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.
Continue Reading Dalreed Solar – FERC Declines to Provide Additional Clarity as to QF Re-Certification “Substantive Changes” that Trigger Protest Rights, But Engages in a Same-Site Analysis

Tuning into a replay of the March 8, 2022 SEIA v. FERC oral argument on FERC’s PURPA reform rule – Order No. 872 – resulted in a somewhat unexpected lesson on the National Environmental Policy Act (NEPA), including NEPA standing, and remedies. About two-thirds of the argument focused on whether an Environmental Assessment (EA) was necessary or too speculative, whether the Public Interest Organizations (PIOs) had standing to raise NEPA issues, and whether the most appropriate remedy for a NEPA violation was vacatur of the Final Rule or remand (leaving the Final Rule in place).

Before delving into the NEPA issues, much of the other one-third of the oral argument was spent discussing the issue of the right of a state commission to eliminate a QF’s option of selecting a fixed energy rate with the rate set at time of the legally enforceable obligation. SEIA’s primary contention was that FERC reversed a long-standing policy by finding in Order No. 872 that a single PURPA contract that over its life exceeded actual avoided cost, rather than balancing out over time, was a violation of PURPA itself. SEIA may have scored a point in arguing that given such a policy was adopted, the Final Rule could not have left it to the states to determine whether or not energy costs could be fixed or variable, as that act in itself would have itself been arbitrary. That said, it is quite difficult to find in Order No. 872 any definitive holding or finding that an individual contract violates PURPA if it over-estimates avoided cost over its lifetime, let alone, that FERC adopted a remedy to address this possible result.
Continue Reading The Future of PURPA Reform Under Order No. 872: Did the Oral Argument Provide Any Clues?

This post updates the most recent post regarding initial state and federal proceedings that were initiated in light of Order No. 872.

Post-Order No. 872 Requests for Relief from the PURPA Purchase Mandate

Given the paucity of actual or potential QFs in the relevant service areas of ETEC and NTEC, and thus an absence of protests, these entities, who led the pack in submitting the first QM filing under Order No. 872, rather quickly obtained the requested relief. Since their filing, a few more applications have been submitted and certainly more are expected soon. Not surprisingly, many of the earliest filers had relatively few existing or queued potential QFs. No protest has been filed in any QM docket to date.
Continue Reading Order No. 872-Related FERC and State Proceedings Initiated in Its Initial Months of Effectiveness

Last week, FERC issued Order No. 872-A, its “further guidance order” on the PURPA Reform Final Rule. Appeals of Order No. 872 are pending at the Ninth Circuit, with the first appeal being held in abeyance until no later than early January 2021. Given the relatively few changes to the Final Rule, this order may close the relevant docket at FERC, for now. Whether some portions of the Final Rule will be remanded or even vacated is difficult to predict at this early stage, and may well depend on the judicial panel. Of the clarifications issued, only one was particularly significant – the affirmation of CARE v. CPUC on tiered avoided cost rates. Both that clarification and the few other changes and clarifications indicate that the degree to which the Final Rule will alter the PURPA landscape is largely dependent on state and FERC implementation of the new policies and regulations adopted. The clarifications/modifications adopted by FERC are discussed below.
Continue Reading FERC’s PURPA Reform Rule: Order No. 872-A’s Few Clarifications and Modifications Continue to Indicate that FERC and the States Will Have Significant Discretion in Implementing PURPA

Order No. 872 spends an inordinate number of pages discussing the wholly optional use by a state of Locational Marginal Prices (LMPs) for those QFs selling only as available energy in an RTO market. 18 C.F.R. § 292.304(b)(6). The reason this fuss is somewhat surprising is that most QFs (excluding net metered QFs) enter into

One very significant set of cases seems to have been overturned in Order No. 872, although more clarity could have been provided and a regulation is needed to make any reversal binding on the courts.

In 2010, in CPUC, FERC reversed 15 years of precedent and found that an avoided cost rate could be based on a subset of resources, as opposed to all resources. FERC, speaking permissively, said that a state with a renewable portfolio standard (RPS) may set an avoided cost rate foe renewables if the utility had not yet met the mandate. In short, the concept the tiered avoided costs was born. Several years later, the Ninth Circuit interpreted this permissive wording as mandatory, holding that if an RPS existed and a QF could meet that need, the avoided cost rate has to be based on only renewables.
Continue Reading PURPA Final Rule Post III – Were the Ninth Circuit’s CARE v. CPUC and FERC’s CPUC Decisions Overturned?

Because LSEs must still offer fixed capacity prices under Order No. 872, and given the trend in decreasing prices for renewables, the Final Rule’s impacts on LEO formation may actual be fairly significant, particularly in states viewed as hostile to QFs. In the Final Rule, FERC adopted a “minimum standard” for LEOs, amending its regulations to provide that: “A qualifying facility must demonstrate commercial viability and financial commitment to construct its facility pursuant to criteria determined by the state regulatory authority or nonregulated electric utility as a prerequisite to a qualifying facility obtaining a legally enforceable obligation. Such criteria must be objective and reasonable.” 18 C.F.R. § 292.304(d)(3).

FERC provided examples of factors a state could reasonably require a QF to demonstrate: (1) taking meaningful steps to obtain site control adequate to commence construction of the project at the proposed location and (2) filing an interconnection application with the appropriate entity. A state could also require that the QF show that it has submitted all applications, including filing fees, to obtain all necessary local permitting and zoning approvals. FERC also ruled that obtaining a PPA or financing cannot be required. Also not permitted are requirements that: a utility execute an interconnection agreement (or likely any agreement at all); a QF file a formal complaint with the state commission; the QF being capable of supplying firm power; and, the QF being able to deliver power in 90 days.
Continue Reading PURPA Final Rule Post II – LEOs, the Texas Lion Has Been Tamed and Other Impacts

In Post I, we explore the three “big” issues that the Final Rule highlights at Paragraphs 13-20 – the (potential) reduction of the 20 MW cap to a 5 MW cap for renewables as to the must-purchase obligation on utilities in organized markets; changes to the one-mile rule; and, the holding that for QFs selecting that a price be fixed at the time of its legally enforceable obligation (LEO), the energy price need no longer be fixed over the contract term. As discussed below, the impact of cap reduction to 5 MW may turn heavily on future case law, and may not prove highly significant if FERC finds specific barriers to participation. LSEs are going to need to carefully make their cases for a cap reduction in responding to protests, particularly if a change in Administration occurs before their new petitions are filed. As to the one-mile rule, this change may prove more significant due to the frequency with which the same FERC test is used for other purposes. Finally, the “new” rule on states being permitted to adopt non-fixed energy prices in otherwise fixed-rate contracts is not particularly new at all.
Continue Reading PURPA Final Rule Post I – Which of FERC’s Resolutions of the “Big Three Issues” Is Most Significant?

Order No. 872 probably deviated more in favor of QFs, from the highly controversial NOPR that spawned it, than some expected. Nonetheless, it still will trigger a deluge of rehearing requests largely from environmental, public policy, and QF interests. The degree to which load serving entities (LSEs) and some states, including Texas in particular, push