Greenfield Wind and Northwestern Energy file Unopposed Joint Motion to Settle Before the Montana PSC
Greenfield Wind, LLC and NorthWestern Energy presented an unopposed joint settlement to the Montana PSC for approval in November 2014, and although there was not opposition at the hearing on December 1st, the settlement was inexplicably denied in mid December by an 11th hour surprising reversal ruling.
The December 16th Decision denying the Unopposed Stipulation appeared to result from past commission chairman Gallagher, who did not attend the December hearing, placing his personal opinion and politics ahead of Federal and State law and ahead of the best interests of Montana rate payers.
In response, on January 8th, Greenfield Wind filed a Motion for Reconsideration, which is currently before the Montana Public Service Commission and presents a critical question of whether the Commission will approve of a Qualifying Facility negotiating with NorthWestern to obtain reasonable long-term avoided cost rates as directed by PURPA and supported by recent rulings from FERC and Montana State Courts, or whether the Commission will subject the parties, and quite possibly the Commission itself, to further litigation.
After eight months of work on the contested case and the settlement, the December 16th last minute reversal decision to deny the unopposed settlement was not only surprising but unlawful, unjust, and unreasonable, and should thus be reconsidered for the following reasons:
- First, the record abundantly supports a conclusion that the rates and terms contained in the Stipulation are consistent with, and likely significantly below, any reasonable current estimate of NorthWestern’s actual avoided costs. The Commission Staff’s analysis demonstrated that the Settlement rate would save between $5.9 and $10.6 million over the life of the project compared to the two most reasonable alternative avoided cost benchmarks. Rejection of the Unopposed Settlement unreasonably deprives NorthWestern’s customers of the benefits of these favorable rates.
- Second, Greenfield Wind submits that the avoided cost rates will be significantly higher if Greenfield is forced to fully litigate its claim to a legally enforceable obligation (“LEO”) at the Commission and any subsequently necessary judicial proceedings – thus subjecting NorthWestern’s customers to higher rates than those offered in the Unopposed Stipulation.
- Third, the apparent rationale for rejection of the Unopposed Stipulation rests upon unlawful discrimination against QF projects, which combined with other recent events would constitute an actionable violation of federal and state law if allowed to stand.
- Fourth, the rejection of the negotiated rate between NorthWestern and Greenfield will launch the parties and the Commission back into unnecessary and costly litigation.
If a state chooses to regulate electric utilities, it must implement the Federal Energy Regulatory Commission’s (“FERC”) regulations under the Public Utility Regulatory Policies Act of 1978 (“PURPA”) (16 USC § 824a–3(f)(1); FERC v. Mississippi, 456 U.S. 742, 751, 102 S.Ct. 2126, 2133 (1982)).
FERC’s regulations, which are adopted by ARM 38.5.1902(1), require state commissions to implement PURPA in a way that requires a utility to purchase energy and capacity from QFs at the full avoided costs of the purchasing utility (Amer. Paper Institute, Inc. v. Amer. Elect. Power Serv. Corp., 461 U.S. 402, 415-18 (1983)).
The Montana Supreme Court has explained: “PURPA requires large utilities to purchase energy from smaller qualifying facilities at rates that allow the small facilities to become and remain viable suppliers of electricity.” (Whitehall Wind, LLC v. Montana Pub. Serv. Comm’n., 355 Mont. 15, 16-17, 223 P.3d 907, 908-09 (2009)).
FERC’s regulations also permit a QF and an electric utility to enter into a contract containing agreed-to rates, terms, or conditions. 18 C.F.R. § 292.301(b). FERC has explained that “a contracted-for-rate would never exceed true avoided costs and would thus be consistent with PURPA.” (Cedar Creek Wind LLC, 137 FERC ¶ 61,006, at n. 73 (2011) (citing Order No. 69, 45 Fed. Reg. 12,214 (1980))).
This rule “recognizes that the ability of a qualifying cogenerator or small power producer to negotiate with an electric utility is buttressed by the existence of the rights and protections of [FERC’s] rules.” (45 Fed. Reg. at 12,217)
FERC has rejected state implementation schemes that stand as an impediment to such amicable contract formation (Grouse Creek Wind Park, LLC, 142 FERC ¶ 61,187, at P 40 (2013)) and some courts have reversed state commission decisions rejecting agreed-to PURPA rates (Pub. Util. Commn. Of Texas v. Gulf States Utilities Co., 809 S.W.2d 201, 208-09 (Texas 1991)).
Montana’s “mini-PURPA” further instructs the Montana PSC. It declares: “Long-term contracts for the purchase of electricity by the utility from a qualifying small power production facility must be encouraged in order to enhance the economic feasibility of qualifying small power production facilities.” (M.C.A § 69-3-604(2) (emphasis added)).
The Commission’s own rules provide, “Each utility shall purchase available power from any qualifying facility at either the standard rate determined by the commission to be appropriate for the utility, or at a rate which is a negotiated term of the contract between the utility and the qualifying facility.” (ARM 38.5.1905(2)).
However, the MPSC has also implemented a rule that requires QFs sized over 3 megawatts (“MW”) to prevail in an all-source competitive solicitation to obtain a long-term contract (ARM 38.5.1902(5)). Because NorthWestern has not been compelled to regularly hold such solicitations, FERC declared this rule constitutes a failure to implement PURPA’s bare minimum requirement to make long-term avoided cost rates available to QFs (Hydrodynamics, 146 FERC ¶ 61,193, PP 32-35 (2014)).
