Enviro group: North Carolina decision will aid renewables development

The Southern Environmental Law Center on Dec. 18 lauded a Dec. 17 decision from the North Carolina Utilities Commission on qualifying facility (QF) payment rates and terms as a victory for renewable energy projects and their developers.

The commission issued the Dec. 17 o order in its biennial proceeding to set the rates that the state’s electric utilities must pay when they buy power from independent power producers, such as solar project companies. Earlier in the proceeding, the commission rejected changes proposed by subsidiaries of Duke Energy (NYSE: DUK) and Dominion Resources (NYSE: D), and recognized that independent power producers have a right to fair rates and contract terms when they sell power to the state’s electric utilities, the center said. In the Dec. 17 order, the commission required the utilities to revise their proposed rates and contracts and file new versions within 30 days.

“Thanks to the Utilities Commission’s ruling, the outlook for renewable energy in North Carolina remains sunny. The rates and standard contract terms required by the Commission will allow independent power producers a fair opportunity to keep selling clean, renewable power to our state’s electric utilities, creating jobs and allowing utilities to pass on the benefits of cost-effective renewable energy to their customers,” said Gudrun Thompson, an attorney with the Southern Environmental Law Center, which represented the Southern Alliance for Clean Energy in the proceedings.

This decision came in the second phase of the 2014 biennial proceedings held by the North Carolina commission under the Public Utility Regulatory Policies Act of 1978 (PURPA) and the Federal Energy Regulatory Commission regulations implementing those provisions, which delegated to this Commission certain responsibilities for determining each utility’s avoided costs with respect to rates for purchases from qualifying cogenerators and small power production facilities.

Under Section 210 of PURPA, cogeneration facilities and small power production facilities that meet certain standards can become “qualifying facilities” (QFs). Each electric utility is required under Section 210 of PURPA to offer to purchase available electric energy from cogeneration and small power production facilities that obtain QF status under Section 210 of PURPA. For such purchases, electric utilities are required to pay rates which are just and reasonable to the ratepayers of the utility, are in the public interest, and do not discriminate against cogenerators or small power producers. 

The North Carolina sommission determined to implement Section 210 of PURPA and the related FERC regulations by holding biennial proceedings. In prior biennial proceedings, the Commission has determined separate utility-specific avoided cost rates to be paid by the electric utilities to the QFs with which they interconnect. The commission also has reviewed and approved other related matters involving the relationship between the electric utilities and such QFs, such as terms and conditions of service, contractual arrangements, and interconnection charges.

For the purpose of considering various issues raised in the 2012 avoided cost proceeding, the commission initiated the first phase of the 2014 avoided cost proceeding in advance of the filing of new proposed rates, stating that such rates would be required by a subsequent commission order. Duke Energy Carolinas (DEC), Duke Energy Progress (DEP) Virginia Electric and Power d/b/a Dominion North Carolina Power (DNCP), Western Carolina University (WCU), and New River Light and Power Co. were made parties to the proceeding.

The Dec. 17 commission decision said in part: “It is appropriate for DEC, DEP, and DNCP to be required to offer long-term levelized capacity payments and energy payments for five-year, ten-year, and 15-year periods as standard options to (a) hydroelectric QFs owned or operated by small power producers as defined in G.S. 62-3(27a) contracting to sell five MW or less capacity and (b) non-hydroelectric QFs fueled by trash or methane derived from landfills, hog waste, poultry waste, solar, wind, and non-animal forms of biomass contracting to sell five MW or less capacity. The standard levelized rate options of ten or more years should include a condition making contracts under those options renewable for subsequent terms at the option of the utility on substantially the same terms and provisions and at a rate either (1) mutually agreed upon by the parties negotiating in good faith and taking into consideration the utility’s then avoided cost rates and other relevant factors, or (2) set by arbitration.

“DEC, DEP, and DNCP should offer their standard five-year levelized rate option to all other QFs contracting to sell three MW or less capacity. DNCP should continue to offer, as an alternative to avoided cost rates derived using the peaker method, avoided cost rates based upon market clearing prices derived from the markets operated by PJM Interconnection, LLC (PJM), subject to the same conditions as approved in the Commission’s Order Establishing Standard Rates and Contract Terms for Qualifying Facilities in the 2006 biennial avoided cost proceeding in Docket No. E-100, Sub 106 (Sub 106 Order).

“It is appropriate that DEC, DEP, and DNCP offer QFs not eligible for the standard long-term levelized rates the following three options if the utility has a Commission-recognized active solicitation: (a) participating in the utility’s competitive bidding process, (b) negotiating a contract and rates with the utility, or (c) selling energy at the utility’s Commission-established variable energy rate. If the utility does not have a solicitation underway, it is appropriate that any unresolved issues arising during such negotiations be subject to arbitration by the Commission at the request of either the utility, the QF or both for the purpose of determining the utility’s actual avoided cost, including both capacity and energy components, as appropriate; however, only if the QF is prepared to commit its capacity to the utility for a period of at least two years.

“Whether there is an active solicitation underway or not, it is appropriate that QFs not eligible for the standard long-term levelized rates have the option of selling into the wholesale market. It is appropriate that the exact beginning and ending points of an active solicitation be determined by motion to, and order of, the Commission. Unless there is such a Commission order, it will be assumed that there is no solicitation is underway. If the variable energy rate option is chosen, such rate may not be locked in by a contract term, but shall instead change as determined by the Commission in the next biennial proceeding.”

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.