FERC initiates unprecedented enforcement action against Idaho PUC 

The Federal Energy Regulatory Commission will seek to enforce an earlier order against the Idaho Public Utilities Commission over wind power projects near Murphy.

The federal commission oversees electric and natural gas delivery policy. Its ruling says the Idaho commission
violated federal law when it denied an appeal by developers for three Murphy Flat wind power projects.

The appeal was based on FERC’s 2011 decision that the commission’s rejection of contracts for Murphy Flat with Idaho Power were “inconsistent” with regulations and rules governing projects under what is known as PURPA, the Public Utility Regulatory Policies Act.

The federal panel did not take an enforcement action then but it said Monday it will initiate action now. The Federal Commission’s action against a state commission is unprecedented, said Peter Richardson, an attorney who represents renewable developers.

“This is the first time this has ever happened,” he said.

The federal action comes as the Idaho Commission deliberates on a major case to determine how it will carry out the federal law.

FERC said the Idaho Commission should have recognized power contracts signed by the Murphy Flats developer by a deadline it set in 2010 as a “legally enforceable obligation.”

The Idaho Commission issued a statement late Monday saying it could not by state law accept the Murphy Flat petition because it waited 15 months after the original FERC order to file with the state.

“The lack of a timely appeal disrupts the regulatory process, introduces uncertainty and is contrary to the interests of ratepayers and utilities,” the IPUC said in its statement. “Murphy Flats failed to follow long-established and well-known procedure and law that requires a party to timely seek relief in order to preserve its right to a remedy.

FERC noted that Murphy Flat’s developers had been in settlement discussions with the Idaho Commission during that time and were not “sitting on their rights.” Two other wind projects were affected by the original FERC order and one, Cedar Creek, in Eastern Idaho, which had a contract with Rocky Mountain Power, has moved forward.

FERC’s 2011 decision was unusual. The state commissions are designed to regulate utilities that have a monopoly over necessities such as electricity, natural gas, telephone service and municipal water, and are given wide deference over how they do it.

Congress passed PURPA in 1978 to open up the electricity market to small producers.

The law requires utilities to purchase the power at a cost equal to what it would cost the utility to build a plant to supply that power. That rate is called the “avoided cost.”

That avoided cost rate and the regulations for administering PURPA are placed in the state regulatory commission’s hands.

In late 2010, the Idaho PUC was considering a petition from the state’s utilities asking it to halt PURPA contracts temporarily because a wave of proposals was overwhelming the utilities’ ability to integrate the power into their systems.

Utility officials also complained that large-scale wind operations – such as the three-project, 58-megawatt Murphy Flat project – were bending the rules. The utilities said developers like Murphy Flat were building several small wind farms to qualify for the avoided-cost price guaranteed to small power producers, when those projects should rightly be considered as one big project.

The Idaho commission denied the request for a moratorium but set a deadline of Dec. 14, 2010, for all PURPA projects eligible for the set price get their contracts in. Murphy Flat and other developers signed their contracts before Dec. 14, but the utilities didn’t sign until after the deadline.

That prompted FERC’s action. It ruled that the IPUC’s rejection of Murphy Flat’s contract essentially allowed Idaho Power to control whether eligible developers could get the PURPA rate simply by delaying signing the contract.

“We haven’t yet had time to fully review the order,” said Idaho Power spokeswoman Stephanie McCurdy. “We are looking at it very closely and evaluating what the next steps might be.”

The 2011 decision could have affected 17 developers but only Murphy Flat and a second, Rainbow Ranch continued seeking settlements with Idaho Power and the Idaho Commission. In the meantime, an Idaho sales tax rebate for renewable projects ended in June 2011. A federal production tax credit for renewable projects that covers as much as 30 percent of costs required developers to start work in 2011.

And the Idaho PUC last summer changed the rules for which companies can qualify for the preferential PURPA rates (today, only very small wind and solar projects qualify).

The Idaho PUC is now in the middle of deliberations on how to set avoided-cost rates and other rates for PURPA projects. A ruling is expected within weeks.