Idaho Commission Determines that QFs Cannot Establish a LEO Unless the Utility Delays Contract Execution

In April 2021, the Idaho Public Utilities Commission (the Commission) affirmed its December 2020 order that qualifying facilities (QF) under the Public Utility Regulatory Policies Act of 1978 (PURPA) can only establish a Legally Enforceable Obligation (LEO) by filing a meritorious complaint against the purchasing utility before the utility’s rates change. This order means that QFs interested in selling to Idaho utilities can only lock in contract pricing by obtaining a fully executed contract before rates change or by demonstrating that a utility delayed contract execution. 

The order arose in a proceeding that began in June 2020, when Idaho Power Company (Idaho Power) sought Commission approval of an executed QF contract with Coleman Hydro Project. The contract states that it is legally effective when signed by both parties, which occurred on June 19, 2020. Staff noted that the Commission issued an order on May 29, 2020 that updated Idaho Power’s avoided cost pricing on June 1, 2020. Because the pricing in the contract was higher than the pricing approved by the Commission for contracts signed after June 1, 2020, Staff recommended that the Commission not approve the contract unless the contract pricing was revised. The QF argued that the contract should be approved with grandfathered pricing, because it had concluded negotiations with Idaho Power before rates changed and the only step that remained was to execute the contract. Because of this, the QF argued that it had established a LEO and was entitled to the previously effective pricing.

Under PURPA, a LEO is a commitment by a QF to sell at the avoided costs in effect as of the time of the commitment, and a QF can establish a LEO without having a fully executed power purchase agreement (PPA). However, the QF can only establish a LEO by following the state regulatory commission’s rules on how to do so. For example, in Idaho, the Commission requires QFs to file a meritorious complaint before a utility’s rates change in order to establish a LEO.

In December 2020, the Commission determined that Coleman Hydro Project did not have a LEO and was not entitled to the rates in effect prior to June 1, 2020. The Commission noted that the QF did not allege any utility delay. The Commission also noted that the QF signed a PPA that would be effective only after both parties signed. Based on this, the Commission found that the pricing in effect when both parties signed ought to be used. The QF asked the Commission to reconsider its order. The QF noted, among other things, that the Commission has previously approved at least 20 QF PPAs where the effective date was after the utility’s pricing changed. In April 2021, the Commission disagreed with all of the QF’s arguments and affirmed its prior order.

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.