Supplemental Comments in Docket No. AD 16-16

In testimony before the Senate Energy and Natural Resources subcommittee as well as other venues, FERC Chairman McIntyre has made clear his desire to update PURPA, which has led to several entities submitting supplemental comments to FERC in Docket No. AD16-16. Supplemental comments have been filed by ELCON, et al., North American BioFuels LLC (BioFuels), EEI, and NARUC. Largely, these comments reiterate prior positions taken by these parties. EEI and NARUC continue to be focused on, among other issues, several areas of reform that would accrue to the benefit of utility purchasers (and presumably their ratepayers) such as competitively-determined avoided cost, the one-mile rule and other economy-of-scale issues, lowering the MW threshold for eliminating the must-purchase obligation. ELCON reinforced its position on standard contracts, FERC’s inappropriate focus on QF size, and the need for more public documentation on avoided cost.

Although the focus of these trade associations on a limited number of big picture issues is understandable, the reality is that FERC’s PURPA regulations could use an even more comprehensive overhaul. For example, a good start would be for the Commission’s PURPA regulations to assume that open access exists, to reconcile (or reconsider) the Commission’s “better than firm” transmission policy for QFs with the reality of the terms of open access tariffs, and to codify the FP&L policy on interconnection jurisdiction. If fast action is desired, two separate rulemakings could be opened: 1) a narrow rulemaking to deal with more pressing issues; and 2) a rulemaking that is broader in scope and focuses on eliminating the vestiges of the 1970s vintage FERC PURPA regulations and case precedent set in the 1980s.

In contrast to the trade associations discussed above, BioFuels, is seeking to solve a particular problem that arose when FERC issued Order No. 671 and Order No. 732 which together require QFs over 1 MW to file self-certifications through Form 556. In its most recent set of supplemental comments, BioFuels is asking FERC to: 1) provide an amnesty period for QF-eligible entities that do not have a Form 556 on file in order to allow them to get into compliance; 2) require that a purchasing utility has received a Form 556 or the equivalent before a power purchase agreement (PPA) becomes effective or a purchase is initiated; 3) require that a purchasing utility not purchase energy from a QF without having received Form 556 or the equivalent; 4) place an obligation on the purchasing utility to provide FERC a copy of any PPA with a QF (whether or not the PPA is entered into pursuant to PURPA) and documentation that the purchase is from a QF; 5) impose possible penalties (albeit under 15 U.S.C. § 797, rather than the Federal Power Act) on purchasing utilities for violation of this last regulations; and/or 6) simplify Form 556 by creating a small power production-specific form.

Although BioFuels has some good ideas as to how to prevent a very real problem – QF eligible entities selling power under the auspices of PURPA without filing Form 556 – some of its solutions are overbroad, unnecessary, and shift the blame for QF misconduct to the purchasing utility. For example, an amnesty period may be equitable, but perhaps only for a limited set of entities, i.e., that lack FERC regulatory counsel. Form 556 can be daunting for a renewable entity, as much of it is inapplicable, and reform of it is reasonable, as are regulations or instructions that dictate exactly what triggers the need to refile a Form 556. Many of the BioFuels proposals, however, put the onus on a purchasing utility to be the QF’s “compliance” gatekeeper. The proposal adds a PPA filing obligation for seemingly no reason (FERC has never required purchasing utilities to file PPAs outside the affiliate context and PURPA PPAs are exempt from this affiliate filing requirement). In fact, FERC has eliminated the burden in recent years on reporting PURPA purchases in the market-based rate context. The BioFuels’ proposal is made more onerous by the fact that, as written, it would require FERC filing of PPAs with QFs not selling under PURPA. Of greater concern, one proposal subjects purchasing utilities to penalties if a QF-eligible entity does not fulfill its obligation to actually become a QF before commencing PURPA sales. If a rulemaking is opened on PURPA such proposals should be opposed by purchasing utilities. Although BioFuels’ proposal would likely ensure that utilities do not purchase power under PURPA PPAs until and unless the seller is a QF, utilities often have a self-interest in not purchasing power that they are not compelled to purchase under PURPA. Utilities can police their own purchasing policies by requiring proof of QF status before they begin either the contracting or interconnection processes.

There are other “QF status” issues that should be raised by parties and addressed by the Commission in any PURPA reform rulemaking. For example, a specific understanding as to how FERC will determine the QF status of renewables-paired-with-storage facilities and how a purchasing utility should address such determinations for under 1 MW pairings in light of the proliferation of such devices and the fact that such under 1 MW facilities do not need to self-certify. Again, a two-pronged approach to reforming PURPA would allow certain issues to be fast-tracked, and other issues to be resolved through a more comprehensive look at PURPA and the current era.

Other Recent FERC PURPA Issuances

FERC’s few actions on PURPA in recent months have not shed too much light on how the reform process will play out. In one order, FERC refused to lift the over-20 MW PURPA purchase obligation of Cloverland Electric Cooperative, which was adjacent to MISO, but not a member. The decision is somewhat unremarkable in that FERC historically has never lifted the purchase mandate for an entity that has not joined an ISO under PURPA Section 210(m)(1)(A), which is the portion of the statute on which Cloverland relied. In a more interesting decision, the Commission indicated that a QF (T.E.S. Filer) significantly increasing its capacity, would need to demonstrate once again how it met the “fundamental use test” as it was a “new” cogeneration facility given its five-fold size increase. Although the facts indicated that this QF will be able to make this showing, this order indicates that FERC is examining QF applications more closely to ensure compliance with Order No. 671.