PURPA amendment stalls in Arizona

Last night, a proposed resolution and an amendment to that resolution before Arizona regulators to set power contracts under the Public Utility Regulatory Policies Act of 1978 (PURPA) at a minimum of 15 years failed to pass, stalling before the commission to a 2-2-1 vote, with one abstention.

The resolution is not dead, however. Hearings are set to be held this November on the requests of Arizona Public Service, Tucson Electric Power and UNS Energy to standardize power purchase contracts for facilities in excess of 100 kW to a maximum of two years – which would ensure that PURPA is not usable by solar developers.

The proposal for a 15-year contract mandate, originally introduced by Commissioner Andy Tobin, can be re-voted upon after these hearings. For context, Arizona’s conforming PURPA rules do not currently specify a minimum length for contracts.

In the grand scheme of contract lengths, 15 years is right on the edge of, if not entirely feasible for solar developers. For example, North Carolina saw a boom in utility-scale solar development from these small qualifying facilities (QFs) after implementing 15-year standard contract for facilities up to 5 MW (Note: in 2017, the state enacted compromise legislation replacing the standard offer with a competitive solicitation model for new projects). In Michigan, similar amendments to the avoided cost calculations ended a suspension of revisions to PURPA, amid a complaint from Consumers Energy, which argued that it doesn’t need any additional capacity over the next 10 years, so it should not be forced to buy from renewable energy projects under the law.

That same unnecessary capacity argument was used to gut PURPA in Idaho and Montana, effectively burying the already marginal utility-scale solar markets in the states. And what accompanied these unnecessary capacity arguments in both of those states? Well, in Montana, contract lengths were reduced to 10 years, until just recently, and in Idaho they were slashed to five years, with certain facilities getting hit harder with two-year contract minimums.

Only furthering the sentiment that this timeframe may be a good thing is the fact that, to this point, there has been very little PURPA development in Arizona. Uncertainty over the lack of mandated contract lengths undoubtedly contributed to little development under PURPA in the state. Furthermore, the general attitude surrounding the amendment seemed to be that the 15-year contract lengths would spur new development nearly immediately.

To put today’s ACC PURPA decision in perspective, APS currently has a grand total of 75MW of PV solar under a PPA, if the vote had been “yes” today, it would have launched 500MW of new PV! Was single biggest chance to add solar in Arizona since original REST adoption.

— Court Rich (@Court_Rich) April 24, 2019

Commissioner Tobin, in his testimony for the resolution claimed that a rejecting vote would cause the state to miss out on $600 million worth of potential PURPA-based projects. While this number is staggering considering the previous lack of action regarding the policy, guaranteed minimum contract lengths, coupled with the expiring 30% federal tax credit for renewable-energy projects would support the positions of Rich and Tobin, as projects must break ground prior to Jan. 1, 2020 to be eligible for the credit.

Even if the resolution is re-proposed and passes in November, it may be too little too late for the boom that Arizona could have seen with mandated 15-year contracts.