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Renewable Subsidies in the Age of Deregulation

Fortnightly Magazine - December 1997

promote certain supply-side QF technologies. C.G.E. Fulton, L.L.C., 70 FERC ¶ 61,290. What the state cannot do, is to attempt to set the price of a wholesale transaction, which is exclusively within FERC jurisdiction, so that sales by QFs at wholesale to utilities exceed PURPA's avoided cost cap.

21States may not directly regulate or control the price for such transactions, except under federal PURPA for QF transactions, and then with no price discrimination of renewable or DSM power. So. Calif. Edison, supra.

22"Under state authority, a state may choose to require a utility to construct generation capacity of a preferred technology or to purchase power from the supplier of a particular type of resource." So. Calif. Edison, supra. The FERC adds that "In setting an avoided cost rate, a state may account for environmental costs of all fuel sources included in an all-source determination of avoided cost." The FERC noted that this could include a tax on fossil generators or a subsidy to alternative generation, but that costs thus imposed must reflect only actual costs incurred by the utility buyer. Environmental "adders" or "subtractors" must be based on real environmental externality costs, substantiated on a record before the PUC.

23So. Calif. Edison, supra. When segmentation occurs, non-QFs cannot be excluded in determining the avoided price of wholesale power for purposes of PURPA avoided cost determinations.

24FERC Stats. & Regs., ¶ 32,455, at 32,044 (1988).

25So. Calif. Edison, supra (order on reconsideration).

26So. Calif. Edison, supra.

27Massachusetts courts struck down an externality process as beyond state commission authority. Mass. Elec. Co. v. Mass. DPU, 419 Mass. 239, 643 N.E.2d 1029 (1994).

28See Hughes v. Oklahoma, 441 U.S. 322 (1979) (subsidies to in-state auto hulk removers).

29See e.g., Philadelphia v. New Jersey, 437 U.S. 617 (1978) (impermissible ban on interstate waste disposal).

30See e.g., Wyoming v. Oklahoma, 112 S.Ct. 789 (1992) (requiring indigenous fuel resources); New Energy Co. of Indiana v. Limbach, 486 U.S. 269 (1988) (tax credit only for in-state ethanol); Alliance for Clean Coal v. Miller, 44 F.3d 591 (7th Cir. 1995) (preference for Illinois coal).

31Philadelphia v. New Jersey, 437 U.S. 617 (1978); Dean Milk Co. v. City of Madison, 340 U.S. 349 (1951) (regulating milk quality).

32General Motors v. Tracy Corp., 11 S.Ct. 811 (1997)

(distinguishes bundled gas distribution from unbundled gas commodity).

33512 U.S. 186 (1994).

34The Massachusetts Supreme Judicial Court upheld a reduced rate for low-income elderly persons subsidized by ratepayers. American Hoechest Corp. et al v. D.P.U., 379 Mass. 408, 399 N.E.2d 1 (Mass. 1980).

35In Massachusetts, the substantial funds collected would pass to a state-sanctioned entity that would function as a venture capital fund to subsidize wholesale market entry for renewables through grants, loans, and equity investments.


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