The Montana courts have likewise faulted the Commission for failure to provide reasonable avoided cost rates to QFs (See Whitehall Wind, LLC, 355 Mont. at 18, 223 P.3d at 909 (reversing rate determination where “the PSC’s own staff economist contradicted the PSC’s rate determination”)); (Whitehall Wind, LLC v. Montana Pub. Serv. Comm’n, Cause No. DV-03-10080, Remand Order (Mont. 5th Dist., May 21, 2014) (again reversing the MPSC’s subsequent order)).
PROCEDURAL AND FACTUAL BACKGROUND
Greenfield has been seeking a long-term contract under PURPA with NorthWestern since 2010. It has spent substantial sums of time and money to develop its wind project in reliance on federal and state law. But those efforts have been stymied since at least 2010 by the Commission’s rules prohibiting such long-term contracts for projects over the eligibility cap for standard rates and outside of the 50-MW cap for wind projects.
NorthWestern states that it filed the original Petition in this case at the PSC because the Commission has not authorized it to enter into long-term contracts outside of an all-source solicitation. In the absence of a Commission-approved methodology to calculate long-term rates for Greenfield Wind’s project, the parties engaged in extensive and costly discovery and contested proceedings over the most appropriate methodology.
Through the Commission’s proceedings and discovery processes, Greenfield was able to review NorthWestern’s data and calculations. In doing so, Greenfield recognized that with some concessions on Greenfield’s part the gap between the rate proposed by NorthWestern and the rate proposed by Greenfield could largely be bridged. Additionally, a contested transmission cost issue became moot when Gaelectric’s senior transmission requests were withdrawn and removed from the transmission queue – further bridging the gap between the parties.
Thus, Greenfield and NorthWestern were able to negotiate a rate that was derived using NorthWestern’s method of estimating the avoided costs. The net Stipulation/Settlement rate is approximately $50.49/MWh if Greenfield pays NorthWestern for integration, or $53.99/MWh if Greenfield delivers a wind integrated product. Due to NorthWestern’s near-term long position, Greenfield agreed to delay the commercial online date for the full contract rate until 2016, and will only be paid $19.99/MWh (minus integration costs) for any generation delivered in 2015.
In light of the fact that NorthWestern is a regulated utility and the Commission has approved no methodology to calculate large QF rates, such approval is necessary for the project to move forward without further delay.
On December 1, 2014, the Commission held an evidentiary hearing on the Stipulation. Multiple rounds of testimony from Greenfield and NorthWestern and all data requests were admitted into the record for purposes of evaluating the Stipulation. All of NorthWestern and Greenfield’s witnesses were made available for live or telephonic cross examination. The Montana Consumer Counsel (“MCC”) and LEO Wind, Inc. both attended the Stipulation hearing. Neither of them opposed the Stipulation or requested post-hearing briefing to challenge its terms.
On December 16, 2014, the Commission held its work session on the Stipulation.
The Commission’s Staff presented a memorandum summarizing the terms of the Stipulation, including five market benchmarks against which to compare the Stipulation rate. Each of Staff’s five benchmark rates were higher than the Greenfield Wind rate. Thus, Commission Staff recommended approval of the Stipulation.
The PSC Commission’s Staff explained: The reasons to approve, would be that the rate appears to reasonably approximate avoided costs. It would avoid expenditure of further resources by all parties, including the Commission, on this matter. It would signal that NorthWestern can negotiate with large QFs, and that the PSC will implement rates for large QFs.
In fact, the Commission’s Staff explained that its portfolio comparison benchmark analysis, using the same inputs used to model the PPL Montana Hydroelectric Projects (“PPL Hydros”), demonstrated that “having Greenfield energy as part of the portfolio saves the portfolio costs.” But the Commission voted to reject the Stipulation by vote of three to two.
Former Commissioner Gallagher, as well as Commissioners Koopman and Bushman voted against the Stipulation, while Commissioners Kavulla and Lake supported approving the settlement.
==January 12, 2015
Marty Wilde, WINData LLC
Marty Wilde brings a long-term seasoned technical, scientific and utility business perspective on the wind industry. Mr. Wilde’s strategic thinking and engineering expertise, dating back to 1991, is highly respected by major utilities, investors and wind energy experts. Mr. Wilde is Principal Engineer and CEO of WINData and provides leadership to the WINData team in all areas of met tower design, siting, installation and wind data analysis. Mr. Wilde launched his wind energy business in 1991 to develop commercial wind projects and provide development services to the growing wind industry. He has worked as a project developer, managing engineer and scientist for numerous commercial and government teams since 1984 and has extensive experience supporting both public and private sector organizations.
WINData principals have been in the wind energy resource assessment business since 1991 and have initiated the identification and successful development of wind energy assets across the US over the past 21 years.
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WINData’s PE and CEO, Marty Wilde provides a long-term seasoned engineering and business perspective to the wind industry, which comprises strategic thinking and technical expertise dating back to 1991. Wilde is Principal Engineer and CEO of WINData, WINDataNOW! Technologies LLC and Wild Madrone, LLC and is a veteran Researcher, Project Engineer and Business Development Specialist.
WINData personnel offer expert services in wind energy development, also in design, development and installation of advanced meteorological measurement systems.