FERC tells Entergy Texas it can’t terminate power purchase deal with Goodyear

The members of the Federal Energy Regulatory told Entergy Texas in a Nov. 17 order that the utility can’t reject a Power Purchase Agreement with Goodyear Tire & Rubber Co.

On Aug. 9, Goodyear filed a complaint against Entergy Texas under section 306 of the Federal Power Act (FPA) and other FERC rules. Goodyear alleged that Entergy Texas’ notice of intent to terminate its Power Purchase Agreement (PPA) for purchases from Goodyear’s qualifying facilities (QF) located at Goodyear’s Beaumont Chemical Plant in Beaumont, Texas, is contrary to Entergy Texas’ obligation to purchase energy and capacity from Goodyear under section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA), and the commission’s order issued on Jan. 21, 2016.

Said the Nov. 17 order: “As discussed below, we grant Goodyear’s Complaint and find that Entergy Texas may not rely on the January 21 Order as a basis for terminating its PPA with Goodyear.”

In its Jan. 21 order, the commission granted Entergy’Corp.’s (NYSE: ETR) petition, pursuant to section 210(m) of PURPA, to terminate the Entergy Operating Companies’ mandatory purchase obligation to enter into new contracts or obligations with QFs greater than 20 MW in the Entergy Operating Companies’ service territory within the Midcontinent Independent System Operator region, with the exception of Dow Chemical Co.’s and Union Carbide Corp.’s greater-than-20-MW Plaquemines QF.   

Goodyear owns and operates two cogeneration facilities which support its chemical plant in Beaumont, Texas. Its Beaumont/West QF was self-certified in 1987 and has a net capacity of 13 MW. Its Beaumont/East QF was self-certified in 1999 and has a net capacity of 18.835 MW.

On April 22, 2016, Entergy Texas e-mailed Goodyear, stating that it planned to issue notices of termination of contracts to affected QFs, including Goodyear’s facilities. Goodyear responded to Entergy Texas, explaining that the termination of the must-purchase obligation granted in the Jan. 21 order is not applicable to Goodyear’s QFs. On June 6, 2016, Goodyear received a letter from Entergy Texas providing notice of termination of the PPA.

Goodyear asserts that, since its Beaumont/East QF and Beaumont/West QF were separately self-certified as under-20 MW QFs, the Jan. 21 order allowing Entergy to terminate its mandatory purchase obligation for over-20 MW QFs does not apply to Goodyear’s QFs.  Furthermore, Goodyear asserts that the energy from its Beaumont/West  QF (which is only operational when the chemical plant is operating) is fully utilized by the chemical plant, and that the PPA only applies to the Beaumont/East QF.

Goodyear argues that since only the energy from its Beaumont/East QF is available for sale, and since the Beaumont/East QF has a net capacity of 18.835 MW, the Jan. 21 order did not terminate Entergy’s mandatory purchase obligation as to that QF.  Goodyear further emphasizes that Entergy’s application for termination of its mandatory purchase obligation acknowledged that the Goodyear QF that is the subject of the PPA is an under-20 MW QF from which Entergy Texas remains obligated to purchase energy and capacity.

Entergy filed a motion to intervene and a request for extension of time in this case. As part of its request for extension of time, Entergy committed to extend the termination of the PPA between Goodyear and Entergy Texas by three months to Dec. 1, 2016. The commission granted Entergy’s request for extension of time.

Entergy argues that, regardless of Goodyear’s QF self-certifications, Goodyear’s two QFs should be considered as one unit for purposes of the Jan. 21 order, thereby allowing Entergy to terminate its mandatory purchase obligation. Entergy asserts that small QFs – less than or equal to 20 MW – have access to relevant markets. Entergy also argues that the commission has distinguished QFs based on size to reflect their ability to access markets. Entergy argues that: Goodyear owns both QFs; the QFs are located on the same site; the QFs are less than a half mile apart; and the energy produced by the QFs is commingled behind the meter with the excess sold to Entergy over a single point of interconnection. As such, Entergy argues that Goodyear’s facilities fall within the scope of relief granted by the Jan. 21 order, and thus are eligible for termination.

Said the Nov. 17 order: “In the January 21 Order, the Commission terminated Entergy’s obligation to purchase from QFs larger than 20 MW. Goodyear has self-certified two QFs, each smaller than 20 MW. Orders Nos. 688 and 688-A provide that a QF’s size for purposes of being relieved of the mandatory purchase obligation is determined by its certified size. Because each of Goodyear’s QFs was certified as smaller than 20 MW, the January 21 Order did not affect Entergy’s obligation to purchase from Goodyear’s QFs.”

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.