NORTHERN LARAMIE RANGE ALLIANCE

Transcription

1 NORTHERN LARAMIE RANGE ALLIANCE BEFORE THE PUBLIC SERVICE COMMISSION OF WYOMING COMMENTS OF THE NORTHERN LARAMIE RANGE ALLIANCE ON PROPOSED CHANGES TO CHAPTER III OF THE PUBLIC SERVICE COMMISSION'S REGULATIONS The Northern Laramie Range Alliance ("NLRA? or "Alliance?), by and through its counsel, Crystal McDonough, Esq. of Pathfinder Law Offices, LLC, hereby provides its comments to the proposed changes to Chapter III of the Rules and Regulations of the Public Service Commission of Wyoming (the "Commission?) and in particular to proposed Section 35 thereof: "Arrangements between Electric Utilities and Qualifying Cogeneration and Small Power Production Facilities?. Background The Alliance, a citizen organization most of the more than 900 members of which are electric ratepayers in the RockY Mountain Power (?'RMP") service area in central Wyoming, increasingly has become concerned that RMP and, potentially, other utilities, have entered contracts for the purchase of energy from third-party developers of certain qualifying facilities ("QFs?) on terms that violate the "ratepayer indifference? standard of federal law; in particular, by paying more than the utility's "avoided cost? for the energy purchased pursuant to these contracts. Three issues are of particular concern: (1 ) RMP and other utilities have entered long-term contracts (typically 20 years) for purchase of QF output at fixed prices. This can result in the utilities' becoming "locked in" to energy costs that may be substantially higher than alternatives during the period of the contract, and it can constrain their flexibility in managing supply and demand across their entire "fleet" of generating resources. (2) RMP has entered QF contracts requiring it to purchase output that is not required to meet system demand as assessed in its Integrated Resource Plan ("IRP?). When no additional energy is required in the system, there is no "avoided cost" for "incremental? energy. (3) QF contracts entered by RMP can deprive it of substantial government subsidies (notably the federal production tax credit for wind energy, or "PTC" ') that otherwise could dramatically reduce the net power cost of entering the rate base for such a facility. A simple comparison between (l) the net power cost ("NPC?) impact of a hypothetical long-term, fixed-price wind QF contract similar to one currently pending before the Commission and (2) the NPC impact if RMP built and owned the ' The federal PTC expired by its terms for facilities that had not begun construction by year-end 2014, or in production by year-end However, the PTC typically has been renewed after such an expiry and, in the meantime, some developers appear to be relying on TRS "guidance" to the effect that actual p)iysical construction need not have begun for a facility under development to qrialify Accordingly, the issue described in the text remains pertinent to the work of public?itility commissions such as the Commissioii. P.0. Box 3215 * Casper, Wyoming (307) 436-9l47 or (307)

2 same i-acility illustrates this point: Assuming a $40 per mwh contract price for the output of an 80 mw nameplate facility with a 40% capacity factor, the PTC (a $23 per mwh tax credit) has a pretax value, at the standard federal tax rate for corporations, of more than $18 million per annum. If RMP buys the output from a QF, it wil l pay - and charge ratepayers - more than $11 million, and the QF and its "tax equity? investors will receive the PTC. But if RMP builds and owns the facility and collects the PTC, the NPC impact on RMP of adding the facility would be to reduce it by roughly $7 million (assuming that RMP's cost was equivalent to the same $40 per mwh - if RMP's cost, given its loivcr financing costs, were less than $40 per mwh, its building and owning the facility would reduce NPC even more) In other words, the value of the PTC would mean that a new utility-owned facility would redttce rates - in effect, since RMP needs no new generation, the federal government would be paying RMP to back off other resources. Put differently, the real?'avoided cost? against which a QF contract should be assessed is negative. Obvioeisly, these liolicy issues can be addressed in utilities' tariff schedules (Schedules 37 and 38 in the cii:;e of RMP) :ind in rate cases But reviewing how specific PPAs address these and other PURPA-compliance issues by their terms is a function central to the PSC's responsibility to implement PUR?PA. The following suggested changes to proposed Section 35 reflect this. As the Commission is aware, NLRA has taken the position before the Commission and in the district court that the Commission has a responsibility to conduct contract-specific reviews for PURPA and statelaw compliance before accepting a PPA, and the Attorney General's office, in its responsive pleadi :'igs and in or-al argument representing the Commission, has agreed that the Commission has a "duty- to review QIF contracts for compliance with PURPA.2 It is therefore appropriate, consistent with this duty, th,-if the Commission include in Section 35 a specific provision providing for review of each contract. NLRA recommends, for the foregoing reasons, that the Commission adopt the following changes to its pro,iosed rules (a) Filing of purchase, sale rates and contracts (i) y".11 regulations, tariffs and contracts governing sales and purchases between quril ifying facilities and utilities shall be filed with, reviewed and approved by the Comtnission. In add ;' tion, NLRA opposes the movement of subsection (c)(ii) (factors for determining the avoided cost rc',.e offered to each QF) from its previous location in the rules. The Commission moved this subsecii'on from i t>;!ocation in the Commission's existing Rule 31 7(i)(iii)(l). In fact, the proposed roles move, deletc :ind add language throughout that make reading and understanding very difficult where those roles :iltempt to reflect PURPA's language set forth in 18 CFR The purpose of proposing rule cli:inges is to streamline and make the rules simpler. Instead these proposed rules 2 The ( :ommissioii :tdmits in its Response Brief that it must review the PPA for PURPA compliance. "PURI t-t specifics ;lie requirements for a PPA and the state's duty is to review the PPA and to deteri:.:?ue coml;::;,uce.? Northern Laramie Range Alliance v. Public Service Commission, District Court i:irst Judici:ii' District, Docket NO , Brief of Respondent at 20 (decision pending) (emph:isis added; 2

