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News Analysis

According to the solar industry, a U.S. appeals court decision—and a Southern California Edison petition pending at the FERC—might put them out of business.
Fortnightly Magazine - October 1 2000

"enthusiastic" endorsements of solar projects a decade ago as evidence that it has done an about-face, suggests that a profit motive lies at the heart of its recent FERC action.

"The striking inconsistency between Edison's claims of harm to ratepayers and its prior enthusiastic assessments of the benefits that would flow to the consumers from the development of [solar] projects, clearly suggest that Edison is primarily concerned with its own bottom line rather than consumer welfare." And to spell it out even more clearly, the solar company adds that "it is well known that alternative energy producers have become key competitors of traditional utilities and their affiliated generation assets."

At the heart of the simmering debate is whether the 1999 federal appeals court Laidlaw decision was intended to be applied beyond that case, thereby striking down FERC orders from the mid-'80s that allowed a solar plant to burn fossil fuels for such uses as operating a gas-fired superheater, an oil-fired "emergency" steam generator, and an auxiliary gas-fired steam boiler, in order to make the plant more efficient.

The California Solar Energy Industries Association asserts that the decision, which involved not a solar facility but a landfill gas-to-energy plant, only applied to the subject QF in the case, and that "the Court was neither asked, nor did it provide, that any retroactive or generic application was appropriate. ..." But to Edison, the across-the-board application of Laidlaw is clear. "The D.C. Circuit found in Laidlaw that there is not, and never has been, any justification in the language of PURPA ... for the use of fossil fuel to improve the efficiency of the 'essential fixed assets' of a small power production qualifying facility."

In general, the intervenors defend the FERC orders allowing efficiency-enhancing fossil fuel use by citing the "core purpose" of PURPA's QF provisions: to encourage the development of small power production facilities. What does Edison have to say about that argument? That it's the same old mantra always dragged out when "excessive QF profits are threatened."

Yet for a decade-and-a-half, the solar side argues, the solar industry has developed and constructed its plants based on the "essential fixed assets" standard. "These plants were developed based on the certifications they got," says Eric Wills, president and chief executive officer of Sunray. And back when they got these certifications, Wills contends, Edison "knew exactly what was going on," and did not act until now, years later.

"You have in excess of $1.5 billion invested in these facilities, based on certifications that are final," he says. "You're talking about applying a 1999 law—which we view as in error anyway—to facilities that were certified almost two decades ago. It's not appropriate, it's not fair."

Take Away Generation—Now?

Ironically, the eruption of this, a generation issue, coincided almost perfectly with the event that has taken up virtually all the ink in the realm of California energy: skyrocketing wholesale power prices and the resulting high consumer bills.

"Every day the news reports the increasingly dire straits of the California electric system and its inability to meet consumer demand