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Court lifts hold on Conn. renewables request for proposals

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Court lifts hold on Conn. renewables request for proposals

A federal appeals court has lifted an injunction against Connecticut's participation in a three-state renewable mandate for distribution utilities.

In a Dec. 12 decision, the U.S. Court of Appeals for the 2nd District threw out the temporary hold preventing Connecticut regulators from approving contracts pursuant to a request for proposals for renewables issued in 2015 for Connecticut, Massachusetts and Rhode Island. The court did not explain why it was lifting the injunction, just that "an opinion will follow in due course."

The court issued the injunction on Nov. 2 as part of a case filed by New York-based renewable generator Allco Finance Group Ltd. against Robert Klee, commissioner of the Connecticut Department of Energy and Environmental Protection, over both the 2015 multistate request for proposals and a 2013 Connecticut RFP that Allco lost out on. The case could have ramifications on other states' energy programs, including Massachusetts' renewable mandate and New York's Clean Energy Standard.

The winning bids for the three-state 2015 RFP were revealed on Oct. 24, while one of the two winning contracts of the 2013 RFP has since been terminated for failing to meet a series of milestones and the associated project's permit application has been withdrawn.

The issue at the heart of Allco Finance v. Klee is whether state-mandated request for proposals for renewable energy violate the Federal Power Act by forcing utilities to enter into contracts with specific generators, and the Commerce Clause by requiring renewable energy credits, tied to energy delivered into New England, be used for compliance.

During oral arguments heard on Dec. 9, the judges focused their questioning on whether utilities and generators can negotiate rates once projects are selected or if they are unchangeable once submitted. The three-judge panel also sought assurances that Connecticut was not interfering with FERC's jurisdiction when reviewing final contracts.

Since 2013 and throughout the filing of multiple lawsuits and unfavorable lower court rulings, Allco has maintained that a state can only set a wholesale rate by complying with the Public Utility Regulatory Policies Act of 1978, which requires the seller to be a qualifying facility. PURPA defines qualifying facilities as either a renewable, biomass, or geothermal facility smaller than 80 MW, or a cogeneration facility that produces both electricity and thermal energy. According to the plaintiff, if the state was in compliance and non-qualifying sellers were barred from the request for proposals, Allco would have received a contract under the RFPs.

Allco said in a recent filing that Connecticut offers "a Trojan horse" in the disguise of renewable energy solicitations that seek to achieve environmental goals but are "eviscerating" qualifying facilities' rights and taking advantage of a "massive loophole" in the Federal Power Act. Allco further claimed all of the state's environmental goals for the power sector could be met by "Congress' preferred generators — qualifying facilities."

"Such a loophole would give states unlimited ability to compel interstate wholesale electricity transactions that support the political whims of a state under the guise of regulation of the construction of new generation, further sabotaging QF development," Allco said. "Compelling a wholesale transaction — one that would not have taken place but for the state's compulsion — plainly involves the regulation of wholesale sales, and thus falls squarely within the field that Congress has occupied."

Regarding the dormant Commerce Clause, the court wanted to know why renewable energy credits, or RECs, tied to renewable generation that could not be delivered into the region operated by ISO New England Inc. cannot be counted towards the state's renewable portfolio standard.

In an amicus brief jointly filed Nov. 29 by the states of California, Massachusetts, New York, Oregon, Vermont and Washington, they explained that an REC from Allco's Georgia facility "is not substantially similar to a Connecticut-certified REC because the former does not advance Connecticut's interest in altering the energy resource mix available to Connecticut consumers."