Yesterday EPA Administrator Gina McCarthy unveiled the highly anticipated carbon dioxide rules for existing power plants. Dubbed the “Clean Power Plan,” the rules taken together likely will have a significant impact on industrial and other consumers of electricity as well as developers of natural gas-fired and renewable generation (e.g., solar, biomass and wind). Stoel Rives attorneys with significant Clean Air Act experience react to the new rules in a client alert available here.
* 5/14/14 update: FAQs released
Northern States Power Company (d/b/a Xcel Energy) released its long-awaited solar request for proposals (RFP) today. Although it had earlier suggested the RFP would be for up to 150 MW, today’s RFP seeks up to 100 MW of PV resources. The Company explained that the amount acquired through this RFP may ultimately be impacted by other Minnesota Public Utility Commission decisions involving solar resources (see more on at least one related proceeding here).
Eligible proposals must be at least 5 MW AC and the company expressed caution about bids coming in over 50 MW in light of the company’s total solar needs being in flux. Xcel continues to desire projects that will be in commercial operation by December 31, 2016 in order to take full advantage of the 30 percent Investment Tax Credit (ITC). Further the company desires to fulfill the requirement through power purchase agreements (the associated model PPA is available on Xcel's website here), though it is open to bids with different ownership structures. Xcel has indicated an interest in “proposals that offer PPAs along with an indicative offer for ownership in the project through an affiliate of NSP”. Proposals are due June 20, 2014 with selections to be filed with the Commission in late October, 2014.
Court Declares Minnesota Coal Law Unconstitutional: Electrons Favor the Laws of Physics to Those of Governments
Minnesota legislators passed the Next Generation Energy Act in 2007 which, in part, established power sector standards for carbon dioxide emissions. As a result Minn. Stat. §216H.03 now provides that no person shall:
- Construct within a state a new large energy facility that would contribute to statewide power sector carbon dioxide emissions;
- Import or commit to import from outside the state power from a new large energy facility that would contribute to statewide power sector carbon dioxide emissions; or
- Enter into a new long-term power purchase agreement that would increase statewide power sector carbon dioxide emissions. For the purposes of this section, a long-term power purchase agreement means an agreement to purchase 50 megawatts of capacity or more for a term exceeding five years.
In 2011 neighboring state North Dakota, along with coal and utility interests, challenged the law and named as defendants the Commissioners of the Minnesota Public Utilities Commission and the Department of Commerce. Today District Court Judge Susan Nelson ruled in favor of the plaintiffs on cross motions for summary judgment. She determined the second and third provisions of the above statute unconstitutional, finding that they are per se invalid under the dormant Commerce Clause. Minnesota Governor Dayton quickly responded to the ruling with a press statement articulating his intentions to vigorously defend the law and appeal the decision.Continue Reading...
Fake Punt! Minnesota Commission Immediately Reevaluates Motion, Advances Solar Plus One (or more) Gas Plants
In a follow up to our prior post, we now report that the Minnesota Commission subsequently modified its initial decision to clarify that Xcel Energy is directed to negotiate a power purchase agreement with the solar bidder, which will be reviewed by the Commission to ensure the terms are consistent with the public interest. Xcel is also directed to negotiate with the natural gas project bidders and develop pricing terms for its own natural gas project. Here is the text from the revised motion.
Although all terms will be reviewed by the Commission, Xcel Energy's Minnesota ratepayers will likely have a utility-scale solar project and at least one natural gas project to meet capacity needs in the 2017-2019 timeframe. And it's fair to state the Commission's decision puts solar in the red-zone, first and goal.
After the years of inconclusive resource planning, months of contested case proceedings, and days of oral argument, discussion and review that led to today’s deliberations, the Minnesota Public Utilities Commission (“Commission”) unanimously decided not to decide. The ultimate question before the Commission was what capacity needs had been determined in the record and what should be done to fill that need on Xcel Energy’s system. At the turn of the new year, the Administrative Law Judge’s (“ALJ”) answers to these questions made national news by finding that the solar bid provided the best value for ratepayers (see our blog on that here). The ALJ made his determination, in part, based on new modeling done at the request of the Commission given the significant changes in circumstances that had occurred since docket was opened (e.g., Xcel Energy acquired 750MW of new wind and Minnesota passed a Solar Energy Standard). In light of the changed circumstances and uncertain need, the ALJ recommended selection of the solar resource that was independently “needed” by statute, a capacity bid that could be added as necessary to bridge for any further shortfall, and then conduct a more thorough analysis for the longer-term needs. Today the Commission instead chose to rely primarily on the original need determination that opened the docket, accept the ALJ’s findings only to the extent they were consistent with their own findings, and direct Xcel to negotiate with everyone proposing to build something and report back.
Despite the above, the decision is a significant step forward for solar. This was the first time a solar proposal had competed directly with natural gas in a resource acquisition process and, despite significant pressure from the Department of Commerce to shuffle the solar bid off into a separate, solar-only proceeding, the Commission confirmed today that the solar bid was welcome at the big kids table.
Look for a forthcoming Order that includes something like this:
In order to meet reliability and adequacy requirements and to comply with MN energy policy statutes, direct Xcel to separately negotiate power purchase agreements with Geronimo Energy, Calpine, Invenergy and develop pricing terms for Black Dog 6 to address the overall Xcel system needs identified in this record and the March 5, 2013 Integrated Resource Plan Order and determine which resources best meet system needs and are in ratepayers’ best interests.
