avoided cost rate and the regulations for administering PURPA are placed in the state regulatory commission’s hands.
IDAHO UTILITIES SOUGHT HELP LAST YEAR
In late 2010, the Idaho PUC was considering a petition from the state’s utilities asking it to halt PURPA contracts temporarily because a wave of proposals was overwhelming the utilities’ ability to integrate the power into their systems.
Utility officials also complained that large-scale wind operations – such as the five-project, 150-megawatt Cedar Creek project – were bending the rules. The utilities said developers like Cedar Creek were building several small wind farms to qualify for the avoided-cost price guaranteed to small power producers, when those projects should rightly be considered as one big project.
The PUC denied the request for a moratorium but set a deadline of Dec. 14, 2010, for all PURPA projects eligible for the set price get their contracts in.
Cedar Creek and other developers signed their contracts before Dec. 14, but the utilities didn’t sign until after the deadline.
That prompted FERC’s action. It ruled that the PUC’s rejection of Cedar Creek’s contract essentially allowed Rocky Mountain to control whether eligible developers could get the PURPA rate simply by delaying signing the contract.
“Based on the record, it is highly probable that Cedar Creek and Rocky Mountain Power are bound by a contract that specifies the use of published avoided cost rates,” FERC commissioners said.
Attorneys for Cedar Creek and a spokesman for the Idaho commission said they did not want to comment in light of the settlement talks. Idaho Power also did not comment.
A FAIRER PLAYING FIELD
But Peter Richardson, a Boise attorney who represents the Northwest and Intermountain Power Producers Coalition, said the decision restores the fundamental purpose of PURPA: to keep utilities from closing markets to renewable energy producers.
“I think it helps level the playing field between the renewable energy players and the monopoly utilities,” Richardson said.
The decision also should allow the developers of the other 17 rejected projects to use FERC’s arguments and decision to further their cases in court. The Idaho PUC efforts to encourage settlement talks for Cedar Creek sets the table for similar talks for the other alternative energy projects.
But it’s not clear how it will turn out for companies trying to develop alternative-energy projects in Idaho.
Those developers already have lost access to an Idaho sales tax rebate that ended in June. A federal production tax credit for renewable projects that covers as much as 30 percent of costs requires developers to start work before the end of this year. And the Idaho PUC last summer changed the rules for which companies can qualify for the preferential PURPA rates (today, only very small wind and solar project qualify).
The Idaho PUC is now in the middle of deliberations on how to set avoided-cost rates and other rates for PURPA projects.
What ultimately happens to the wind projects remains to be seen, but the Idaho commission and staff are trying to be fair to developers and ratepayers, said Ben Otto, an energy analyst for the Idaho Conservation League.
“I think what I’ve seen is they’re really worried about customers paying too much,” he said.
WIND PROJECTS AFFECTED BY FERC ORDER
Cedar Creek: Five wind projects southeast of Shelley in Bingham County by Western Energy.
Cotterel: Five projects near Burley by Shell.
Rainbow: Two projects near Declo (Rainbow Ranch and Rainbow West), managed by American Wind Group.
Grouse Creek: Two wind projects near Lynn, Utah, south of the City of Rocks national reserve in Idaho owned by Wasatch Wind Intermountain.
Murphy Flats: Three wind projects near Murphy managed by American Wind Group.