On July 29, 2019, the Ninth Circuit released an opinion in Winding Creek Solar, LLC v. California Public Utility Commission (California Commission or CPUC), finding that the Public Utility Regulatory Policies Act (“PURPA”) preempted the CPUC’s “Renewable Market Adjusting Tariff” (Re-Mat) and “Standard Offer Contract” programs. Under PURPA, utilities are required to purchase any energy and capacity made available from a qualifying facility (QF) at the utility’s avoided cost, and the QF has the option to have the price it is paid for that energy and capacity determined either at the time of contracting or at the time of delivery.
In California, the CPUC administered PURPA using two different programs. First, the Re-Mat program allowed QFs to enter a queue and be offered a contract on a two-month rolling basis. The contract price under Re-Mat was initially set by the CPUC at $89.23/MWh, adjusted in each subsequent two-month period based on the number of QFs that accepted or did not accept the price in the prior month’s auction. The Re-Mat also included a statewide cap of 750 MW divided among the state’s utilities, and a 5 MW cap on PG&E in any given two-month period. The Ninth Circuit found that the cap violated PURPA because it could result in a scenario where the utility may refuse to purchase the energy or capacity made available by a QF. The Court found that the pricing feature also violated PURPA because it was not based on the utilities’ avoided cost, but on an arbitrary formula based on QFs’ willingness to supply energy.
The Court explained that although the CPUC may still comply with PURPA if it offers another program that is PURPA compliant, that the CPUC’s second program also violated PURPA. The “Standard Offer Contract” program offers QFs the option to sell to a utility under a standard offer contract at the avoided cost rates determined according to a formula with six variables. Three of the six variables under this formula were impossible to determine at the time of contracting. The Ninth Circuit found that because the avoided cost price could not be set at the time of contracting then this program, too, violated PURPA.
The practical result of the Court’s decision is that the CPUC must go back to the drawing board to develop a program that complies with PURPA. The QF, Winding Creek Solar, requested equitable relief from the Court awarding it a contract at the initial $89.23/MWh price, but the Ninth Circuit agreed with the District Court that such equitable relief was not warranted. The next step for the QF would be to return to California and ask the Commission to award it a contract under a proper implementation of PURPA.
Sanger Thompson filed an amicus brief in this case on behalf of the Northwest and Intermountain Power Producers Coalition, joined by Richardson Adams on behalf of the Community Renewable Energy Association.
Disclaimer
These materials are intended to as informational and are not to be considered legal advice or legal opinion, nor do they create a lawyer-client relationship. Information included about previous case results does not assure a similar future result.