Find that negotiated terms that shift risk or unknown costs to ratepayers are not likely to be reasonable. Find that bidders shall be held to the prices and terms used to evaluate each bid for purposes of cost recovery from Xcel ratepayers. Ratepayers will not be at risk for costs that are higher than bid or for benefits assumed in bids that do not materialize. If actual costs are lower than bid, the bidders should be allowed to keep those savings.
Require that power purchase agreement provide terms that sufficiently protect ratepayers from risks associated with the non-deliverability of accredited capacity or energy from the projects as proposed.
Yesterday afternoon, the Minnesota Public Utilities Commission approved the methodology for calculating value of solar (VOS) tariffs in Minnesota as developed by the Department of Commerce. In doing so, Minnesota became the first in the nation to adopt a VOS tariff methodology.
The Commission was required by statute to take action on the VOS calculation methodology by the end of the month. It had three options: to approve it as proposed, reject it, or approve it with modifications and with the consent of the Department. For background on the Department's January 31st recommendation, see our blog posts here and here. The Department subsequently included several modifications affecting the fuel price escalation factor, the avoided distribution capacity cost, and the environmental cost categories.
In its ruling, the Commission approved the Department’s methodology, as amended, by a 3-2 vote.Continue Reading...
After a full day of hearing arguments on Xcel’s proposed Community Solar Garden (CSG) program (see more on that here), the Minnesota Public Utilities Commission deliberated in public on the issue yesterday and made some important modifications to Xcel’s proposal. The program would allow Xcel customers to invest in off-site solar facilities and receive bill credit for their portion of generation. Ultimately that credit would be at the Value of Solar rate, but as parties await a decision on the Value of Solar (VOS) methodology (more on the VOS here), the Commission settled on an interim rate for the program (though its final vote on the matter is still forthcoming). It is largely based on average retail rates but importantly includes a placeholder value of any transferred Solar Renewable Energy Certificates (SRECs). A CSG developer could transfer the S-RECs to Xcel at a compensation rate of $.02/kWh for facilities with a capacity greater than 250 kW and at $.03/kWh for those with a capacity of 250 kW or less. The S-REC value is not intended to reflect a market rate and is intended and is intended to be strictly temporary, expiring upon the approval of Xcel’s VOS tariff. Furthermore the rate and S-REC value are to be reviewed annually and adjusted if necessary.
The illustrative range of rates (assuming the SREC is transferred) is as follows:
Residential: $.14033 or $.15033
Small General: $.13738 or $.143738
General Service: $.11456 or $.12456
In addition, Xcel’s proposed 2.5 MW quarterly cap on the program was removed given the statute precludes a cap. While a final decision has not yet been issued by the Commission, newsmedia have already begun to report on it (see Star Tribune article here).
Final comments were filed yesterday on the proposed methodology for calculating a value of solar (VOS) rate for utilities in Minnesota (more on the proposed methodology is here). With the Commission required to make a decision within 60 days of January 31, 2014, parties remain in fairly wide disagreement about what is required by statute, particularly what values are truly “known and measurable” and whether the value calculation or proposition applies to the particular utility or more broadly to society. Depending on the interpretation of these factors among others, the estimated VOS rate could vary from half of that suggested by the Department’s original $0.135/kWh example to something considerably higher. The rate would eventually apply to Xcel’s Community Solar Garden (CSG) Program and potentially as an alternative to net-metering arrangements for projects under 1MW. In a separate proceeding yesterday, the Commission set interim rates for the CSG program that could be even higher with a placeholder SREC value included (more on that in a separate blog).Continue Reading...
In May 2013, the Minnesota Legislature passed legislation that, among other things, set a solar standard, directed Xcel Energy to develop a community solar garden program, and provided for the development of an alternative tariff mechanism to net metering that would also serve as the rate for community solar garden programs. Under this new scenario and instead of traditional net-metering arrangements, customers would potentially buy all of their electricity from their local distribution utility and then sell all of their PV generation under that utility's Value of Solar (VOS) tariff which would be designed to capture the societal value of PV-generated electricity.
The legislation directed the Department of Commerce to work with stakeholders to develop a VOS methodology and to deliver its recommendations to the Minnesota Public Utilities Commission (Commission) on Friday, January 31, 2014. The Department’s filing today includes its recommendation, with a more in-depth document addressing the methodology. The Department’s recommendations do not set a rate, but rather propose the methodology for calculating a utility-specific rate for distributed PV solar (1 MW and smaller). If the Department’s sample calculation is any indicator of what’s to come, however, the value went from $0.126/kWh in its initial draft to $0.135/kWh in the documents filed this morning.Continue Reading...
At the close of last year, Minnesota Administrative Law Judge Eric Lipman determined that the single solar proposal in a competitive resource acquisition process would provide the best value to Xcel ratepayers (see more here). Key to his decision was his conclusion that Xcel's capacity needs in the timeframe considered were uncertain and potentially declining substantially. Yesterday Xcel and the natural gas bidders (Calpine and Invenergy) in the process filed exceptions to his findings and took sharp aim at the Judge's determination that Xcel's capacity needs appeared to be declining from what had earlier been predicted. In a related news article, Bill Grant, the Deputy Commissioner for Energy Programs at the Department of Commerce, voiced concern that the Judge had relied on an "untested and unusually low forecast for future sales" and suggested that ratepayers would be better served by Xcel's procurement of solar resources through a solar-specific process. The parties with the selected solar (Geronimo) and capacity (GRE) bids, perhaps unsuprisingly, do not agree with these voiced concerns and largely applauded the Judge'sselection of scalable resources in light of uncertain need . Reply comments are due at the end of this month and ultimately the matter will soon be taken up by the Minnesota Public Utilities Commission.