3 seem to make undcrstanding PURPA's implementation by the Commission more convoluted and incons : stent with llie language in PURPA. The st;ite Commission has?discretion in determining the manner in which the rules will be impleiq ranted, and may comply by issuing regulations, by resolving disputes on a case-by-case basis, or by oilier action reasonably designed to give effect to FERC's rules.? Idaho Power Co., 316 P.3d at 1278; see also FERC, 456 u.s. at 751. Therefore the Commission may implement PURPA by issuin;i +-egulatioii:; or rules; however those rules must "give effect to FERC's rules.? Id. The propo.,1 changcs (,O not?give effect to FERC's rules.? NLR?i'? i cspectfii:l>' requests that the Commission adopt the language from PURPA as set forth in 18 CFR b Aii'i;iched to these comments is a copy of 18 CFR for the Commissioners as they C(,isider thesc important proposed rule changes and their adherence to federal law. NLRA greatlv :ipprecialcs the Commission's consideration of these matters. Respet'!fully submitted, The h tliern Li me Range Alliance byit. ':ering( iimittee Bretl?' rye Keio.'o ' s Lay Sallv?i-vey D? :ertrue Willard McMillen Sharon rodeman Tom Swanson 3

4 Rates for purchases. Code Of Federal Regulations Title 18. Conservation of Power and Water Resources Chapter 1. FEDERAL ENERGY REGULATORY COMMISSION, DEPARTMENT OF ENERGY Subchapter K. REGULATIONS UNDER THE PUBLIC UT?LITY REGULATORY POLICIES ACT OF 1978 Part 292. REGULATIONS UNDER SECTIONS 201 AND 210 of THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978 WITH REGARD TO SMALL POWER PRODUCTION AND COGENERATION Subpart C. ARRANGEMENTS BETWEEN ELECTRIC UTIL?TIES AND QUAL?FYING COGENERATION AND SMALL POWER PRODUCTION FACILITIES UNDER SECTION 210 of THE PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978 Current through April 30, Rates for purchases (a) Ratesforpurchases. (1) Ratesforpurchasesshall: (i) Be just and reasonable to the electric consumer of the electric utility and in the public interest; and (ii) Not discriminate against qualifying cogeneration and small power production facilities. (2) Nothing in this subpart requires any electric utility to pay more than the avoided costs for purchases. (b) Relationship to avoided costs. (1) Forpurposesofthisparagraph,"newcapacity"meansanypurchasefromcapacity of a qualifying facility, construction of which was commenced on or after November 9, (2) Subject to paragraph (b)(3) of this section, a rate for purchases satisfies the requirements of paragraph (a) of this section if the rate equals the avoided costs determined after consideration of the factors set forth in paragraph (e) of this section

