Week Ending July 17, 2020

PURPA Final Rule Approved, Net Metering Petition Denied at FERC Meeting

This Article Appears as Published in Foster Report No 3308
PURPA Final Rule Approved, Net Metering Petition Denied at FERC Meeting

A final rule to ease utility obligations associated with the Public Utility Regulatory Policies Act (PURPA), and the dismissal of a petition to undermine net metering were two major items FERC tackled at the July 16 open meeting.

Both cases involve small renewable power projects, with solar and wind power trade commending the decision on net metering and examining the final rule on PURPA to assess the implications. The Solar Energy Industries Association (SEIA) didn’t take long to comment that the PURPA changes will stifle the intention of the law and allow utilities to strengthen their monopolies. “We will continue advocating for reforms that strengthen PURPA and allow solar to compete nationwide,” said Katherine Gensler, vice president of regulatory affairs at SEIA.

Gensler commented that SEIA is glad to see some of the group’s proposals in the final rule.

The final rule (RM19-15, AD16-16) brings FERC regulations implementing the law into the modern era while still encouraging the development of qualifying facilities (QFs), the Commission said in a statement. “It’s been my view from the start that FERC should modernize our regulations in ways that not only meet our statutory obligations, but also protect consumers and preserve competition,” FERC Chairman Neil Chatterjee said. “Today’s rule accomplishes those goals,” he said.

The final rule provides flexibility to state regulators in establishing avoided cost rates for QF sales to utilities inside and outside of organized wholesale power markets. It also grants states the ability to require energy rates, but not capacity rates, to vary during the life of a QF contract.

For QFs in independent system operator (ISO) regions, the locational marginal price (LMP) in those markets can be used as avoided cost rates, subject to a rebuttable presumption that the LMP represents the avoided costs of utilities in those markets. States where QFs sell to utilities outside of ISO regions would be able to use prices at market hubs using natural gas prices and power plant heat rates, FERC explained.

The order modified the “one-mile rule” to discourage breaking large renewable power projects into smaller QFs under the law and lowered the rebuttable presumption for nondiscriminatory access to power markets from 20 MW to 5 MW.

To establish a legally enforceable purchase obligation for QFs, the final rule requires QF owners to show commercial viability and financial commitments to build facilities under state-determined criteria. The rule calls for states to develop “objective and reasonable criteria” to determine a QFs commercial viability before a QF owner is entitled to a contract with a utility or a legally enforceable obligation.

The PURPA final rule was approved with a partial dissent from Commissioner Richard Glick, who listed his concerns similar to the notice of proposed rulemaking that was issued in November 2019.

Glick said the final rule will harm the development of QFs and took issue with a characterization that his previous comments dubbed the proposed changes an attempt to repeal PURPA. “I said it would gut the statute, and I think it’s still true,” he said during the meeting.

Besides being displeased with the final rule, Glick said he is disappointed with how FERC arrived at this point, without further analysis or collection of testimony or evidence suggested by parties in their comments on the proposed rule. The developments have FERC voting on a major rule to gut PURPA with little analysis, he said.

Commissioners who voted for the order said the renewable sector has thrived and regulations need to be updated to account for market changes. The final rule has FERC carrying out its statutory duty of protecting consumers from paying excessive rates, Commissioner Bernard McNamee said. The changes are needed because it is likely that utility customers were paying in between $2.2 billion and $3.9 billion too much for power under utility PURPA contracts, he said.

Chatterjee also discussed with FERC staff how the rule will still encourage development of QFs and provide states with sufficient flexibility on rates from QFs.

The final rule takes effect 120 days after publication in the Federal Register.

The order on net metering (EL20-42) rejects the petition for a declaratory order from the New England Ratepayers Association, which did not provide details on its members and raised all kinds of concerns among those who support rooftop solar facilities.

The order was not available at press time July 16. It was approved on a 4-0 vote, with concurring statements to come from McNamee and Commissioner James Danly. The petition did not identify a specific harm or controversy that merited a generic finding through a declaratory order, Chatterjee said.

The head of the American Council on Renewable Energy (ACORE), Greg Wetstone, praised the order rejecting the petition. “While we are gratified that today’s decision respects the Federal Power Act, we will continue to stay vigilant about protecting forward-looking state energy policies that deliver the pollution-free renewable power Americans want and deserve,” Wetstone said.

Numerous other groups were praising the decision, with some of them noting that more than 57,000 comments were filed in opposition to the request and only 22 comments were filed in support of it.

Net metering compensates rooftop solar project owners for any excess power that is send back to the power grid, and utilities in some parts of the country have argued that the compensation plans of states harms their bottom line.

By Tom Tiernan ttiernan@fosterreport.com

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