Wyoming PSC rejects PacifiCorp effort to cut QF contracts to three years

The Wyoming Public Service Commission, in a June 23 order, rejected an application from PacifiCorp d/b/a Rocky Mountain Power (RMP) requesting authority to modify the contract term of its Public Utility Regulatory Policies Act of 1978 (PURPA) power purchase agreements (PPAs) with Qualifying Facilities (QFs).

Intervenors in the case included EverPower Wind Holdings Inc.

In August 2015, Rocky Mountain Power submitted an application asking the commission to issue an order approving a reduction of the maximum contract term of prospective PPAs with QFs under PURPA from 20 to three years consistent with the company’s hedging and trading policies and practices for non-PURPA energy contracts, and to align with its Integrated Resource Plan (IRP) cycle.

The company also requested approval to modify its avoided cost Partial Displacement Differential Revenue requirement (PDDRR) methodology to reflect all active QF projects in the pricing queue ahead of any newly proposed QF requests for indicative pricing.

In its application, RMP stated that it is necessary to reduce the maximum contract term for PURPA contracts from 20 to three years due to a dramatic increase in QF pricing requests it has received in 2014 and 2015. RMP asserted the current cornmission-approved PURPA contract length puts retail customers at risk of harm due to significant and unnecessary exposure to long-term price risk. Further, RMP stated that the 20-year maximum QF contract term is inconsistent with the hedging policy put in place as a direct result of input from the company’s stakeholders. 

Said the June 23 PSC order: “The Commission denies RMP’s Application for authority to amend Schedules 37 and 38 to reduce the contract term of its PURPA PPAs with QFs from 20 years to three years. The Commission concludes that RMP failed to meet its burden to demonstrate that the proposed modification of the Wyoming PPA contracts is reasonable, will solve an alleged system-wide problem, and is in the public interest of Wyoming ratepayers.

“Rather than approving the pending application, the Commission directs the Company to initiate a collaborative process with relevant stakeholders to address substantive and procedural reforms to Wyoming’s PPA process and PDDRR avoided cost methodology. In this context, the Commission denies the Company’s request to modify its avoided cost PDDRR methodology described in Schedules 37 and 38 to reflect all active QF projects in the pricing queue ahead of any newly proposed Wyoming QF requests for indicative pricing on a similar basis, and leaves this approach for consideration in the collaborative process.”

RMP sought to align the QF contract duration with its 36-month hedging policy and its two-year IRP planning cycle. According to the company, aligning the QF contract duration would ensure pricing remains consistent with the most current information regarding RMP’s resource needs. RMP contended its request will not eliminate the “must purchase” obligation of PURPA; rather, the QF PPAs would be renegotiated every three years and would include the avoided cost pricing current at that time.

This isn’t the only recent defeat for the utility in this area. 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 PURPA. Based on the information developed through that proceeding, the Oregon 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.

Said the Oregon decision: “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.”

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.