Several alternative energy companies, qualifying cogeneration facilities (QFs) and electric power groups have asked FERC to reject a request by utilities located in the Southwest Power Pool (SPP) to be relieved of their obligation to enter into new contracts to purchase electricity from QFs or small power producers under the Public Utilities Regulatory Policies Act of 1978 (PURPA).
Specifically, the parties are protesting a petition for a declaratory order being sought by Xcel Energy Services Inc., Southwestern Public Service Co., Oklahoma Gas and Electric Co., American Electric Power Service Corp., Public Service Company of Oklahoma and Southwestern Electric Power Co. for relief from the must-purchase requirement with respect to QFs in the SPP.
The Electric Power Supply Association (EPSA) said it backed the Federal Energy Regulatory Commission’s (FERC) efforts in Order 688 to lift the mandatory purchase obligation for new QF contracts where a sufficiently competitive market exists for a QF to sell its power. FERC in 2006 relieved utilities of this obligation in the service territories of PJM Interconnection, the New York Independent System Operator, ISO-New England and the Midwest Independent Transmission System Operator, but not in the SPP due to concerns over competition.
The Energy Policy Act of 2005 (EPAct) amended PURPA to allow utilities to opt out of buying power from QFs under PURPA, provided the utilities can show and FERC determines that the markets where they seek such relief are competitive.
“The Commission should reject this application because the applicants’ competitive procurement procedures fail to provide adequate competitive opportunities for cogenerators or QFs in the SPP region, and there is insufficient evidence regarding market opportunities in a Day One organized market,” the EPSA told FERC [QM07-5].
The American Wind Energy Association, the Wind Coalition and several companies also urged FERC to deny the utilities’ petition for PURPA relief in the SPP market. “SPP has made progress over the last few years by setting up its regional transmission organization [RTO], and the SPP RTO makes the region more wind friendly than much of the West. But EPAct and FERC set standards for the abilities of wind and other renewables to meaningfully access competitive markets in order to relieve utilities of their must-purchase obligation under PURPA, and the SPP region isn’t there yet,” they said.
Wind project developers North Texas Wind Center LLC and Noble Environmental Power LLC echoed that sentiment, saying the utilities “have not met their burden of proving that QFs would have a meaningful opportunity to make long-term and short-term sales of energy and capacity to third-party buyers other than the QF’s interconnecting utilities” as required by FERC.
For utilities seeking to be relieved from buying renewable QF power in “Day 1” markets, such as the SPP, Congress in EPAct required a “greater evidentiary showing” than it did for utilities that are in more mature, organized “Day 2” markets — specifically, a showing of a “meaningful opportunity” for QFs to sell capacity and energy to buyers other than the interconnected utility, the Noble affiliates said. But the SPP market has “substantial progress to make before QF generators will be able to compete effectively to sell to buyers other than the local interconnecting utility,” they noted.
Borger Energy Associates LP expressed similar concerns. The company owns and operates the Blackhawk Power Station in Borger, TX, a QF that buys and sells power to Southwestern Public Service Co. (SPS) in the SPP. Its 25-year power purchase agreement (PPA) prohibits SPS from unilaterally seeking to impose any changes to the agreement, according to Borger Energy.
Borger Energy “cannot determine whether the application constitutes an effort by SPS to collaterally exit or evade its obligations to seek no unilateral change to the PPA, which by its terms prohibits unilateral changes under nearly all circumstances,” the company said. “Any order…by the Commission in this proceeding should expressly direct that SPS may not terminate any service which it renders to [Borger Energy], either under the PPA or under the Commission’s PURPA regulations.”
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