A federal decision means a proposed wind farm in Converse County is one step closer to being built. But questions remained over the project’s financing and whether it will qualify for an important federal tax credit.
The Federal Energy Regulatory Commission ruled on Dec. 16 that PacifiCorp, the parent company of Rocky Mountain Power, cannot curtail electricity produced at the proposed 46-turbine wind farm near Glenrock.
The ruling comes at a crucial time for what’s known as Pioneer Wind Park. Wasatch Wind, the project developer, and PacifiCorp are negotiating a new contract, which would see the utility buy the wind farm’s power.
Those negotiations are playing out just as a key tax credit for wind energy producers is due to expire on Wednesday. Wasatch officials have said the tax credit is essential to securing financing for the project.
Christine Mikell, Wasatch president, called the ruling “positive” and said it eliminates the last impediment to contract negotiations.
Wasatch petitioned FERC in October, saying PacifiCorp insisted on a contract provision which would allow the utility to turn off electricity generated at the wind farm. FERC sided with Wasatch, ruling that such a provision was against federal regulations governing renewable power operations smaller than 80 megawatts. Pioneer Wind Park is expected to generate 80 megawatts.
“We’re pleased that the ruling went as we anticipated and will lead to a resolution,” Mikell said.
Opponents said the ruling was more notable for what it did not do. FERC did not mandate PacifiCorp enter into an agreement with Wasatch, said Kenneth Lay, a landowner with the Northern Laramie Range Alliance, which opposes the project.
Instead, the commission said it was up to the Wyoming Public Service Commission to first determine if the prices negotiated in the Wasatch-PacifiCorp power agreement meets federal regulations, Lay noted. Those regulations require utilities accept electricity generated by small-scale renewable energy facilities, provided such power comes at no extra cost to ratepayers.
“It’s important because Wasatch still does not have a power purchase agreement for securing financing for these projects,” Lay said.
A Rocky Mountain Power spokesman declined to comment, saying the company’s attorneys could not be reached to provide the appropriate information.
The ruling has important implications for the development’s financing. Wind developers must show they have begun work on projects by Tuesday in order to receive the 2.3-cents-per-kilowatt-hour tax credit. The tax credit is due to expire after Congress declined to extend it.
Wasatch’s attorneys explained the link between its contract with PacifiCorp and the tax credit in its FERC petition.
“In order to begin construction of the Pioneer Wind Project by December 31, 2013, Pioneer Wind must obtain financing and, in order to obtain financing, Pioneer Wind must have an executed (power purchasing agreement) with PacifiCorp,” they wrote.
Wasatch and PacifiCorp are still negotiating a final contract, Mikell said. She gave no timetable for when an agreement might be struck. But with the FERC ruling removing the last hurdle to a deal, Wasatch will now spend money to commence work at Pioneer Wind Park, she said.
Developers who purchase turbines, start construction on roads or the project itself qualify for the tax credit, among other options. Mikell said Wasatch will pursue one of those alternatives. She declined to say which.
Lay expressed doubts over whether the project will qualify. Wind developers previously had to be in commercial production to qualify for the credit. The Internal Revenue Service issued new guidelines in the summer, saying companies only had to show work had begun. The new guidelines are untested in court, said Lay, a lawyer.
“I have no doubt they will claim to have met these requirements. Whether that claim stands up to the scrutiny of the IRS and its overseers in the Congress is another question,” Lay said.
Pioneer Wind Park has been mired by legal challenges from landowners ever since it was first announced by Wasatch in 2010. The company successfully beat back a series of lawsuits, only to be pegged back by the litigation in another way: the court challenges dragged on for years.
Wasatch’s power-purchasing agreement with utility Rocky Mountain Power ultimately expired, forcing the pair to renegotiate a deal. Around the same time, Wasatch’s financial partner, Edison Mission Energy, filed for bankruptcy, forcing the wind developer to look for new financing.
Edison’s bankruptcy prompted the Wyoming Industrial Siting Council to set a May deadline, by which time Wasatch must prove Pioneer Wind is commercially viable. Mikell said the company is making progress in finding a new financial partner.
“We’re pushing hard on it,” she said.