On December 24, the Federal Energy Regulatory Commission (FERC) and the Idaho Public Utilities Commission (Idaho PUC) signed a Memorandum of Agreement addressing their dispute regarding interpretation and enforcement of the Public Utility Regulatory Policies Act (PURPA).

PURPA requires that utilities purchase power from generators with certain renewable or other characteristics (called Qualifying Facilities, or QFs) at prices that reflect the utilities’ avoided cost of generating the power.  FERC enforces the program but has left much of the implementation details to the states.  In 2013, FERC had taken the unusual step of taking the Idaho PUC to Federal court regarding the state’s implementation of the law.

In 2011, the Idaho PUC lowered the maximum size of QFs eligible to receive avoided cost rates.  A number of wind facilities at the time were in the final stages of negotiating purchase contracts with utilities but could not secure signatures until just after the effective date of the new lower size limit.  The Idaho PUC rejected a number of the agreements because they exceeded the new maximum size limits, finding that purchase agreements must be executed prior to the effective date of the change in eligibility criteria.

The wind producers complained to FERC about the rejections as inconsistent with PURPA and asked FERC to take enforcement action in Federal court.  FERC agreed to do so, finding that the state’s actions were inconsistent with PURPA because a legally enforceable obligation can exist prior to the formation of a contract.

FERC’s court action was controversial with state regulators.  The National Association of Regulatory Utility Commissioners said at the time that it was “deeply disappointed,” calling FERC’s action in this case “drastic and unprecedented.”  And FERC Commissioner Tony Clark, a former state regulator, opposed FERC’s lawsuit.

Under the agreement, the Idaho PUC acknowledges that “a legally enforceable obligation may be incurred prior to the formal memorialization of a contract to writing.”  The agreement states that  PURPA “establishes a program of cooperative federalism, with FERC establishing regulations and states implementing them in a manner that accommodates local conditions.”

Under the agreement, FERC will withdraw its complaint filed against the Idaho PUC, and the PUC will withdraw any of its pending claims.

FERC Acting Chairman Cheryl LaFleur said the agreement “will allow FERC and Idaho to focus on our continued cooperation in implementing PURPA,” and Idaho PUC President Paul Kjellander said, “(w)ith this matter behind us, we would hope that we can work with FERC more closely in the spirit of cooperative federalism.”

A link to the agreement is provided above.

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Photo of Bud Earley Bud Earley

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers…

Bud Earley, a non-lawyer senior advisor, provides analysis and advice on a wide range of federal and state energy regulatory issues, including transaction and rate issues, regional transmission organization (RTO) tariffs and rules, interconnection, retail choice and demand response for electricity customers, a natural gas pipelines and hydroelectric facility licenses, and LNG export authorizations.

Working with Covington teams, Mr. Earley has provided expert advice and analysis to investment firms, utilities, independent power producers, project developers, customers, marketers and U.S. and international energy companies,

Prior to joining Covington, Mr. Earley served for over 30 years in various staff positions at the Federal Energy Regulatory Commission (FERC). While at the FERC, Mr. Earley was instrumental in developing and applying policies regarding the transition of the electric utility industry to competition, including policies regarding independent power producers, transmission access, standard generator interconnection procedures, organized electricity markets, mergers and market-based rates.