Stampedes are dangerous. QF stampedes toward stale above-market standard avoided costs rates are dangerous to ratepayers. The first stampede occurred in the 1980s in California. California’s utilities were compelled to offer standard rates to QFs based on gas and oil prices at the time and then very shortly thereafter the bottom fell out of the oil and gas markets. California ratepayers paid for that stampede for decades. Stampedes toward stale avoided cost rates are continuing in various states today, particularly as solar generation prices have fallen rapidly. For example, Portland General reported that in Oregon, where standard rates are available for up to under 10 MW QFs, it has received 173 contract requests from sub-10 MW QFs. How state commissions, FERC, state courts, and federal courts all react to such stampedes will be discussed in future posts, as events unfold in various states. The experience of the Montana PSC in trying to stop a stampede illustrates the differences between the state and federal courts as relates to their authority to specifically set rates, terms, and conditions of PURPA contracts. In the case of the Montana PSC, a state court’s broad authority to set rates may exacerbate the impacts an existing QF stampede.
Both Northwestern Energy and the Montana PSC have been trying to fend off a stampede from 3 MW and smaller (mainly solar) QFs on numerous fronts, but were dealt a blow by a April 2, 2019 state district court order in Vote Solar v. Montana PSC that vacated certain Montana PSC orders. The most interesting aspect of the Cascade County District Court opinion was the fact that the court actually ordered the PSC to set rates, terms, and conditions of standard PURPA contracts in a particular manner.
By 2016, Northwestern recognized that a stampede was heading its way due to stale avoided cost rates for QFs of 3 MW or less. It took several proactive steps to have the Montana PSC protect its ratepayers. The Montana PSC lowered the standard avoided cost rate, limited what size QFs were permitted to request the standard avoided cost rate, reduced the length of the term of standard contracts, and affirmed its legally enforceable obligation (LEO) standard. Continue Reading The Montana QF Stampede and the Varying Roles of the Judiciary in Enforcing PURPA