Dominion argues solar QF issues in North Carolina case

Virginia Electric and Power d/b/a Dominion North Carolina Power told the North Carolina Utilities Commission that three solar projects are too big to qualify for the avoided-cost program that the developer wants them to fit in under.

The utility is in a dispute with the project developers – Fresh Air Energy-II LLC (FAE II) and Fresh Air Energy-X LLC (FAE X) – over potential power purchase agreements (PPAs) for planned solar qualifying facilities (QFs).

FAE II is developing a 20 MW (ac) photovoltaic facility at 16825 Watson Seed Farm Road, North Whitakers, Nash County, N.C. (called the “Watson Seed Farm Facility”), and a 20 MW (ac) photovoltaic facility at 1245 Meadows Road, Williamston, Martin County, N.C. (the “Meadows Facility”). FAE X is developing a 20 MW (ac) photovoltaic facility located in Currituck County, adjacent to Shawboro Road in Moyock, N.C. (the Shawboro Facility”).

Each of these facilities has self-certified with the Federal Energy Regulatory Commission as a QF. The developers wish to enter into a separate PPA with Dominion North Carolina Power for all of the energy and capacity of each facility at the utility’s avoided costs pursuant to PURPA. FAE and Dominion have been engaged in good faith negotiations for a PPA for each facility since December 2013.

“The Company will continue to engage in free, open and good faith negotiations with FAE for a PPA at DNCP’s avoided costs for each Facility that is consistent with the requirements of PURPA and this Commission’s orders and policies implementing PURPA,” the utility said in the Sept. 3 brief. “The issues in controversy identified in the Petition for Arbitration concern the avoided cost energy and capacity rates under each PPA and one provision that is common to each PPA. Specifically, the issues are: (1) whether FAE is entitled to a PPA with pricing reflecting the same avoided costs and rate options contained in the Company’s currently effective Schedule 19-FP; (2) whether the cost of land should be included in the calculation of avoided capacity costs under PPAs between FAE and the Company; (3) what price the Company is required to pay FAE for capacity during periods when the Company has no need for incremental capacity; (4) whether the Company’s avoided energy cost rates ‘take into consideration the value of the typical diurnal profile of solar output”; (5) whether the Company’s avoided cost calculation should include purported fuel hedging benefits from solar generation; and (6) whether the Company can include a ‘Regulatory Disallowance Provision’ in the PPAs.”

In an Aug. 5 scheduling order, the state commission directed each FAE and DNCP to exchange information in a cooperative manner in order to understand each other’s position and obtain information to develop each one’s own position and to present that position to the commission, and to file with the commission a verified statement and any necessary exhibits setting forth its position as to the appropriate avoided cost rates and related terms for PPAs for the capacity and energy produced at FAE’s facilities. The Sept. 3 filing is DNCP’s Statement of Position.

Dominion says projects too large for the Schedule 19-FP program

In part, Dominion argued that because each of the FAE facilities is larger than 5 MW, FAE is not entitled either to a Schedule 19-FP contract for any of the facilities or to the avoided cost rates or options contained in Schedule 19-FP.

Although not eligible for Schedule 19-FP, under PURPA and this commission’s precedent, FAE is entitled to a PPA with avoided cost rates that are calculated as of the date of its legally enforceable obligation (LEO), Dominion added.

The commission issued FAE II a certificate of public convenience and necessity (CPCN) for the Shawboro Facility in December 2013, and issued CPCNs to FAE II for the Watson Seed Farm Facility and the Meadows Facility in February and March of this year, respectively.

On Jan. 17, DNCP provided FAE with avoided cost pricing using data available as of Dec. 4, 2013, which was the LEO date for the Shawboro Facility. The most important component of the data used to calculate avoided costs for FAE was the company’s 2013 Integrated Resource Plan (IRP). Because there were no changes to the company’s long-term cost projections between the date of the Shawboro Facility LEO (Dec. 4, 2013) and the March 20, 2014, LEO for the Meadows Facility, the avoided cost prices provided to FAE in January 2014 are also applicable to the Meadows Facility and the Watson Seed Farm Facility, Dominion noted.

It added that the avoided cost rates provided by DNCP for each FAE facility are consistent with DNCP’s obligation under PURPA to purchase the facility’s output at avoided costs “calculated at the time the obligation is incurred.”

“It is true, as FAE points out in its Petition for Arbitration, that the rates in the FAE PPAs are lower than the Schedule 19-FP rates approved by the Commission in the 2012 Biennial Order,” Dominion added. “That fact, however, is not relevant, as Schedule 19-FP rates are not applicable to FAE. PURPA guarantees QFs rates based on avoided costs calculated at the time an LEO is established, and that is what DNCP has provided to FAE.”

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.