FERC rejects Northern States Power request over QF obligations for hydro facility

The members of the Federal Energy Regulatory Commission on May 14 rejected a request by Northern States Power to terminate its obligation to buy power from a hydroelectric facility.

On Feb. 18, the Northern States Power-Minnesota (NSPM) subsidiary of Xcel Energy (NYSE: XEL) filed an application under section 210(m) of the Public Utility Regulatory Policies Act of 1978 (PURPA) and section 292.309(a) of the commission’s regulations. NSPM sought termination of its obligation to purchase electric energy and capacity from an interconnecting run-of-the-river hydroelectric qualifying facility (QF) with a net capacity of 17.92 MW owned by Twin Cities Hydro LLC.

“In this order, we deny NSPM’s request to terminate its mandatory purchase obligation for the Twin Cities QF, as discussed below,” said the May 14 order.

In 2011, the commission terminated NSPM’s mandatory purchase obligation to purchase capacity and energy from new contracts and obligations for QFs larger than 20 MW in its service territory within Midcontinent Independent System Operator (MISO) system. The termination of NSPM’s mandatory purchase obligation was based on the finding that the MISO markets qualify as markets that warrant termination of the mandatory purchase obligation and on the rebuttable presumption that QFs larger than 20 MW have nondiscriminatory access to the MISO markets.

Notwithstanding that, the commission in Order No. 688 also created another rebuttable presumption; that QFs with a net capacity of 20 MW or below do not have nondiscriminatory access to markets sufficient to warrant termination of the mandatory purchase obligation. In creating this rebuttable presumption the commission found persuasive arguments that some QFs may, in practice, not have nondiscriminatory access to markets in light of their small size. To overcome this rebuttable presumption that smaller QFs lack nondiscriminatory access to markets, the electric utility seeking termination of its purchase obligation must make additional showings to demonstrate on a QF by QF basis, that each small QF, in fact, has nondiscriminatory access to the relevant wholesale markets.

Order No. 688 placed the burden of proof on the electric utility to demonstrate that a small QF has nondiscriminatory access to the markets of which the electric utility is a member (i.e., in this case, MISO), and explained that “relevant evidence may include the extent to which the QF has been participating in the market or is owned by, or is an affiliate of, a[n] entity that has been participating in the relevant market.”

NSPM’s principal argument for terminating its PURPA mandatory purchase obligation with the Twin Cities QF is based on its contention that the Twin Cities QF has nondiscriminatory access to the MISO markets. Specifically, NSPM contended that Twin Cities has been selling energy into the wholesale energy markets of MISO, and that Twin Cities is affiliated with experienced hydroelectric plant operators. These facts, NSPM argued, refute the rebuttable presumption that Twin Cities, as a small QF, lacks nondiscriminatory access to the MISO markets.

NSPM explained that, historically, Twin Cities and NSPM had entered into both a Qualifying Facility Generator Distribution Interconnection and Operating Agreement and a Distribution Wheeling Service Agreement, effective March 31, 2008, facilitating the sale of energy from the Twin Cities QF into the MISO wholesale energy market. In accordance with the terms of the Distribution Wheeling Service Agreement, NSPM provides distribution wheeling service from the Twin Cities QF to NSPM’s Merriam Park Substation, which is under the functional control of MISO.

Based on this distribution arrangement, NSPM asserts that, since March 2008, the Twin Cities QF has had the ability and did in fact participate in the MISO wholesale energy market, and that Twin Cities has been able to pay the distribution rate for firm point-to-point distribution wheeling service on NSPM’s distribution facilities.

The May 14 FERC order said: “Based on the evidence presented in this proceeding, the Commission finds that NSPM has not met its burden of proof to be relieved of its PURPA mandatory purchase obligation with respect to the Twin Cities QF.”

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.