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Duke Energy defends push for shorter solar contracts

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Duke Energy defends push for shorter solar contracts

Duke Energy Corp. wants to implement shorter power purchase agreements with solar developers in certain parts of North Carolina, but it maintains it is following the law.

"We would like to move to a five-year contract term on PPAs that don't qualify for the standard offer," Duke Energy spokesman Randy Wheeless said. "What we would like to do is move to a more competitive bidding process to acquire solar in the future."

California solar developer Cypress Creek Renewables LLC and several of its subsidiaries contend that Duke Energy utilities Duke Energy Carolinas LLC and Duke Energy Progress LLC are violating federal and North Carolina law by refusing to provide indicative pricing or enter into long-term power purchase agreements with their qualifying facilities.

"Contrary to past practice, Duke has refused to provide rates for (or enter into) a long-term PPA to each of the solar [qualifying facilities], and instead has announced its intention, going forward, only to enter into 5-year PPAs with [qualifying facilities] that are not eligible for the Commission-approved standard offer rates and contract terms," Cypress Creek and its subsidiaries wrote in a Jan. 27 complaint and request for declaratory judgment filed with the North Carolina Utilities Commission. "Through this action, complainants seek to compel Duke to fulfill its legal obligation to enter into a financially viable long-term PPA with each of the solar [qualifying facilities]." (NCUC dockets E-7, Sub 1137; E-2, Sub 1136)

Cypress Creek notes that electric utilities are obligated to purchase the energy and capacity of co-generation facilities and small power production facilities that meet certain requirements under the Public Utility Regulatory Policies Act, or PURPA. FERC is charged with implementing the mandatory purchase and sale of power under PURPA, while state regulatory agencies are required to follow FERC's regulations.

The solar developer and Duke Energy agree that there is no minimum or maximum term for contracts initiated under PURPA. Cypress Creek, however, said FERC has held that qualifying facilities are entitled to contracts "long enough to allow [qualifying facilities] reasonable opportunities to attract capital from potential investors."

Cypress Creek and its subsidiaries have proposed the construction of six renewable energy facilities, ranging in size from 22 MW to 80 MW, but argue they are "unable to secure financing for construction" based on the five-year contract term offered by Duke Energy.

"These are PURPA projects that we really don't need in eastern North Carolina, which has a lot of solar," Wheeless said. "We still have an obligation under PURPA, but we think five-year contracts make more sense there to us and our customers."

The spokesman added that solar developers and experts point out that the cost of solar is going down. "So, if that's the case, what benefit is it to us or our customers to sign longer term contracts for projects that we really don't need that badly?" Wheeless said. "Why not ... if the price of solar is gonna keep coming down, have a shorter contract and take advantage of that lower cost five years for now?"

Cypress Creek, in its complaint, also pointed out that Duke Energy is backing changes to the commission's traditional standard contract policy for renewable energy projects by limiting the threshold and term of mandated avoided cost contracts under PURPA.

Duke Energy's utilities, along with Dominion North Carolina Power, want the commission to cap eligibility for their proposed standard avoided cost tariff at 1 MW and reduce the maximum standard qualifying facility contract term to 10 years, among other changes.

The utilities said the state's existing policies "have created a distorted marketplace for solar projects" that could have an adverse and costly impact on customers. Duke Energy's utilities also note that 60% of PURPA projects are located in North Carolina partly because the price and terms they are mandated to offer these projects are "unnecessarily generous" when compared to other utilities and states.

"North Carolina is No. 1 in the nation for PURPA projects," Wheeless said. "But I don't know if that quite benefits our customers as much as it should."

The spokesman said a more competitive process would be more beneficial to customers.

As an example, Wheeless noted that Duke Energy Carolinas issued a request for proposals for renewable energy in late 2016. That request incorporates 15-year contract terms.

"It's not that we want all solar contracts to be five-year [agreements]. In areas where we need it, where we think it's valuable to us, we're offering 15-year terms," Wheeless said.

Dominion Resources Inc. subsidiary Dominion North Carolina Power is known legally as Virginia Electric and Power Co.