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PURPA's Changing Climate

California defends its cogen feed-in tariff—complete with its own virtual carbon tax.

Fortnightly Magazine - July 2010

good reason because PURPA would not authorize the CPUC’s action …

“Here, in the CPUC decision, the CPUC has made no attempt to justify its methodology as avoided cost. Rather, the CPUC has stated that it is not acting under PURPA, and the eligible generators need not even obtain QF status. …

“Nor has the CPUC explained why the resulting rate differed from the one set in its own PURPA avoided cost proceeding … [T]he CPUC admits that it is purposefully adopting a price above the utilities’ short-run avoided cost to compensate for ‘societal benefits,’ thereby acknowledging that the rate exceeds avoided cost. It is not surprising, therefore, that the CPUC disclaims any intent to act under PURPA.”

What Really Matters

Defending the state’s proposed FIT, Attorney General Brown characterizes the measure as a health and safety law, adopted under state police power to safeguard the public health of California’s citizens from the effects of climate change, and so should be presumed lawful—not to be preempted absent “a clear and manifest purpose” expressed by Congress.

Moreover, Brown appears to believe that the greenhouse climate threat has changed the game, so that PURPA and FERC must change in response:

“California’s efforts to address global warming are changing the market in which an IOU purchases power,” writes Brown. These efforts, he notes, “have set California on a path that relies on cleaner power.

“As a result, incremental alternative energy increasingly does not come from fossil-fuel-based generators. What really matters is the avoided cost of alternative renewable energy and highly efficient sources. PURPA’s language and intent and FERC’s regulations governing avoided-cost rate setting are sufficiently flexible to accommodate … state law requirements for energy efficiency, renewable portfolio standards, and reduction of greenhouse gas emissions” ( Comments of AG, pp. 12-13 ).

Representing the FIT Coalition, a California-based group that advocates renewable energy, distributed generation, and FITs, Attorney Tamlyn Hunt argues that the higher-than-PURPA avoided-cost payments prescribed by California’s proposed FIT shouldn’t be questioned, since the concept of the CCGT market price referent already has been accepted as the pricing benchmark for green energy that California utilities already must purchase under the state’s accelerated renewable portfolio standard.

“Importantly,” writes Hunt, “the MPR includes a ‘greenhouse-gas adder,’ which represents the likely cost of greenhouse-gas compliance at the state and federal levels, once these regulations are in place …

“[I]t is the price by which contracts are judged to be de facto reasonable.

“To our knowledge, the utilities have never argued to the CPUC or in other venues that this adder constituted an unauthorized assertion of jurisdiction by the CPUC.”