FERC orders in Sun Edison, JD Wind boost wind, solar projects

By Gregory K. Lawrence, McDermott Will and Emery, LLP

Boston, December 16, 2009 — On November 19, the Federal Energy Regulatory Commission issued an order declaring as inconsistent with the requirements of the Public Utility Regulatory Policies Act of 1978 and related FERC rules, a May 1 decision of the Public Utility Commission of Texas that the wind-powered generation of the JD Wind Companies is not entitled to a legally enforceable obligation and an avoided cost rate calculated when that obligation is incurred.

FERC issues this order instead of initiating an enforcement action against the PUCT. Several intervenors, including the American Wind Energy Association and the Solar Energy Industries Association supported JD Wind’s petition.

The declaratory order responds to the September 24, 2009, petition by JD Wind requesting that FERC overturn the PUCT decision, arguing that the PUCT’s order is contrary to PURPA and rules, which provide every qualifying facility, including renewable wind and solar-powered generating facilities, with the option to sell their output to an electric utility either as the facility determines such energy to be available or pursuant to a legally enforceable obligation.

FERC agreed with JD Wind’s claim that the PUCT’s order, which attempted to limit the award of a legally enforceable obligation to only those qualifying facilities that provide “firm” and not intermittent power that is not “readily available,” is inconsistent with PURPA regulations. FERC found no such “firmness” limitation in its rules.

FERC concluded that under these regulations “JD Wind has the right to choose to sell pursuant to a legally enforceable obligation, and, in turn, has the right to choose to have rates calculated at avoided costs calculated at the time that obligation is incurred.”

FERC also confirmed that states may take actions under PURPA only to the extent that the action is in accord with FERC’s rules.

FERC opted to issue this declaratory order instead of taking requested enforcement action against the PUCT, citing JD Wind’s ability under PURPA to bring its own enforcement action against the PUCT in the appropriate U.S. district court.

Also on November 19, FERC issued a declaratory order that sales by a developer of onsite solar generating projects to end-use customers do not constitute the sale or transmission of electric energy at wholesale in interstate commerce under federal law.

This declaratory order centers on a petition from solar energy services provider SunEdison LLC to confirm that “certain of its subsidiaries’ sales to end-use customers do not constitute the sale of electric energy at wholesale in interstate commerce or the transmission of electric energy in interstate commerce for purposes of the Federal Power Act (FPA), nor involve jurisdictional rates for purposes of the Public Utility Holding Company Act of 2005 (PUHCA 2005).

Here, SunEdison presented a case where the entities owning the generation facilities will not be the participants in a net metering program, but will sell their output to the net metering program participants.

Citing Order No. 2003-A and MidAmerican (describing that FERC does not assert jurisdiction when the end-use customer as owner of a generator receives a credit against its retail power purchases), FERC confirmed SunEdison’s stance, stating that such sales of electricity to end-use customers are not wholesale “sale for resale” subject to FERC jurisdiction under the FPA.

Simply put, FERC confirmed there is no jurisdictional sale when there is no net sale over the applicable billing period to the local utility. Similarly, FERC confirms that rates for these sales do not constitute “jurisdictional rates” for purposes of PUHCA regulation.

SunEdison also requested waivers regarding PUCHA 2005 implementation, as motivated by its desire to not file the “burdensome” claims necessary to establish QF status and PUHCA compliance for its solar facilities. The additional PUCHA 2005 waivers were not granted, however.

“Because qualifying facilities (QF) are already exempt from those provisions of our regulations for which SunEdison seeks waiver, and because QF status for facilities like those at issue here is easy to establish, we see no need to grant the waiver requested,” FERC explained.

FERC’s two separate declaratory rulings confirming that intermittent renewable power generation is entitled to certain PURPA benefits and that sales by a developer of onsite solar generation to end-use customers do not constitute jurisdictional activities provide important regulatory clarity to renewable power developers further boosting the prospects of such projects.

Author: Gregory K. Lawrence is a partner in the Energy and Derivatives Markets Group, resident in McDermott Will & Emery’s Boston office. Mr. Lawrence focuses his practice on regulatory proceedings, negotiations, governmental affairs and agency litigation. He also advises regarding energy and energy-related transactions.

 

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