(November 2009)Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year...
FIT in the USA
Constitutional questions about state-mandated renewable tariffs.
Sustainably Priced Energy Enterprise Development Program was amended to allow projects less than 1 MW in capacity to enter into contracts 15 years in length, at prices adequate to promote renewable resources. The Vermont FIT provides long-term contracts for 15 to 25 years and provides specific tariffs differentiated by technology and size, and with an overall program cap of 50 MW. The legislation instructs the Vermont Public Service Board to review and reset the tariffs every two years and set the tariff rate based on the rate of return for Vermont electric utilities. The individual project cap is 2.2 MW. The current rates by technology all exceed the wholesale price of power: Wind <15 Kw $0.20/kWh; Wind >15 Kw $0.14/kWh; Landfill and Biogas $0.12/kWh; and PV $0.30/kWh.
• California: The California Public Utilities Commission (CPUC) established the California Solar Initiative. This initiative is a performance-based incentive where solar energy generators can receive a five-year contract worth up to $0.39 per kWh for power sold. The program is similar to a German-style FIT, but is shorter in contract term and well below the rates in Germany. The incentive amounts decrease over time after legislative targets for installed solar capacity are met. In February 2008, the CPUC adopted the Onsite Renewable Generation FIT, which provides a 10-, 15-, or 20-year contract for renewable energy systems smaller than 1.5 MW in capacity. The contract price is based on the average cost of electricity production, adjusted for the spot market and time of delivery value. There are other additional statutes in California that apply FIT options for combined heat and power facilities under 20 MW that satisfy certain efficiency requirements (AB 1613) and for renewable energy generation smaller than 3 MW at wholesale prices set by CPUC (SB 32).
In December 2008, “the presiding commissioners accepted the California Energy Commission (CEC) staff’s recommendation that California implement a system of feed-in tariffs.” 10 A final report was prepared in 2009 for approval by the full CEC. “The recommendation called on the Public Utility Commission to … implement a system of feed-in tariffs for projects up to 20 MW in size.” The CEC also recommended that the CEC and CPUC “continue” to evaluate FIT for projects greater than 20 MW. On Dec. 17, 2009, the CPUC rendered an order requiring investor-owned utilities to purchase from certain combined heat and power facilities at a price set by the CPUC. In May 2010, the CPUC and the investor-owned utilities in California each moved separately to ask FERC to declare the CPUC action legal or unconstitutional, respectively.
• Florida: In December 2008, the Gainesville, Fla., city commission approved a tariff of $0.32 per kWh under Gainesville Regional Utilities’ proposed FIT program. 11 The program pays both residential and business customers the $0.32 rate. 12 The city launched the program in March 2009. However, because municipal utilities generally are exempt from the FPA, municipals can enact FITs without encountering Constitutional conflicts
Conflict of Laws
Sections 205 and 206 of the FPA empower FERC to regulate rates for the interstate and