Idaho Public Utilities Commission

Case No. GNR-E-11-01, Order No. 32195

February 25, 2011

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

Commission outlines process for small wind, solar case

The Idaho Public Utilities Commission has established a schedule in a case seeking the best way to allow small wind and solar developers to qualify to be paid commission posted rates.

On Feb. 7, the commission ruled that wind and solar project developers who want to be paid the commission posted rate can be no larger than 100 kilowatts during the period that this case is processed. Previously, projects up to 10 megawatts could qualify for the published rate. The 10 MW upper limit remains for non-wind and non-solar renewable projects.

Parties who want to intervene in the case for the purpose of presenting evidence and cross-examining witnesses must file petitions to intervene with the commission by no later than March 4. Those parties who were part of the previous docket leading up to this case (GNR-E-10-04) are automatically included as intervenors in this case.

Pre-file direct testimony and exhibits will be accepted through March 25 with rebuttal testimony and exhibits due April 22. The commission will then conduct a technical hearing beginning Tuesday, May 10, at 9:30 a.m. in the commission hearing room, 472 W. Washington St. in Boise. The hearing may continue, if necessary, through May 13.

Idaho’s three major regulated electric 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. Commissions must publish avoided-cost rates for projects with a design capacity of 100 kW or less. However, the commission has the discretion to set the published rate at a higher amount and, until recently, the commission has established a 10 MW eligibility cap.

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. 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 commission stated in its Feb. 7 order.

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 break up, or 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. The rapid expansion of these projects is causing a strain on utility transmission systems which can affect electric reliability, the utilities claim.

On Feb. 7, the commission said the utilities 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.

In this case, 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.

“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 in its Feb. 7 order.