Solar developer sPower submits public comments to the Colorado PUC in support of current NOPR regarding the development of renewable energy in the state.
The full text document can be found in the Colorado PUC document service under proceeding number 18R-0492E.
sPower Development Company, LLC (sPower), by and through its undersigned counsel, Keyes & Fox, LLP, hereby files these initial comments in support of the Commission’s proposed amendment to the Commission’s Rule 3902(c), 4 CCR 723-3-3902(c).
I. Introduction.
In Decision No. C18-0601, which initiated this proceeding, the Commission proposed to strike the second sentence of Rule 3902(c), which currently states, “The utility is obligated to purchase capacity or energy from a qualifying facility only if the qualifying facility is awarded a contract under the bid or auction or combination process.” As a matter of practice, the Commission has interpreted the “bid” or “auction” in this sentence to refer to an all-source solicitation held pursuant to a utility’s electric resource plan (ERP). In sPower’s experience, the Commission has enforced Rule 3902(c) according the rule’s plain language and declined to order a utility to purchase energy and capacity from a QF unless the QF first wins an ERP’s all-source solicitation, which generally occurs every four years for each of its jurisdictional utilities. If the Commission’s proposed revision is adopted, Rule 3902(c) will read in its entirety as follows: “A utility shall use a bid or an auction or a combination procedure to establish its avoided costs for facilities with a design capacity of greater than 100 KW.”
II. The Commission Should Adopt Its Proposed Amendment to Rule 3902(c) in Order to Eliminate its Facial Non-Compliance with PURPA.
sPower supports the Commission’s proposed rulemaking but for different reasons from those stated in Decision No. C18-0601. The Commission stated that it proposes to strike the second sentence of Rule 3902(c) “because it conflicts with Commission practice and rules, including without limitation, Rule 3615(a), which exempts projects of not more than 30 MW from the standard provisions requiring competitive bidding in the ERP Rules.” In addition to any such internal conflicts the rule may have with other Commission rules or practices, sPower supports striking the second sentence of Rule 3902(c) because it conflicts with the Public Utility Regulatory Policies Act of 1978 (PURPA) and the Federal Energy Regulatory Commission’s (FERC) regulations implementing PURPA. Specifically, PURPA requires the FERC to issue rules to encourage the development of small power production facilities (known in the FERC’s regulations as QFs) by requiring utilities to purchase electric energy from such facilities. The FERC’s implementing regulations state, “Each electric utility shall purchase … any energy and capacity which is made available from a qualifying facility.” The requirement that a utility “shall purchase” any energy and capacity that a QF makes available to it is commonly known as PURPA’s “must-buy obligation.” To ensure that ratepayers are not negatively impacted by utility purchases from QFs, PURPA requires that QF purchase prices must be based on the utility’s avoided cost, which is defined as the cost that the utility would otherwise incur to generate or purchase the electric energy that the QF provides. The Tenth Circuit Court of Appeals has confirmed that as long as a QF satisfies the statutory and regulatory eligibility criteria for QF status, a QF “can force a utility to buy the energy for its ‘avoided cost.’” The second sentence of Rule 3902(c) is inconsistent with the FERC’s regulations for the simple reason that, if the QF does not win the bidding process required by the rule, the QF cannot exercise this right to force the utility to buy its energy and capacity. The plain language of Rule 3902(c) prevents a utility from purchasing energy and capacity a QF makes available to it unless both (a) the utility holds an all-source solicitation (which occurs only every four years), and (b) the QF wins the all-source solicitation. Imposing these pre-conditions is in direct contravention of 18 CFR 292.303(a), which requires that a utility purchase any energy and capacity a QF makes available to it. By the same token, if a QF is able to win the all-source solicitation and is awarded a contract, it would be selling energy and capacity to the utility by virtue of having won the solicitation and not because of its unique rights under federal law as a QF. In short, Rule 3902(c)’s requirement that QFs participate in and win a bidding process is contrary to PURPA. The FERC has twice found that a competitive bidding requirement similar to that required by Rule 3902(c) was not consistent with PURPA or the FERC’s regulations implementing PURPA. In Hydrodynamics Inc., the FERC found that “requiring a QF to win a competitive solicitation as a condition to obtaining a long-term contract imposes an unreasonable obstacle to obtaining a legally enforceable obligation particularly where … such competitive solicitations are not regularly held.” Accordingly, the FERC held that the Montana rule at issue requiring QFs larger than 10 MW to win a competitive solicitation was “therefore inconsistent with PURPA and the [FERC’s] regulations implementing PURPA to the extent that it offers the competitive solicitation process as the only means by which a QF greater than 10 MW can obtain long-term avoided cost rates.” Like the Montana rule at issue in Hydrodynamics, Inc., Rule 3902(c) offers the all-source solicitation process that only occurs once every four years as the only opportunity for a QF to obtain an avoided cost contract with a utility. In Windham Solar, LLC, the FERC reaffirmed its Hydrodynamics findings with respect a similar rule of the Connecticut Public Utilities Regulatory Authority’s that required QFs to participate in a request for proposal process in order to obtain a LEO. After restating its holding in Hydrodynamics, Inc., the FERC stated, “Regardless of whether a QF has participated in a request for proposal, that QF has the right to obtain a legally enforceable obligation.” By striking the second sentence of Rule 3902(c), the Commission would likewise affirm that a QF has the right to obtain a LEO and an avoided cost contract with a utility without needing to participate and win an all-source solicitation. For all of these reasons, the Commission should strike the second sentence of Rule 3902(c) because it is facially contrary to PURPA.
III. The Commission Must Enforce LEOs in Order to Comply with PURPA.
Amending Rule 3902(c) as the Commission has proposed is only the first step for the Commission to bring itself into compliance with federal law. In order to comply with PURPA and the FERC’s regulations, the Commission must actively enforce the must-buy obligation by requiring its jurisdictional utilities to enter into long-term avoided cost contracts with QFs. sPower is not aware that the Commission has ever required a utility to purchase energy and capacity from a QF larger than 100 kW. Nevertheless, sPower will rely on Commission’s representation that “that the ERP process is not the only opportunity for QFs to receive a contract or legally enforceable obligation from a utility.” sPower understands this statement to mean that a QF (including QFs up to 80 MW) will be able to obtain a legally enforceable obligation (LEO) under the Commission’s existing rules when the second sentence of Rule 3902(c) has been stricken. Accordingly, sPower expects that the Commission will begin enforcing LEOs between its jurisdictional utilities and QFs as soon as this rulemaking proceeding is complete, consistent with its obligation under federal law to implement PURPA in a manner that is consistent with the FERC’s implementing regulations. If it does not, the Commission will remain out of compliance with PURPA despite eliminating Rule 3902(c)’s current facial non-compliance.
IV. Conclusion.
In conclusion, sPower supports the Commission’s proposal to amend Rule 3902(c) by striking the second sentence of the rule. sPower appreciates the opportunity to provide these comments and looks forward to continued participation in this proceeding and the Commission’s efforts to comply with PURPA and the FERC’s regulations implementing PURPA.
Edit: added link to Colorado PUC document service
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