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Bench Report: Top Ten Legal Decisions of 2010

2010 Law & Lawyers Report

Fortnightly Magazine - November 2010

PSC-10-0131-FOF-EI, March 5, 2010.)

6. Feed-In Frenzy

California chips away at PURPA’s avoided cost ceiling.

FERC surprised no one when it ruled this summer that federal law pre-empts state regulation of wholesale power—at least outside of PURPA. Therefore, the California PUC couldn’t rely on a recent state law  (Assembly Bill 1613)  to force utilities to buy wholesale electricity from certain super-efficient combined-heat-and-power facilities—paying subsidized higher prices that reflect costs of carbon control and of mitigating greenhouse gas (GHG) emissions—even if the CHP units can qualify as QFs under the 1978 federal PURPA law.

In essence, by forcing utilities to buy power from CHP plants at a price that reflected the cost of controlling GHGs, California was trying to incorporate a virtual carbon tax in its feed-in tariff. In the July order, FERC ruled that California couldn’t do that if the resulting price exceeded PURPA’s avoided cost ceiling.

Yet it now appears that this avoided cost ceiling was made of glass. In October, in a clarification order, FERC explained how California could circumvent that ceiling and reward green power producers that “feed” clean generation to utility buyers.

FERC’s October order says states may create a two-tiered avoided-cost schedule—one for the short run, and one long-run. Such a schedule, FERC explains, could reflect state-specific mandates for energy procurement. And since California law forces utilities in the long run (commitments five years or longer) to buy power only from combined-cycle gas turbines or other renewable or non-carbon-emitting resources, FERC now will allow California to adopt a higher, second-tier avoided cost ceiling to reflect and reward the high-efficiencies and special green characteristics of CHP plants.  (Docket Nos. EL10-64 and EL10-66, July 15, 2010, 132 FERC¶61,047. Order granting clarification, Oct. 21, 2010, 133 FERC ¶61,059.)

7. Spreading Downwind

EPA’s “Transport Rule” portends state-specific limits on SO 2 and NO x.

When a federal appeals court in 2008 struck down the EPA’s 2005 Clean Air Interstate Rule  (CAIR), the court was probably trying to do the impossible—to make airborne particulate and ozone season emissions of SO 2 and NO x conform to man-made state boundaries, rather than control such emissions over a wide region. In this way, no single state would carry an untoward share of costs for controlling SO 2 and NOx emissions from electric generating units, as they spread downwind from one state to another.

Thus, in its compliance filing submitted in July, the EPA proposed setting a specific pollution limit (or budget) for SO 2/NOx emissions from electric generating units for each of some 31 states and the District of Columbia. A cap-and-trade program would allow each state individually to meet its own SO 2/NOx pollution control obligations, through a cap-and-trade plan with limited interstate trading of emissions.

The EPA’s proposed method will focus on emissions reductions available and achievable in each individual state, in order to address the appellate court’s concern that the 2005 CAIR plan—which identified a single level of emissions achievable across the entire region by the application of highly cost-effective controls—was insufficiently state-specific.  (Federal Implementation