Feds tell Idaho to honor Murphy wind power pact 

The Federal Energy Regulatory Commission, which oversees electric and natural gas policy, says in its ruling that the Idaho PUC violated federal law when it denied an appeal by developers of three Murphy Flat wind projects to get paid higher power rates.

The appeal was based on FERC’s decision that the Public Utilities Commission’s rejection of contracts for Murphy Flat with Idaho Power were “inconsistent” with regulations and rules governing projects under the Public Utility Regulatory Policies Act.

The federal panel did not take enforcement action in 2011 but said Monday that it will initiate action now.

The federal commission’s move against a state commission is unprecedented, said Peter Richardson, an attorney who represents renewable developers.

It comes as the Idaho PUC deliberates on a major case that could determine the future of wind and other alternative energy projects in the state.

HOW DID WE GET HERE?

FERC said the Idaho commission should have recognized the Murphy Flat power contracts as a “legally enforceable obligation.”

PUC issued a statement late Monday saying that it could not, under state law, accept the appeal because developers waited 15 months after the 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 PUC statement said. “Murphy Flat 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 in its action Monday that Murphy Flat’s developers had been in settlement discussions with the Idaho commission during those 15 months and were not “sitting on their rights.”

Two other Idaho wind projects affected by the 2011 order have moved forward. One of those is Cedar Creek, which had a contract with Rocky Mountain Power.

‘AVOIDED COSTS’

State commissions are designed to regulate utilities that have a monopoly over necessities such as electricity, natural gas, telephone service and municipal water. States are given wide deference over how they do it.

Congress passed PURPA in 1978 to open the electricity market and encourage small and alternative producers. The law requires utilities to purchase 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.”

Overseeing that avoided-cost rate and the regulations for administering PURPA is placed in the state regulators’ hands.

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

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

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

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

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

INCENTIVES EXPIRE

The 2011 decision could have benefited 17 projects, but only Murphy Flat and a second project, Rainbow Ranch, continued seeking settlements with Idaho Power and the PUC.

In the meantime, an Idaho tax incentive 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.

The Idaho PUC is deliberating a separate case on avoided-cost and other rates for PURPA projects. A ruling is expected within weeks.