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Mont. solar, environmental parties sue regulators over QF contract rules

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Mont. solar, environmental parties sue regulators over QF contract rules

Montana solar and environmental interests have filed a court petition to block new state utility regulations that reduce the amount NorthWestern Corp. pays independent power producers for their solar energy and cuts the contract terms for those producers.

Vote Solar, the Montana Environmental Information Center, and Cypress Creek Renewables LLC filed their petition for judicial review with the Montana Eighth Judicial District Court in Cascade County, Mont., saying the Public Service Commission's Nov. 24 order undercuts competition for small solar development.

"If the Commission's order, which slashes contract rates and lengths for solar power purchases, is allowed to stand, it is unlikely that Montana will see any solar energy development for the foreseeable future," MEIC, an environmental advocacy group, said in a press release.

Wind development company WINData LLC also filed a similar complaint on Oct. 10 in the same court.

MEIC said dozens of solar projects proposed across the state were put on hold when NorthWestern asked the PSC to limit the size, contract length and rates for qualifying facilities, or QFs, under the state's implementation of the Public Utility Regulatory Policies Act.

The commission sets standard rates and contract lengths for QF projects with a generating capacity of 3 MW or less. The commission slashed standard rates from about $66 per MWh to $31 per MWh and reduced maximum contract lengths for the sale of renewable energy to NorthWestern from 25 to 15 years, according to the petition.

The commission is supposed to set QF rates based on what costs the utility would avoid by acquiring the power. However, the petitioners argue that the PSC ignored NorthWestern's need to acquire new generating capacity in 2018 and instead set the standard QF rates based on short-term market prices rather than projecting what the utility would be required to spend to fulfill its future resource needs.

The commission also ignored the recommendation of its own staff to maintain a carbon cost adjustment in the standard rate and reversed its long-standing practice of compensating noncarbon emitting, renewable energy facilities for avoided regulatory costs associated with carbon emissions, the petitioners said.

The result is the PSC underestimated the avoided costs it should have considered in setting the QF rates, the petitioners said.

Cypress Creek and other developers argued they need longer contract lengths to obtain financing for their projects, especially since the commission decided to cut the developers' source of revenues with lower QF rates, according to the petitioners.

The PSC said in a fact sheet that shorter contracts ensure rates reflect the actual cost of generating electricity since long-term contracts require the commission to calculate a rate based on future assumptions that are less accurate. The Montana Consumer Counsel testified the old 25-year contracts were risky for ratepayers.

The commission said witnesses for the parties in the lawsuit had supported the 15-year contract term. At the time they were arguing against the commission's earlier reduction of the terms to 10 years, which the PSC reconsidered and added an additional five years.

In response the petition, PSC spokesman Chris Puyear said the lawsuit claims lack merit. The developers are seeking to shift ordinary business risk to a captive set of customers, he said.

"The Commission's decision restores balance by ensuring that the rates customers pay for electricity from both independent producers and the utility more accurately reflect the true value of the power," he said. "... The Commission looks forward to further opportunities to establish an equitable sharing of risk between consumers and investors in power projects."