Utah Commission Maintains Long-Term QF Contracts

On January 7, 2016, the Utah Public Service Commission (the Utah Commission) issued an order rejecting PacifiCorp’s (dba Rocky Mountain Power) proposal to shorten the qualifying facility (QF) contract term from twenty to three years. The Commission instead lowered the contract term to fifteen years. The order is a victory for non-utility owned renewable energy generators in Utah.  

Under the Public Utility Regulatory Policies Act (PURPA), utilities must purchase electricity from renewable energy and cogeneration projects (called QFs). Typically, utilities purchase power from QFs under long-term contracts of fifteen years or more. State utility regulatory commissions have the authority to set the contract terms that investor owned utilities must enter into. Long-term contracts are often necessary for projects to obtain financing for construction or significant upgrades, and it is extremely difficult for new QF projects to be built in states with short-term contracts.

PacifiCorp has recently entered into over a thousand megawatts of new PURPA contracts, nearly all of which are solar generators. While some of these projects will not be built, this will be a huge increase in renewable energy in Utah.

PacifiCorp claimed that it wanted to reduce contract terms because long-term contracts unnecessarily subject its customers to significant market risk. Customers ultimately pay for the costs of any contracts to purchase power from QFs, but they also pay for the costs power generated by PacifiCorp’s own power plants. A major difference is that electric utilities do not earn a profit when they sell their customers QF power, but they earn a profit when the utilities sell their customers their own power. This utility disincentive to purchase renewable power from third parties is the reason Congress passed PURPA. PacifiCorp’s parent company, Berkshire Hathaway, has unsuccessfully lobbied Congress to repeal PURPA.

The Utah Commission rejected PacifiCorp’s proposal to reduce contract terms to three years on the grounds that it would make it more difficult for QFs to obtain financing. The Utah Commission recognized numerous new renewable energy projects impose risks on customers, but concluded that a contract term reduction to fifteen years would adequately protect them.

The Utah Commission Order is HERE

A copy of a Salt Lake Tribune News Article is HERE

 

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.