March 21, 2014 6:00 am • By MIKE DENNISON IR State Bureau
In a strongly worded ruling, a federal commission Thursday said Montana Public Service Commission rules are improperly hindering small, renewable-power projects in the state.
The Federal Energy Regulatory Commission said the PSC rules create an “unreasonable obstacle” for the projects to get contracts to sell their power to utilities, as well as go against a federal law meant to encourage development of the independently owned projects.
Yet the unanimous FERC ruling was not an enforcement action against the PSC, which regulates electric utilities in Montana.
Instead, FERC issued a “declaratory order,” leaving either the PSC to correct its rules or the independent power projects to take the issue to a court for enforcement.
Mike Uda, the Helena attorney representing wind-power producers who asked FERC to overturn the PSC rules, said he hopes the PSC will “do the right thing” and undo rules that prevent projects from getting contracts.
“It was a perfect system that they had to prevent (renewable power) development,” he said. “Well, now FERC has told them that’s against the law.”
Two Montana commissioners, however, said Thursday it’s too early to say how the PSC may respond to the ruling, and that its lawyers will review the FERC decision.
A spokeswoman for NorthWestern Energy, the state’s largest electric utility and a supporter of the PSC rules, also noted that FERC did not overturn the rules.
“The Montana rule still stands,” said Claudia Rapkoch. “It will be up to the judicial system to make any further disposition, if the (project developers) choose to pursue it.”
The fight is over a 22-year-old rule adopted by the Montana PSC that says if an independent, renewable-power project is larger than three megawatts and wants a contract to sell to NorthWestern or other utilities, it must win the contract in a competitive bidding process.
The rule was adopted to administer a 1978 federal law that requires utilities to buy power renewable power — wind or hydro power, usually — from independent projects, under certain circumstances.
The Montana PSC also limited to 50 megawatts the total power that can be produced by independent wind projects.
NorthWestern Energy, the state’s largest electric utility, has supported the rules, arguing that without them, the utility would be forced to accept contracts to buy more power than they need at prices above the market.
Small-power developers have long opposed the rules, saying they allow NorthWestern to ignore almost any independent power project they don’t want and, instead, choose development of its own projects.
Commissioner Travis Kavulla, R-Great Falls, who has voted against the rules, said the small-power projects can act as a check and balance against the utility, by offering power that may cost less than utility-sponsored projects.
“The bottom line is, you can’t have a utility that’s absorbing all of these opportunities (for project development), while blocking small, independent developers from doing the same things that cost the same, or less,” he said.
FERC’s ruling said requiring a small producer to win a contract through a competitive bid is “an unreasonable obstacle,” especially when such bidding contests are rarely held by utilities.
It also said limiting the total power from wind projects to 50 megawatts is “inconsistent” with federal law and FERC regulations, which require utilities to buy electricity from small, renewable-power projects that agree to sell for the “avoided cost” — a rate equivalent to what the utility would have to pay for the power elsewhere.