Oregon PUC refuses PacifiCorp/Idaho Power bids to cut QF contract lengths

In what the Sierra Club is calling a victory for clean energy, the Oregon Public Utility Commission on March 29 responded to a PacifiCorp d/b/a Pacific Power application to modify the company’s obligations under the Public Utility Regulatory Policies Act (PURPA) related to power purchase agreements (PPAs) with wind and solar qualifying facilities (QFs).

Based on the information developed through this proceeding, the commission decided to reduce the eligibility cap for avoided costs prices in standard contracts to 3 MW for solar QFs. The commission denied the company’s request to reduce the negotiated contract term from 20 years to two years for all projects above 100 kW in size.

PURPA, federal legislation enacted in 1978, has the primary purpose of providing a market for the electricity produced by small power producers and co-generators. Although PURPA is a federal law, states are responsible for implementing significant aspects of the law, and Oregon has enacted its own complementary legislation. In several previous dockets, the PUC has considered, applied, and revised the rates, terms, and conditions for QF PPAs in Oregon. Two of those orders are relevant to this proceeding. In one, it provided QFs with nameplate capacity of 10 MW and below the opportunity to enter into standard contracts for 20 years, with 15-year fixed prices. The PUC later affirmed the 10 MW eligibility cap and 20-year term for standard contracts.

In May 2015, PacifiCorp filed an application to modify the terms and conditions under which the company enters into PPAs with QFs. The company asked that the commission:

  • reduce the flxed-price term of QF PPAs from 15 years to three years; and
  • lower the eligibility cap for standard QF pricing and PPAs from 10 MW to 100 kW for wind and solar QFs.

Over the years, the PUC has ncreased the nameplate capacity of QFs eligible for standard contracts – first to 1 MW in 1991, and then to 10 MW in 2005. Due to unprecedented growth in QF activity in PacifiCorp’s service territory, it recently granted the company’s request for temporary relief and lowered the eligibility cap for standard contracts to 3 MW for solar QF projects.

Said the March 29 PUC order: “We now address whether to modify the 10 MW eligibility cap on a more permanent basis. Any change to the standard contract eligibility threshold should be targeted to remedy specific and verified problems PaclfiCorp has had with the QF contracting process. Based on our review, we conclude that the threshold for standard contracts should be reduced on a more permanent basis. In 2015, a large developer executed standard contracts with PaciflCorp for seven 10 MW solar facilities and one 8 MW solar facility over a one week period and another developer executed five standard contracts for 36.5 MW of solar on one day. Although the vast majority of the projects were for 5 MW and above, and most were 10 MW, there were three that were 3 MW or less. This indicates that QF projects located in PacifiCorp’s service area as small as 3 MW can be viable. Accordingly, we find that the eligibility threshold should be 3 MW for solar projects.

“We restrict our decision, however, to only the avoided cost prices contained in the standard contracts. A primary advantage of the standard contract is that it guarantees for the applicant the certainty affixed avoided cost rates for the project’s output over a long term. It is primarily for this reason that PacifiCorp sought to decrease the eligible nameplate capacity for QF projects. We find no factual basis to support a reduction to the eligibility threshold for wind QFs. Thus, we conclude that the eligibility standard should remain at 10 MW for wind QF projects.

“PacifiCorp seeks to shorten the contract term for both standard and negotiated QF contracts to a two-year minimum. Other parties oppose the company’s proposal on both legal and policy grounds. For reasons set forth in Order No. 16-129, issued concurrently with this order, we adhere to our current policy. We conclude that [state statute] does not mandate a particular term for QF contracts, and that our use of 20-year contracts, with prices fixed at avoided costs for 15 years followed by indexed pricing for the remaining five years, continues to have merit.”

The Sierra Club said in a March 30 reaction statement that PacifiCorp in this case had proposed to “dramatically” shorten the length of contract terms it is required to provide to independent wind and solar developers from 20 years to only three years. The utility’s plan would have effectively stopped independent renewable energy development in Oregon’s burgeoning clean energy industry, the club said.

Amy Hojnowski, Senior Campaign Representative for the Sierra Club’s Beyond Coal campaign, said: “Oregon families and communities want more local clean energy to power our homes and communities. Yet Pacific Power’s request would have undercut an important sector of the clean energy industry that has provided affordable power to Oregonians and creates good new jobs. On the heels of historic legislation that will double Oregon’s commitment to clean energy and move our state off of coal, the Public Utility Commission’s decision will help ensure the continued growth of homegrown clean, renewable energy like wind and solar.”

The club said PacifiCorp’s “attack” on PURPA in Oregon follows a trend across the country. The utility, owned by investor Warren Buffett’s Berkshire Hathaway Energy, has sought similar changes before state bodies in Idaho, Utah and Wyoming, and in 2015 failed to push through a bill in Congress that would have allowed an end run around PURPA, the club added.

Commission decides similar case of Idaho Power

The Oregon PUC on March 29 also responded to Idaho Power applications to modify the terms and conditions governing the company s obligations under PURPA as they relate to power purchase agreements with QFs. “Based on the information developed through this proceeding, we propose to reduce the eligibility cap for avoided costs prices in standard contracts to 3 megawatts (MW) for solar QFs,” said the March 29 order. “We deny the company’s request to reduce the negotiated contract term from 20 years to 2 years for all projects above 100 kilowatts (kW), but approve Idaho Power’s application for a mid-cycle update and postpone the company’s stated need for an additional major resource until 2021.”

Three prior commission decisions are relevant to this Idaho Power proceeding.

  • First, the commission provided QFs with nameplate capacity of 10 MW and below the opportunity to enter into standard contracts for 20 years, with 15-year fixed prices.
  • Second, the PUC addressed the issue of when a utility should be considered resource deficient for purposes of setting avoided cost prices. In that order, it determined that the demarcation of resource sufficiency and deficiency would be based on the start date of the first major resource acquisition in a utility’s most recently acknowledged Integrated Resource Plan (IRP) Action Plan. Idaho Power’s current standard avoided cost prices are based on a resource deficiency period beginning in 2016.
  • Third, the commission reviewed its prior decisions and maintained the 10 MW eligibility cap and 20-year term for standard contracts, reasoning that standard contract terms are intended to reduce transaction costs associated with QF contract negotiation. In addition, it decided not to include solar resource integration costs in the calculation of standard avoided cost rates, but committed to revisit that issue in the future after more solar development occurs.

In April 2015, Idaho Power filed three applications to modify the terms and conditions under which the company enters into PPAs with QFs. Specifically, Idaho Power requested that the commission:

  • lower Idaho Power’s standard contract eligibility cap for wind and solar QFs to 100 kW and reduce the term for negotiated (or “non-standard”) contracts to two years;
  • approve a solar integration charge; and
  • modify the company’s resource sufficiency determination.
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.