FERC Finds Utah QF Established LEO Prior to Utility’s PURPA Waiver Filing

On April 15, 2021, the Federal Energy Regulatory Commission (FERC) issued an order finding that a qualifying facility (QF) called Kanab Solar had established a legally enforceable obligation (LEO) to sell power to Garkane Energy Cooperative (Garkane) prior to the date that Garkane and its generation and transmission cooperative, Deseret Power, had petitioned FERC for waivers to some of their obligations under the Public Utility Regulatory Policies Act (PURPA). FERC granted the waivers. However, FERC also determined that Kanab Solar established a LEO before the petitions were filed. This means that the waivers do not affect Kanab Solar’s pre-existing right to choose to sell to Garkane rather than to Deseret Power. 

Under PURPA, a utility must both offer to purchase energy and capacity from QFs at the utility’s avoided cost price and offer to sell energy and capacity to QFs. A QF can exercise its right to sell to a utility by entering into a power purchase agreement (PPA) or by establishing a LEO. A LEO entitles a QF to the utility’s avoided cost prices at the time it is established. A utility cannot delay executing a PPA or otherwise delay the PPA negotiation process in an attempt to reduce the avoided cost price because the avoided cost price is locked in once the LEO is established.

The FERC proceeding began with Garkane and Deseret Power petitioning FERC to waive some of their obligations under PURPA. Under the petition, Deseret Power promised to assume the obligations of member-owners like Garkane to purchase energy and capacity from QFs, and the member-owners promised to assume Deseret Power’s obligation to offer to sell energy and capacity to QFs. The practical effects would be that QFs could sell power to Deseret Power but not to its member-owners like Garkane and that QFs could buy power from member-owners like Garkane but not from Deseret Power.

Kanab Solar then intervened in the FERC proceeding and filed what FERC calls a protest. Kanab Solar did not oppose or support the requested waivers but asked FERC for clarity on the effect of the waivers, if granted, to QFs with PPAs or LEOs to sell to Garkane. Kanab Solar told FERC that it thought it had established a LEO to sell to Garkane and asked FERC to confirm that the waivers, if granted, would not apply to any QF with a PPA or LEO.

Whether a QF has established a LEO or not depends on the state standards in the state where the project sits. However, FERC has jurisdiction to review whether the state standards comply with PURPA. Kanab Solar is located in Utah and cited a Utah Public Service Commission order finding that a QF could establish a LEO by demonstrating that a contract would have been executed “but for” some action or non-action of the purchasing utility. Kanab Solar cited this order as the only available state-level guidance of which Kanab Solar was aware. Kanab Solar told FERC that it had negotiated to sell power to Garkane for approximately six months before Garkane stopped negotiating and told Kanab Solar it would be petitioning FERC for a waiver of Garkane’s obligation to purchase QF power. Kanab Solar also explained to FERC that, although Garkane notified Kanab Solar that it could sell power to Deseret Power instead, Kanab Solar wished to sell power to Garkane at Garkane’s avoided cost price because the pricing was higher than that of Deseret Power. Deseret Power and Garkane filed an answer but did not cite any alternative legal standard for when a Utah QF can establish a LEO. Also, they did not dispute that Garkane was negotiating with Kanab Solar but then stopped the negotiations before filing the petition for waivers.

In its order, FERC held that Kanab Solar established a LEO and had a legal right to sell power to Garkane at Garkane’s avoided cost price. FERC did not take a position on what Garkane’s avoided cost price was under the LEO. FERC also noted its disagreement with Deseret Power and Garkane’s argument that any LEO Kanab Solar might have had with Garkane was voided by Deseret offering a PPA to Kanab Solar. FERC noted that allowing a utility to void an existing LEO in this way would largely nullify the effect and purpose of a LEO. FERC’s order is publicly available at this link or by visiting the docket EL20-47-000.

Sanger Law represented Kanab Solar in the FERC proceeding.

These materials are intended to as informational and are not to be considered legal advice or legal opinion, nor do they create a lawyer-client relationship. Information included about previous case results does not assure a similar future result.