FERC declines to intervene in Montana PURPA fight

As the cost of solar continues its historic declines, new markets and mechanisms for selling electricity are opening up in the United States. A particularly rich source of new contracts for solar projects is the use of the Public Utility Regulatory Policies Act of 1978 (PURPA), which mandates that utilities must buy power from independent power producers if it is below their cost of generation.

PURPA has opened up utility-scale markets in a number of states that have weak or no renewable energy mandates, such as North Carolina, Utah, Idaho and Montana. However, in some states utilities and regulators have pushed back, with Idaho slashing contract lengths and Montana suspending PURPA in the territory of utility Northwestern Energy.

Environmental groups and a solar developer took the fight in Montana all the way to the Federal Energy Regulatory Commission (FERC), which yesterday ruled that the Montana Public Service Commission (MPSC) has acted in a manner inconsistent with the federal law. However, it also declined to force Montana regulators to comply with the law.

“Our decision not to initiate an enforcement action means that FLS may itself bring an enforcement action against the Montana Commission and NorthWestern in the appropriate court,” reads the FERC ruling.

FLS Energy appeared before FERC along with 14 project companies, and MPSC’s ruling affected 155 MW of solar projects ranging from 100 kW to 3 MW in capacity. It is unclear how much of that capacity FLS’ project companies represent.

At issue was the cost of the PURPA contracts. Under PURPA developers must submit contracts that a utility’s “avoided cost”, which is the cost they would otherwise pay for electricity. In Northwestern Energy that rate was set at $67 per megawatt-hour, which the utility had argued was too high, necessitating a freeze on the program until a new avoided cost figure could be determined.

It is unclear what impact this nuanced decision will have on the decisions of other states. PURPA projects are booming in Utah, which enabled the state to become the 2nd-largest solar market in the 3rd quarter of 2016. However, in North Carolina Duke Energy is currently seek to modify its interconnection requirements, which Vote Solar says undermines PURPA.