(March 2010) New Day for Prudence: I am sending this letter at the request of Robert Gruber, who is the executive director of the Public Staff-North Carolina Utilities Commission (...
PURPA's Changing Climate
California defends its cogen feed-in tariff—complete with its own virtual carbon tax.
it sees fit and to any buyer, while benefiting from the option to sell to the IOUs at the FIT rate.” ( Comments of Attorney General, FERC Docket EL10-64, filed June 2, 2010. )
This dance is aptly described in a technical report issued in January 2010 by the National Renewable Energy Lab:
“Does FERC’s exclusive authority over wholesale sales mean that U.S. law bars state-level feed-in tariffs outside of PURPA? [T]he answer is ‘no,’ provided that the state designs the tariff to be the utility’s offer to buy at a state-specific price.” ( See, Scott Hempling, Carolyn Elefant, Karlynn Cory, Kevin Porter, “Renewable Energy prices in State-level Feed-in Tariffs: Federal Law Constraints and Possible Solutions,” NREL/TP-6A2-47408, January 2010 .)
But as the NREL report adds, “this analysis is not free from doubt.”
The key precedent is FERC’s 1997 ruling in Midwest Power Systems, Inc. ( Docket EL95-51, 78 FERC ¶61067 ).
In that case, FERC reviewed orders issued pursuant to state law by the Iowa Utilities Board that had directed Midwest Power (now known as MidAmerican Energy) to buy wholesale power, renewable and other so-called “alternative energy production facilities” at a rate of 6 cents per kWh ($60/MWh), rather than the 1.5-cent rate that Midwest was paying to PURPA QFs under a FERC-sanctioned avoided-cost rate.
Importantly, the “alternative” energy sellers needn’t have qualified as PURPA QFs to receive the 6-cent sales rate guaranteed by the Iowa state law, though some likely could’ve won PURPA certification.
Even so, FERC ruled that the 6-cent FIT was pre-empted as unlawful as to any Iowa alternative facility that, in principle, could’ve qualified under PURPA, if it had taken the trouble to do so.
For FERC, the principle was key—that payments to QFs, whether or not their status is known, must be capped at the PURPA-tested avoided-cost rates. It wasn’t crucial for policymaking purposes to identify which facility was which.
Today, in the California case, the Midwest Power rule still governs. Thus, both the California legislature and the CPUC took care in implementing the CHP feed-in tariff to emphasize that the authority and justification for the policy didn’t depend on PURPA, even though it was likely (as in the 1997 Midwest Power case) that most, if not all, of the CHP units meeting the FIT efficiency standard could’ve qualified as well under the lesser PURPA standard.
This don’t-ask, don’t-tell aspect of the CPUC’s FIT policy leads to an inherent contradiction. First, in order to defend FIT offer payments that exceed traditional PURPA avoided costs, the CPUC must argue that its FIT statute and program stand completely independent of PURPA. But at the same time, the CPUC certainly can’t admit that the state statute or implementing tariff run counter to the general principles that Congress and FERC have outlined and refined in the 30 years of PURPA’s existence. In opposing the California policy and arguing for federal preemption, EEI noted the contradictions inherent in the CPUC’s position in comments it filed June 3 in Docket EL10-64:
“The CPUC seeks to avoid these constraints by not invoking PURPA—for