North Carolina commission refuses to set PPA length in Dominion, Ecoplexus dispute

The North Carolina Utilities Commission on June 24 rejected a Feb. 4 petition from Fresh Air Energy XIX LLC, Fresh Air Energy XXV LLC, Fresh Air Energy XXXIII LLC, Fresh Air Energy XXXV LLC and Fresh Air Energy XXXVII LLC (collectively called “Solar QFs”) and Ecoplexus Inc. for arbitration against Virginia Electric and Power d/b/a Dominion North Carolina Power (DNCP).

The Solar QFs are five renewable energy projects located in DNCP’s service territory and the complainants said each is entitled to sell power to DNCP under terms established under the Public Utility Regulatory Policies Act of 1978 (PURPA). Each of them has obtained a certificate of public convenience and necessity (CPCN) from the commission and each has committed to sell its electric output to DNCP under a negotiated long term power purchase agreement (PPA) for qualifying facilities having a capacity in excess of 5 MW, thus creating a legally enforceable obligation upon DNCP to purchase the Solar QF’s electrical output.

The complainants sought commission relief related to three unresolved issues: whether the regulatory disallowance provision offered by DNCP is consistent with prior regulatory disallowance provisions agreed upon by DNCP and other Ecoplexus QFs; whether DNCP should be required to offer complainants a 15-year term for the PPA; and whether DNCP should be required to offer complainants levelized rates similar to the levelized rates previously agreed upon by DNCP and other Ecoplexus QFs.

Complainants agreed that the regulatory disallowance provision offered by DNCP includes the language previously approved by the xommission for such provisions. However, they asserted that the provision is not consistent with prior regulatory disallowance provisions agreed upon by DNCP and other Ecoplexus QFs.

The relief requested by complainants was that the commission treat their petition as a request for arbitration and that the commission arbitrate the unresolved issues.

In its answer, DNCP admitted that each of the Solar QFs has obtained a CPCN from the commission, each has been self-certified as a QF, and each has indicated to DNCP in a written communication dated Feb. 26, 2015, that the Solar QF was committed to selling its output to DNCP pursuant to a PPA to be negotiated between it and DNCP. Thus, DNCP agreed that each of the Solar QFs has the right under PURPA to sell its power to DNCP pursuant to a PPA negotiated between the Solar QF and DNCP. DNCP stated that it has offered each of the Solar QFs an identical PPA, with the only differences being the name of the Solar QF and the location and capacity information of each facility.

In addition, DNCP said that it previously negotiated and entered into PPAs with three other Ecoplexus QFs (called the “2015 PPAs”). However, DNCP maintained that the terms of those PPAs are not relevant to the terms being offered by DNCP in the present PPA negotiations because circumstances, including business risks and some of the commission’s avoided cost guidelines, have changed.

Moreover, DNCP stated that on Feb. 19, 2016, it provided the applicable avoided cost rates to the Solar QFs and that the rates were calculated in accordance with the commission’s Dec. 17, 2015, order issued in the 2014 biennial avoided cost proceeding. The complainants did not take issue with the rates offered by DNCP.

With regard to the unresolved issues, DNCP contended that: it has offered the Solar QFs a regulatory disallowance provision that complies with the commission’s guidelines governing such provisions; it is not required by PURPA or the commission’s guidelines to offer the Solar QFs a PPA with a 15-year term; and it is not required by PURPA or the commission’s guidelines to offer the Solar QFs a PPA with levelized rates.

On May 2, oral argument was held as scheduled. On May 20, complainants filed a status report stating that the parties continued to negotiate after the oral argument and have resolved the issues regarding the regulatory disallowance provision and levelized rates. Complainants provide the details of the resolution of these two issues under seal as confidential information. With regard to the third issue, complainants stated that the parties have been unable to agree on the term of the PPA and, therefore, they requested that the commission decide this issue. DNCP said it agrees with complainants explanation of the resolution of the regulatory disallowance provision and levelized rates issues. Further, DNCP confirmed that the parties are unable to reach agreement on the term of the PPA and request that the Commission render a decision on this issue.

The commission pointed out in the June 24 decision that for QFs between 5 MW and 20 MW in size, the commission has declined to require the electric utilities to offer PPAs of any stated length, thereby, at least by implication, signaling its intent that the length of those PPAs should be left to negotiation. “Consistent with such determination, the Commission declines to require DNCP to provide Complainants a PPA of a stated length,” said the June 24 decision.

The commission said its decision in this arbitration proceeding is also based on the fact that DNCP has offered the complainants another option with regard to the term of the PPA. “In the context of a negotiated PPA and in light of the facts of this case, the Commission does not find that DNCP’s negotiating position regarding the duration of the PPA is unreasonable,” it added. “Based on the foregoing and the record, the Commission concludes that the Complainants’ request that DNCP be required to enter into a PPA with Complainants’ QFs for a term of 15 years should be denied. Further, the Commission concludes that this Order is based on the unique facts of this docket and shall not be cited as precedent in future proceedings.”

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.