FERC: Utilities cannot curtail wind purchased from a QF under PPA

FERC ruled Sept. 20 that utilities cannot unilaterally curtail wind energy purchased from a qualifying facility (QF) under a long-term fixed avoided-cost power purchase agreement (PPA) (Docket No. EL12-74).

The matter was brought before the commission by Idaho Wind Partners in July, in part because of a provision contained in a proposed new Idaho Power tariff that the Idaho Public Utilities Commission (PUC) is considering in conjunction with an ongoing review of the QFs’ PPAs.

Idaho Wind has 11 subsidiary companies, each of which has a 20-year fixed avoided-cost rate PPA with Idaho Power.

Schedule 74 of its proposed new tariff details a new curtailment policy that would apply to Idaho Power’s purchases from QFs. The utility asserted that section 210 of the Public Utilities Regulatory Policies Act (PURPA) allows the company to curtail wind energy purchases during periods of light load.

In the case before FERC, Idaho Power argued that it should have the right to curtail wind generation “if, due to operational circumstances, purchases from the applicable QF would require [Idaho Power] to dispatch higher cost, less efficient resources to serve system load or to make base load resources unavailable for serving the next anticipated load.” The utility also argued that moving base load generation would create additional costs, which are then passed on to its ratepayers

Idaho Wind disagreed.

It argued that allowing Idaho Power to curtail wind generation unilaterally “would expose Idaho Wind’s QFs and similarly situated QFs to immediate financial harm” given that producers “are only paid for the hours when energy is produced.”

Idaho Wind argued that PURPA “does not override a utility’s legally enforceable obligation to purchase from QFs pursuant to a contract with fixed avoided-cost rates established at the time the obligation is incurred.”

Further, Idaho Wind argued that the power prices set in the PPAs “already account for the variability and operational challenges that Idaho Power seeks to redress with Schedule 74 curtailments.”

FERC agreed with Idaho Wind, noting that “the rates set in the PPAs for such bilateral transactions – which reflect avoided costs calculated at the time the obligations were incurred – already represent each party’s taking into consideration various changes in circumstances over time such as light loading when deciding to be bound by the PPAs’ terms.”

However, FERC made a point of emphasizing that its ruling fell within narrow parameters: “[W]e emphasize that in the case before us we are addressing sales pursuant to long-term PPAs, i.e., sales pursuant to ‘contractual or other legally enforceable obligations’.”

The Idaho PUC, Idaho Power, and PacifiCorp had argued that Idaho Wind’s petition should be dismissed as premature because Idaho Power’s proposed Schedule 74 is still pending before the PUC.

Four of the five FERC commissioners disagreed.

While acknowledging that Idaho Power’s proposed new tariff and the curtailment provisions have not been approved by the PUC, FERC found that “Schedule 74 is inconsistent with PURPA and that, if approved by the Idaho Commission or applied unilaterally, would violate PURPA and commission regulations implementing PURPA.”

Commissioner Tony Clark cast the lone dissenting vote. In his dissenting option, he said the matter was “unripe for commission review.”

“The commission should discourage parties from seeking FERC intervention in pending state proceedings in all but the most extraordinary circumstances,” Clark wrote.

“By this order, the commission is allowing one party in a state proceeding to cherry-pick a single issue in a larger, ongoing case.  By putting its thumb on the scale prior to the state commission even finishing its work, we could inhibit the parties’ willingness, or the Idaho Commission’s ability, to come to a flexible, tailored accommodation that may meet the concerns of multiple parties—most important, Idaho consumers,” Clark said.