United States

United States

Idaho curtailment row could set precedent

UNITED STATES: A clash over turbine curtailment in Idaho may have national implications as the US wind industry struggles against a backdrop of scarce power purchase agreements, historically low gas prices and the likely year-end lapse of the federal production tax credit (PTC).

Idaho row has big implications for wind
Idaho row has big implications for wind

In late September, the Federal Energy Regulatory Commission (Ferc) ruled that utility Idaho Power must buy contracted wind energy even at times of low customer demand. Ferc cited the Public Utility Regulatory Policies Act (Purpa) - a 1978 federal law intended to promote domestic renewable energy by forcing utilities to purchase power from small generation projects. Wind and other projects meeting the criteria under Purpa are known as qualifying facilities (QFs).

Curtailment is one of several Purpa-related issues likely to be resolved within coming months, which could prompt a resurgence of wind power QFs in a number of states where regulators can choose to revisit policies and make the 35-year-old law increasingly relevant.

Idaho Power, the state's largest utility, has been curtailing Purpa-qualifying wind power since the spring. The utility justified its decision by arguing that it must reduce base load during times of low demand to spare its customers additional costs.*

Renewables developers argue that Purpa allows for curtailment only to meet emergency operational needs. They also say that curtailment retroactively modifies existing contracts with rates set by the Idaho Public Utilities Commission (IPUC).

However, the IPUC believes that Ferc's ruling is without teeth. The three-member commission is currently deliberating over curtailment and other issues related to Purpa. "We might take notice of the Ferc order," said IPUC spokesman Gene Fadness. "But it's really of no consequence in our final decision."

Regardless of the IPUC ruling, the losing side is likely to appeal in court. "The commission is setting itself up for a real fight in federal court if they ignore Ferc's ruling and allow Idaho Power to curtail," said Peter Richardson, a managing member at law firm Richardson & O'Leary, which represents Purpa-qualifying developers. "You can bet there's going to be a motion for an enforcement action by Ferc against the Idaho commission."

Viable alternative

While roughly two-thirds of the US maintains competitive wholesale electricity markets, QFs represent a viable alternative in the remaining third. It is up to individual states to decide how to implement Purpa.

The majority of projects supported by Purpa are in California, Minnesota, Texas, Idaho, Oregon and New York. Around two thirds of these are wind.

Purpa prices are set using formulas that work out avoided-cost rates - the amount a utility would spend to build a comparable facility, typically represented by gas plants.

Other Purpa issues with precedent-setting potential facing the IPUC are whether utilities or generators should control renewable-energy credits resulting from projects, the length of contracts, the formula for determining avoided-cost rates, and the penalty for damages that result when QFs fall behind production schedules. In a Texas court, meanwhile, Xcel Energy is challenging Purpa's must-buy provision.

*The utility said it has occasionally used curtailments for system reliability issues. The cost argument relates to its proposal to the IPUC for Purpa projects going forward.

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