On June 15, 2012, Idaho Wind Partners 1, LLC (“Idaho Wind”) filed at FERC a petition for declaratory order, stating that a Qualifying Facility (“QF”) curtailment policy proposed by Idaho Power Company (“Idaho Power”) at the Idaho Public Utilities Commission (“Idaho PUC”) would violate the Public Utility Regulatory Policies Act (“PURPA”).
In the Idaho PUC case, Idaho Power proposed a new policy that would allow it to curtail purchases from QFs during low load periods when making such purchases would require Idaho Power to dispatch higher cost resources to serve system load or make baseload resources unavailable for serving the next anticipated load. The new policy would affect both new and pre-existing QF PPAs, including PPAs with fixed avoided cost rates, i.e., where avoided costs are established at the time of contracting, not at the time of delivery.
The dispute between the parties hinges on differing interpretations of Section 304(f) of the Commission’s PURPA regulations, which states that a utility “will not be required to purchase electric energy or capacity during any period which, due to operational circumstances, purchases from qualifying facilities will result in costs greater than those which the utility would incur if it did not make such purchases, but instead generated an equivalent amount of energy itself.”
While Idaho Power has taken the position (supported by Idaho PUC staff) that this provision applies to fixed avoided cost contracts, Idaho Wind argued in its FERC petition that PURPA does not allow the utility to unilaterally curtail purchases from such contracts. According to Idaho Wind, Section 304(f) applies only to those QF contracts where the avoided cost rate is determined at the time of delivery. Idaho Wind reasons that such an application makes sense because it essentially gives utilities a way to notify a QF that it should not deliver, as doing so would mean the QF would have to pay the utility to take its power. By contrast, Idaho Wind argues that parties to a fixed avoided cost rate contract have opted to calculate the rate on an average or composite basis that already reflects variations in the value of the purchase, and the parties intend that rate to be locked in for the entire term. Accordingly, Idaho Wind believes that Section 304(f) does not give Idaho Power the authority to unilaterally curtail QF purchases based on a claimed negative avoided cost rate at the time of delivery for such contracts.
A copy of the Idaho Wind Petition for Declaratory Order, filed in FERC Docket No. EL12-74, is available on the elibrary at www.ferc.gov.
The Idaho PUC docket, case number GNR E-11-03, is available here.