In Order No. 872, FERC provided PURPA purchasers and other interested parties the opportunity to protest QF re-certifications if a “substantive change” was being made, although the Final Rule was less than perfectly clear as to what constituted a substantive change. FERC stated in Order No. 872-A that substantive changes that may be subject to a protest could include “a change in electrical generating equipment that increases power production capacity by the greater of 1 MW or five percent of the previously certified capacity of the QF or a change in ownership in which an owner increases its equity interest by at least 10% from the equity interest previously reported.” In response to a concern that the “substantive change” standard was vague, FERC responded that it intended to make a case-by-case determinations on what changes are substantive.
In Dalreed Solar, FERC declined an opportunity to expand its identification of examples of substantive changes. In the re-certification at issue, Dalreed Solar changed its net power production capacity from 20 MW to 40 MW, an obvious slam dunk of “substance,” although due to an earlier re-certification of its original proposed project from 40 MW to 20 MW, Dalreed Solar had a non-frivolous claim that the change was not substantive. FERC readily dismissed this argument and indicated that the proper comparison was between the last re-certification and the current one. Given that it ruled on this MW change as sufficient, FERC then declined to rule on whether other changes were substantive.
In its recertification Dalreed Solar changed the interconnecting utility from PacifiCorp to Portland General. It would be difficult to imagine that such a change would not be substantive, as Portland General explained that otherwise it would need to proactively review and protest the self-certification for any QF that might possibly interconnect with or sell to it (assuming there were grounds for a protest). FERC’s failure to confirm that a change in proposed interconnecting utility or offtaker is disappointing, as it would add clarity useful for all.
Also, Dalreed Solar identified for the first time in the recertification its affiliated QFs located within ten miles. This coupled with a relocation of 1.5 miles impacted the one-ten mile analysis. Again, a new listing of affiliates, when such listing can impact the 80 MW size limit for small power production facilities, should always be substantive, as otherwise QF developers can simply game the protest system by self-certifying an unbuilt facility, allowing the 30-day “free” protest period to pass, and at some later date, perhaps when the facility is complete, disclose the affiliation. (A 1.5 mile move, standing alone (i.e., with no other changes at all), might have been a defensible case for Dalreed Solar.)
In sum, FERC provided no additional clarity on the issue of substantive changes. It also could have used the case to deal with the vexing issue of when affiliation should be disclosed on Form 556 as to a proposed project that is siting within 10 miles of an affiliated project(s). Given that FERC has effectively recently ruled that it is fine for a Form 556 to be inaccurate, if there is no need for QF status until a later date (Irradiant Partners, LP), a developer may be tempted to delay revealing affiliations. This strategy should be rejected by FERC on the grounds that absent an accurate Form 556, revealing affiliations, a proposed QF should not be able to seek a PURPA contract, as the entire contracting process may be a waste of time if it is later revealed the one-mile or the one-ten mile rules should have applied and the small power production QF is no longer eligible for a PURPA contract based on the belated revelation.
In the Dalreed Solar order, FERC provided a small degree of clarity as to how it would conduct same-site analysis under the one-ten mile rule found in 18 C.F.R. § 292.204(a)(2)(i)(C). Portland General argued to FERC that the affiliated QFs within ten miles and Dalreed Solar:
- are all solar photovoltaic facilities;
- share a common off-taking utility;
- are all located on property owned by one LLC;
- share the same 200 MW interconnection request with PGE;
- share busses, step-up transformers, relays, and other interconnection facilities;
- possibly would share common access and easements;
- are all being developed by one entity – Energy of Utah; and
- are expected to all have PPAs within 12 months of each other.
These facts combined probably also constituted a “slam dunk” as to Dalreed Solar being considered part of the same small power production QF as its affiliates, which would have put the grouping over the 80 MW limit for a small power production QF. In finding that Dalreed Solar would be a same-site facility as its affiliates, FERC recounted basically all of Portland General’s facts, but did not distinguish which facts might be more or less important. Given that Order No. 872 was issued by a different set of Commissioners and remains outstanding on appeal, the fact that its clear intent was upheld sends a signal to the industry that as long as the new regulations remain in place, they will be enforced as intended, as nearly every factor FERC indicated would be examined would have led to a same-site conclusion.
Perhaps more interesting were FERC’s comments on some of Dalreed Solar’s “defenses.” First, FERC rejected the argument that failed negotiations with the first off-taker were to blame, noting that it cannot conditionally affirm QF status for a facility based upon one of the factors changing before the facility reaches commercial operation. Second, FERC rejected a rather strained argument that “interconnection factors” should be ignored in its same-site analysis. Third, in light (pun intended) of arguments that this particular region was ideal for solar QFs for several reasons, FERC stated that “there is nothing unique about this particular location” or the “need to be located in this particular configuration.” A waiver request also was rejected, largely because the parcels of land the various facilities were on were not “sufficiently, uniquely distinguishable” to justify granting waiver.