Idaho Public Utilities Commission

Case No. GNR-E-10-04, Order No. 32176

February 7, 2011

Contact: Gene Fadness (208) 334-0339, 890-2712

Website: www.puc.idaho.gov

 

Commission adjusts size cap for wind, solar projects

 

Wind and solar project developers that want to be paid a rate published by the Idaho Public Utilities Commission can be no larger than 100 kilowatts, according to an order issued by the commission today. Previously, projects up to 10 megawatts in size could qualify for the published rate. The 10 MW upper limit remains for non-wind and non-solar renewable projects.

 

The smaller size limit for wind and solar projects that can qualify for the published rate is temporary until a number of issues that led to a petition filed by the state’s largest three electric utilities can be resolved. Wind and solar projects that have signed agreements with utilities dated before Dec. 14 are still under the former 10 MW eligibility cap.

 

The three regulated utilities – Idaho Power Company, Avista Utilities and PacifiCorp – contend that a rapidly expanding number of wind projects is having a profound impact on customer’s rates and reliability. The utilities contend that large-scale wind farms are breaking up their projects into smaller 10-MW increments in order to qualify for the published rate, which is typically more attractive than rates for projects larger than 10 MW.

 

The published rate is called an “avoided-cost rate” because it is to be based on the cost the utility avoids by buying power from the small-power producer and, thus, not having to build the generation itself or buy power from another source.

 

Small-power producers can have their projects declared Qualifying Facilities (QFs) under the provisions of the federal Public Utility Regulatory Policies Act (PURPA) passed by Congress in 1978 to promote the development of renewable energy technologies. PURPA requires electric utilities to buy power generated by QFs at the avoided-cost rate determined by state commissions. The commission must ensure the avoided-cost rate is reasonable for utility customers because 100 percent of the price utilities pay to QFs is included in customer rates.

 

The three utilities claim the small-power projects PURPA was originally intended to encourage are now often developed by sophisticated large-scale wind farms that disaggregate large wind projects into several smaller projects in order to qualify for the published avoided-cost rate. When combined, these projects can total up to 100 or 150 MW interconnecting at one delivery point. Idaho Power claims it could have 1,100 MW of wind generation on its system in the near term, which exceeds the amount of power used in Idaho Power’s total system on the lightest energy-use days. The rapid expansion of these projects is causing a strain on utility transmission systems which can affect electric reliability, the utilities claim.

 

In today’s order, the commission states the utilities have made a “convincing case,” to temporarily reduce the eligibility cap for wind and solar projects only until these issues can be resolved. The 100-kW cap does not include all types of renewable projects, such as biomass, hydro, geothermal and anaerobic digestion, because these types of projects do not pose the same type of issues as those posed by wind and solar. The latter two are intermittent and must be backed-up by other generation when the wind does not blow or when the sun does not shine. Further, large-scale wind and solar projects can be broken up into smaller projects to qualify for the published rate.

 

“The commission is supportive of all small-power producers contemplated by PURPA, including wind and solar, and it is not the commission’s intent to push small wind and solar QF projects out of the market,” the commission said. The commission is directing the parties in the case, which include utilities, power producers and environmental organizations, to schedule an informal meeting within 10 days of the commission order to establish a schedule to gather evidence in advance of a technical hearing that will be scheduled during the week of May 9.

 

Specifically, the commission is soliciting information and investigation of an avoided-cost rate cap structure that allows wind and solar QFs that are 10 MW or smaller to again qualify for published rates while also preventing large QFs from disaggregating their projects to qualify for a rate exceeding true avoided cost.

 

Parties representing wind developers claim the utilities have not provided sufficient evidence that reducing the published cap will have an adverse impact on PURPA development. The commission said federal rules regulating PURPA development insist that rates for purchases from QFs be “just and reasonable to ratepayers and in the public interest – not in the interest of the QFs.”

 

The Northwest and Intermountain Power Producers Coalition said the reduction in the eligibility cap is not necessary because if avoided cost rates are accurately set, the rates for small and larger projects would be the same.

 

Further, they claimed that the commission’s establishment of a December 14 effective date is “retroactive ratemaking,” which is prohibited.

 

The commission said it provided notice on Dec. 3 that whatever decision it made in the case would be effective Dec. 14. “One need look no further than the abundance of firm energy sales agreements filed with the commission within that time frame to realize that the parties took the commission’s notice of its effective date seriously,” the commission said.

 

A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Electric Cases” and scroll down to Case No. GNR-E-10-04.