Oregon Commission Maintains 20 Year PURPA Contracts

On March 29, 2016, the Oregon Public Utility Commission (Oregon Commission) issued two orders resolving issues in PacifiCorp’s and Idaho Power’s separate proposals to lower the contract term and size thresholds for qualifying facilities (QF). The Oregon Commission retained the twenty-year contract term, with fifteen years of fixed prices. The Oregon Commission lowered the size threshold for published rates for solar QFs only to 3 megawatts (MW), but also allowed solar QFs to use standard contracts up to 10 MW in size. The Commission did not alter the size threshold for any other QFs.  

PacifiCorp’s proceeding was docketed as UM 1734, and PacifiCorp proposed to lower the QFs contract term for all QFs to three years and lower the standard contract size threshold to 100 kilowatts (kW) for wind and solar QFs. Idaho Power’s proceeding is docketed as UM 1725, and Idaho Power proposed, for wind and solar QFs, to lower the contract term to two years and the size threshold to 100 kW.

QFs, which are cogenerators and small renewable energy generators have the legal right to sell their energy and capacity to electric utilities under the Public Utility Regulatory Policies Act (PURPA). State utility commissions have discretion to implement many aspects of PURPA, including contract terms and conditions. Oregon policy since 2005 has been that QFs have the unilateral right to select the appropriate contract term, up to twenty years. In addition, Oregon has allowed QFs up to 10 MWs the right to sell under Commission pre-approved rates and to use Commission-approved standard contract terms.

On April 24, 2015, Idaho Power filed its application to lower contract terms and size thresholds, and PacifiCorp followed up with its own application on May 21, 2015. Idaho Power and PacifiCorp claimed that they had filed their requests because they had entered into a large number of new solar QF contracts. Idaho Power had made a similar proposal in Idaho, and PacifiCorp requested lower contract terms in Idaho, Utah and Wyoming as well.

The Oregon Commission explained that any change to the standard contract eligibility threshold should be targeted to remedy specific and verified problems the utilities had identified. For this reason, they limited any changes to solar projects, and limited the size threshold for standard rates to 3 MWs. The Oregon Commission will still allow solar QFs between 3 and 10 MWs access to standard contracts, and refused to lower the size threshold at all for wind generators.

The Oregon Commission refused to lower the contract term available for QFs, and recognized the benefits and risks associated with longer QF contract terms. The Commission explained: “Longer term contracts help align the financing period with an asset’s useful life, making the investment less risky and more likely to obtain far more reasonable financing terms. On the other hand, longer term contracts increase the likelihood of forecasting errors in developing QF avoided prices, thus potentially subjecting ratepayers to costs that exceed the utility’s actual avoided costs. After further consideration in this docket, we conclude that our current policy appropriately balances these interests.”

 

 

Disclaimer
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.