Wyoming Commission Reduces PURPA Contract Terms and Changes PacifiCorp’s Avoided Cost Pricing Method

On June 23, 2020, the Wyoming Public Service Commission (Wyoming Commission) partially granted a request from PacifiCorp, dba Rocky Mount Power, for authority to modify its Public Utility Regulatory Policies Act (PURPA) contracts with qualifying facilities (QFs). Within the same proceeding, the Wyoming Commission approved PacifiCorp’s other proposed changes to its avoided cost pricing methodology.  The Wyoming Commission approved reducing the maximum contract term for PURPA power purchase agreements (PPAs) from a 20-year term to a 15-year term (but left the term for small hydro projects at 20 years). PacifiCorp initially requested a 7-year PPA term, arguing that the reduced term would restore the balance between its obligation to enter into long-term contracts to buy power from QFs and the customer indifference principle to mitigate any risks to its customers. The utility also argued that it was necessary to have reduced PPA terms due to the rapidly declining cost of financing renewable energy projects.

The Wyoming Commission found that the utility had provided no evidence that QFs could attract financing on the proposed 7-year terms, which was problematic because, under FERC policy, contract terms must be long enough to allow QFs reasonable opportunities to attract capital from potential investors. Instead, the Wyoming Commission concluded that evidence in the proceeding suggested that QFs would have a reasonable opportunity to attract capital investments with a 15-year term, which the Wyoming Commission ultimately selected. The Wyoming Commission also noted that hydroelectric projects need longer contract terms to attract financing when maintaining 20-years for only small hydro facilities.

The Wyoming Commission’s final Order also approved three of PacifiCorp’s proposed changes to its avoided cost pricing methodology. First, the utility proposed refinements to its Partial Displacement Differential Revenue Requirement (PDDRR) methodology. Under the new “like-for-like” method, a renewable QF will look to the utility’s IRP, and if it includes renewable resources that are the same type as the QF, then the QF will displace those resources. If there is no similar resource in the IRP, then the QF will displace thermal resources unless the next resource is more than two years away. If that is the case, then the QF may apply for a waiver and displace the next deferrable resource based on capacity instead of QF type. The Commission determined that the change would make avoided cost pricing more accurate and consistent with PURPA’s customer indifference principle.

Second, the Wyoming Commission approved a definition change for the utility’s on-peak summer hours (now 3 – 10 p.m. PPT June through September) and winter hours (now 5 – 8 a.m. and 5 – 11 p.m. PPT October through May), as the Commission found that the current definitions did not account for variable pricing due to generation type. PacifiCorp’s rebuttal testimony accepted an additional proposal, made by parties representing QFs, to ensure the revenue neutrality of cost price shaping through the summer and winter periods during the resource sufficiency period. The Wyoming Commission found that the accepted proposal would provide more accurate avoided cost pricing, that the new definition was reasonable, and in the public interest.

Finally, PacifiCorp’s proposal to utilize the PDDRR to set tariff prices for small QFs at least annually was determined just and reasonable. The utility argued that the new change would allow for more accurate avoided cost pricing. The QFs argued that more accurate rates would impair smaller QF development. The Wyoming Commission recognized the importance of small QF development but found that the PURPA “Customer Indifference Principle” required it to adopt a methodology that was in the public’s interest, and that accurate avoided cost pricing was ultimately in the public’s interest.

Sanger Law represented the Renewable Energy Coalition (REC), which advocates for reasonable PURPA policies on behalf of renewable QFs located in Oregon, Idaho, Montana, Washington, Utah, and Wyoming. REC’s technical consultants were Marc Hellman with MH Energy Economics and Lance Kaufman with Aegis Insight.

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.