5 (3) A rate for purchases (other than from new capacity) may be less than the avoided cost if the State regulatory authority (with respect to any electric utility over which it has ratemaking authority) or the nonregulated electric utility determines that a Iower rate is consistent with paragraph (a) of this section, and is sufficient to encourage cogeneration and small power production. (4) Rates for purchases from new capacity shall be in accordance with paragraph (b)(2) of this section, regardless of whether the electric utility making such purchases is simultaneously making sales to the qualifying facility. (5) In the case in which the rates for purchases are based upon estimates of avoided costs over the specific term of the contract or other legally enforceable obligation, the rates for such purchases do not violate this subpart if the rates for such purchases differ from avoided costs at the time of delivery. (c) Standard rates for purchases. (1) Thereshallbeputintoeffect(withrespecttoeachelectricutility)standardratesfor purchases from qualifying facilities with a design capacity of 100 kilowatts or less. (2) There may be put into effect standard rates for purchases from qualifying facilities with a design capacity of more than 100 kilowatts. (3) The standard rates for purchases under this paragraph: (i) Shall be consistent with paragraphs (a) and (e) of this section; and (ii) May differentiate among qualifying facilities using various technologies on the basis of the supply characteristics of the different technologies. (d) Purchases"asavailable"orpursuanttoalegallyenforceableobligation.Eachqualifying facility shall have the option either: (1) Toprovideenergyasthequalifyingfacilitydeterminessuchenergytobeavailable for such purchases, in which case the rates for such purchases shall be based on the purchasing utility's avoided costs calculated at the time of delivery; or (2) To provide energy or capacity pursuant to a legally enforceable obligation for the delivery of energy or capacity over a specified {erm, in which case the rates for such purchases shall, at the option of the qualifying facility exercised prior to the beginning of the specified term, be based on either: (i) The avoided costs calculated at the time of delivery; or (ii) The avoided costs calculated at the time the obligation is incurred. (e) Facforsaffectirigratesforpurchases.lndeterminingavoidedcosts,thefollowingfactors

6 shall, to the extent practicabie, be taken into account: (1) Thedataprovidedpursuantto (b),(c),or(d),includingStatereviewof any such data; (2) The availability of capacity or energy from a qualifying facility during the system daily and seasonal peak periods, including: (i) The ability of the utility to dispatch the qualifying facility; (ii) The expected or demonstrated reliability of the qualifying facility; (iii) The terms of any contract or other legally enforceable obligation, including the duration of the obligation, termination notice requirement and sanctions for non-compliance; (iv) The extent to which scheduled outages of the qualifying facility can be usefully coordinated with scheduled outages of the utility's facilities; (v) The usefulness of energy and capacity supplied from a qualifying facility during system emergencies, including its ability to separate its load from its generation; (vi) The individual and aggregate value of energy and capacity from qualifying facilities on the electric utility's system; and (vii) The smaller capacity increments and the shorter lead times available with additions of capacity from qualifying facilities; and (3) The relationship of the availability of energy or capacity from the qualifying facility as derived in paragraph (e)(2) of this section, to the ability of the electric utility to avoid costs, including the deferral of capacity additions and the reduction of fossil fuel use; and (4) The costs or savings resulting from variations in line Iosses from those that would have existed in the absence of purchases from a qualifying facility, if the purchasing electric utility generated an equivalent amount of energy itself or purchased an equivalent amount of electric energy or capacity. (f) Periods during which purchases not required. (1) Anyelectricutilitywhichgivesnoticepursuanttoparagraph(f)(2)ofthissectionwill not be required to purchase electric energy or capacity during any period during which, due to operational circumstances, purchases from qualifying facilities will result in costs greater than those which the utility would incur if it did not make such purchases, but instead generated an equivalent amount of energy itself. (2) Anyelectricutilityseekingtoinvokeparagraph(f)(1)ofthissectionmustnotify,in

7 accordance with applicable State Iaw or regulation, each affected qualifying facility in time for the qualifying facility to cease the delivery of energy or capacity to the electric utility. (3) Any electric utility which fails to comply with the provisions of paragraph (f)(2) of this section will be required to pay the same rate for such purchase of energy or capacity as would be required had the period described in paragraph (f)(1) of this section not occurred. (4) A claim by an electric utility that such a period has occurred or will occur is subject to such verification by its State regulatory authority as the State regulatory authority determines necessary or appropriate, either before or affer the occurrence. Cite as 18 CFR