Minnesota PUC looks at Minnesota Power dispute with wind developers

The Minnesota Public Utilities Commission will be looking at its Dec. 13 meeting at the contested issue of whether Minnesota Power has legally-enforceable obligations to buy power from the Highwater Wind LLC and Gadwall Wind LLC projects.

In November 2011, Highwater and Gadwall filed a complaint with the commission against Minnesota Power (MP), commission staff noted in a Dec. 6 briefing paper that the commission will use as a reference at the Dec. 13 meeting. The petitioners claimed the commission has jurisdiction over this matter pursuant to Minnesota statute and the federal Public Utility Regulatory Policies Act (PURPA). The petitioners stated that in February 2011, they offered to sell and negotiate in good faith to finalize an agreement to sell to MP all production and capacity from their respective wind facilities at a price equal to MP’s nonrenewable energy full avoided cost rate.

The wind companies claim that a legally enforceable obligation under federal regulatuions has been created through their offer to sell its electric output to MP. They stated that under federal regulations a utility must purchase the energy offered by a qualifying facility (QF). At the time the petitioners made the offer to MP to sell its projects under PURPA, MP had not yet been relieved of its mandatory purchase obligations under PURPA, they argued.

  • Highwater is developing a 33-MW wind energy project in partnership with local landowners. The owners of Highwater include Allco Renewable Energy Ltd. and Minnesota farmers and potentially other local individuals residing in southwest Minnesota. Highwater certified the project as a QF through the filing of FERC Form 556 in February 2011. Highwater’s point of interconnection is on ITC Midwest LLC’s transmission system. Highwater has a shared facility arrangement with Jeffers South LLC under the Midwest ISO interconnection number G517. Highwater’s QF interconnects through G517 under an unexecuted large generator interconnection agreement (LGIA) that is subject to a proceeding at the FERC to determine the appropriate amount of network upgrades that should be allocated to the project.
  • Gadwall is developing a 51-MW wind energy project in partnership with landowners and rural communities. The petitioners said that the beneficial owners of Gadwall include Allco Renewable Energy, Minnesota farmers, and other local individuals residing in southwest Minnesota. Gadwall stated that it certified the project as a QF through the filing of FERC Form 556 in February 2011. Gadwall’s point of interconnection is on Northern States Power’s transmission system. The petitioners stated Gadwall’s QF interconnects through MISO interconnection number G520, which has an executed amended and restated LGIA dated in October 2011, which amended and restated the original LGIA dated in December 2007. The petitioners stated that Gadwall is part of a shared facility arrangement with Shetek Wind Inc. under the G520 LGIA.

Highwater and Gadwall are asking the commission to:

  • declare that legally enforceable obligations exists effective Feb. 15, 2011, between MP and each of Highwater and Gadwall;
  • determine the energy purchases rate for a 20-year power purchase agreement (PPA) term based upon MP’s properly determined projected avoided costs as of the time the obligation was incurred; and
  • declare that Highwater and Gadwall retain all Renewable Energy Credits (RECs).

MP told the commission that the petitioners do not have in place project financing, interconnection approvals for at least the Highwater project, have not begun the commission approval process for site permits, or identified whether turbine suppliers even have capacity available by Dec. 31, 2012. The petitioners have never been “ready, willing and able” to obligate these two wind projects, which nearly one year after submitting a FERC QF self-certification, are still in the early stages of development, the utility contended.

Staff outlines a lot of ways to look at this dispute

“It is clear that the Commission has the authority to decide whether a [Legally Enforceable Obligation] exists between MP and the Petitioners, and if so, when that LEO was formed,” staff wrote. “In the event of a dispute, Minn. Stat. § 216B.164, subd. 5, places the burden of proof on the utility. If the Commission finds that a LEO exists, the Commission can make a decision as to whether that date was February 15, 2011 or a later date, such as the date the petition was filed with the Commission. It is important to note that no negotiations between the Petitioners MP occurred after March 17, 2011. Additionally, it is unclear whether the Petitioners attempted to negotiate with Xcel Energy after the Petitioners claimed it established a LEO with Xcel Energy.”

Staff added; “If the Commission finds that a LEO with MP has not been formed solely on the basis that the Petitioners have nondiscriminatory access to a market, then the date that would have enabled the creation of a LEO becomes critical to this matter. The Highwater project is located in two service territories, one of which was relieved of its PURPA purchase obligations in 2008 and the other is a cooperative. The transmission owner, ITC Midwest, is not subject to the purchase obligations under PURPA. Therefore, it would be reasonable to find that Highwater had nondiscriminatory access to a market long before it claimed a LEO with MP. However, the Gadwall project is located in a service territory (Xcel Energy) that was relieved of its purchase obligations under PURPA after the Petitioners claimed a LEO with MP, but prior to filing this petition with the Commission.”

Due to the timing of relief of mandatory purchase obligations under PURPA for the affected utilities and when a LEO could be determined to have been created with MP, the commission could dismiss the portion of the petition that affects the Highwater project because Highwater had nondiscriminatory access to a market before it approached MP, staff added. “However, if the Commission finds that Gadwall also has nondiscriminatory access to a market, the Commission must address the issue of whether and when a LEO was formed. Alternatively, if the Commission finds whether the Petitioners had nondiscriminatory access to a market and termination of mandatory purchase obligations under PURPA for utilities serving the areas where the projects are located is irrelevant, then both projects would be subject to analysis of whether a LEO was formed.”

It would not be unreasonable to find that a LEO can only be created on the date a petition is filed with the commission, staff pointed out. “On the other hand, it would not be unreasonable to find that a LEO is created at the date at which the QF approaches the utility provided that there is enough evidence to support that a LEO was created, which is a separate issue. The Commission’s LS Power 1993 Order did not address the timing of when a LEO could be created except that it disagreed that LS Power had a LEO at the time it submitted its proposal to Xcel Energy based on the facts of that case. However, the Commission could further direct the parties to negotiate as it did in LS Power 1993 Order. Note that Commission in the LS Power 1993 Order found that Xcel Energy should not have unilaterally suspended negotiations without prior Commission approval, which is different from the facts in this case.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.