FERC Deals Blow to Above-Market Rates (Feed-In Tariffs)
I want to thank my colleague, Lee Hoffman, for bringing this case to my attention... The Federal Energy Regulatory Commission (FERC) has dealt a large and, in some cases, fatal blow to Renewable Energy projects in the US. The California PUC requested that FERC rule that the California feed-in-tariff for CHP is not pre-empted by the Federal Law (FPA and PURPA). Southern California Edison and San Diego Gas and Electric filed counter requests for Declaratory Ruling. In a potentially wide spreading decision, the FERC decided the following: 1. The FERC has exclusive jurisdiction to regulate the rates, terms and conditions of sales for resale of electric energy in interstate commerce by public utilities. 2. While States set wholesale rates under PURPA, States can only do so when the FERC fails to act. 3. California argued that the feed-in-tariff is merely an "offering price" by the purchaser of power. However, FERC disagreed and states "setting rates for wholesale sales in interstate commerce by public utilities ...[is] preempted by the FPA." 4. States can only determine the avoided costs for Qualified Facilities and that wholesale QF rates cannot exceed avoided costs. 5. The rate cap does not apply to states or their political subdivisions. 6. States can require purchase from certain types of facilities but not at rates that exceed avoided costs. 7. The FERC jurisdiction extends to both transmission level and distribution level facilities. This obviously affects all feed-in-tariffs and nullifies them (including "alternative energy purchasing rates" that certain states have implemented to spur alternative energy). In Connecticut, for example, this Decision may nullify Project 150 (the State's attempt to have 150 MW of Renewable Energy installed by providing a rate that is 5.5 ents above market). Basically, a State cannot put the costs of alternative energy on to the backs of ratepayers. States must find other ways to fund alternative energy, either through tax based incentives or grants/loans. Beyond that, this could also have negative implications toward net metering should that be deemed a "sale for resale". According the FERC decision in Sun Edison, so long as the on-site generator sells back less than the on-site usage, there is no sale for resale and FERC rules are not violated. However, it is clear that this decision would prevent sales back to the grid under net metering at beyond avoided costs for excess electricity. Congressman Inslee (D-WA) has been actively working to change the FPA to allow feed-in tariffs (along with national net metering). He has successfully inserted such language into the climate change bill that passed the House. Most likely, the Senate will not pass the bill this year.
