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Solar group asks FERC to protect small renewable plants as PURPA changes loom

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Solar group asks FERC to protect small renewable plants as PURPA changes loom

A U.S. law aimed at requiring utilities to buy power from small renewable and cogeneration power plants could be enhanced to improve market competition but must still prevent discrimination against independent generators, a key solar industry trade group told federal regulators.

The comments come as the Federal Energy Regulatory Commission is said to be considering changes that could be released as soon as September to its implementing regulations for the Public Utility Regulatory Policies Act, or PURPA. The law, which the U.S. Congress passed in 1978, was intended to promote greater reliance on domestic renewable and alternative fuels in response to the 1973 oil crisis.

Although the development of larger renewable energy facilities has jumped in recent years, PURPA defenders say the mandate is still necessary to encourage diversity of supply and check the monopoly power of vertically integrated utilities.

"Despite some significant advances in competition in the electric power industry since 1978, in vertically integrated territories PURPA remains critical to maintaining a minimal level of competition with monopoly utilities, which is essential to reduce costs and drive innovation for the benefit of ratepayers," the Solar Energy Industries Association, or SEIA, said in comments filed Aug. 28 with the commission in a related docket (FERC docket AD16-16).

The comments were partly aimed at resisting what SEIA said is a push from some stakeholders, including the National Association of Regulatory Utility Commissioners, or NARUC, to allow utility-run competitive power solicitations to relieve utilities of PURPA's must-purchase obligations.

Under the more than 40-year-old law, utilities must buy power from renewable facilities with less than 80 MW of capacity or cogeneration plants of any size. In 2005, Congress updated PURPA to allow FERC to exempt utilities from the law's mandatory purchase obligations if a qualifying facility, or QF, has nondiscriminatory access to wholesale markets.

As a result, FERC established a rebuttable presumption that QFs larger than 20 MW that operate in regions with auction-based, day-ahead and real‑time markets have nondiscriminatory access to wholesale markets and therefore no longer need PURPA's mandatory purchase requirement protections. QFs with a net capacity of 20 MW or less, however, would be considered not to have access to such markets.

Even after those changes, lawmakers and some large utilities have pressed to further ease PURPA's requirements. With the commission soon to have a GOP majority, some industry members have said FERC could propose revisions this autumn to its PURPA implementing regulations.

SEIA proposal

With the potential rulemaking looming, SEIA proposed a bidding program that would relieve utilities of their obligation to pay QFs for avoided capacity costs when the utility meets all its needs "through a fair and open competitive solicitation."

Under the proposal, utilities in states that establish a "completely non-discriminatory process" for procuring energy and capacity from new sources should not have to buy power from QFs that do not prevail in a competitive solicitation. But if the utility does not secure all its energy and capacity needs through the solicitation, that utility must remain obligated to pay QFs for energy and capacity at an avoided cost rate that equals the clearing price from the competitive solicitation, SEIA said.

Determination of capacity needs must be linked to the utility's integrated resource plan, and the purchasing utilities must offer nondiscriminatory access to transmission and interconnection services, the group added. SEIA also said an additional FERC technical conference is warranted to develop rules for competitive bidding programs and "ensure sufficient protections are in place to prevent discrimination against QFs."

Despite being open to increased use of solicitations, SEIA said it "opposes a finding that utility-run competitive solicitations could, as some including [NARUC] suggest, satisfy the statutory criteria for an exemption from the 'must purchase' obligation." The group said NARUC's proposal to create a "yardstick" of characteristics describing how a utility could be exempt from PURPA's must-purchase requirements does not comply with Section 210 of PURPA.

If FERC proceeds with the yardstick approach, SEIA suggested the commission encourage utilities to join an existing regional transmission organization or independent system operator, form a new RTO/ISO, or provide direct market access for all commercial and industrial "off-takers" within the applicable service territory.

"Multiple discussions with SEIA's membership revealed that the majority of QF developers are unable to gain meaningful market access in most of the 35 states with vertical-integration, including the 15 states where vertically-integrated utilities are members of an ISO/RTO," the Aug. 28 filing said.

SEIA also pressed FERC to strengthen its oversight and enforcement of PURPA, including by requiring contract lengths that are sufficient to support capital market financing and requiring transparency in avoided cost data. The commission should also maintain a "bright-line one-mile rule" for determining what facilities are considered separate or located at the same site. Currently, FERC considers facilities under common ownership and using the same energy resource that are located within one mile of each other to be a single facility for purposes of the 80-MW size limit, while facilities situated more than a mile apart are deemed separate.

Some industry representatives including the Edison Electric Institute have suggested FERC could replace the one-mile rule with a rebuttable presumption whereby other factors could be considered for determining whether facilities represent one QF, including a common point of interconnection or a financing plan. The change is aimed at avoiding possible gaming of the one-mile rule to compel utilities to buy power from several QFs that may be jointly developed and located close to one another.

But changing the one-mile rule to a rebuttable presumption "is an invitation for extensive and contentious litigation and no party has presented any actual or documented instances of 'gaming' of the one-mile rule," SEIA said.

Lastly, the solar group asked that FERC preserve the presumption that QFs of 20 MW or less do not have nondiscriminatory access to wholesale markets and to maintain FERC's practice of allowing certain facilities to self-certify as QFs.