Idaho QFs Petition FERC to Approve Sale of Unbundled RECs Into California
On December 15, 2010, Idaho Wind Partners 1, LLC (“Idaho Wind”) filed a petition for declaratory order with FERC (Docket EL11-12) on behalf of its eleven qualifying facilities ("QFs") in Idaho to approve an unconventional plan to sell RECs into California. Idaho Wind is seeking confirmation that the plan (1) would not violate any of the Commission’s anti-manipulation rules and (2) would in no way result in the loss of small power producer QF status.
In a nutshell, Idaho Wind proposes to sell bundled power and RECs from the eleven QFs to a third party “inside the fence” (i.e., before being placed on the grid). Idaho Wind has already applied for market based rate authority for each of the projects- a step required prior to the sales. The third party would then instantaneously sell the power back to the projects, keep the RECs, and attach them to power already scheduled for delivery into California. After buying the power back from the third party, the projects would sell it to Idaho Power (which has no need for the RECs because the state has no renewable portfolio standard) under Idaho Power’s standard PURPA contract.
In its petition, Idaho Wind states that the projects qualify as eligible renewable resource (“ERR”) facilities and that the third party can meet the California RPS deliverability requirement. After discussing the ERR qualifications, the petition cites an example from the California Energy Commission’s guidebook that it believes would allow the third-party to deliver the unbundled RECs into California:
“The retail seller [buying from the ERR] could provide firming and shaping services. The retail seller could buy energy and RECs from an RPS-eligible facility, sell the energy back to the facility, and ‘match’ the RECs with energy delivery into California from a second PPA and/or with imports under a pre-existing PPA.” CEC Guidebook at n.2 (emphasis added).
Idaho Wind has requested expedited review. Only PG&E has intervened in the docket at this point.
CPUC Proposed Decision on TRECs--Comments Due January 19
The California Public Utilities Commission ("CPUC") issued a proposed decision on December 23, 2009 that would, if adopted, allow California investor-owned utilities, energy service providers, and community choice aggregators to purchase renewable energy credits alone, without the associated energy (sometimes referred to as "unbundled renewable energy credits ("RECs)" or "tradable RECs"), to satisfy their obligations under California's RPS. California's largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric—would be limited to meeting no more than 40% of their annual procurement targets under the RPS with tradable RECs, and a price cap of $50 would be imposed. The CPUC will revisit both the percentage cap and the cost cap and whether those caps should be revised within 24 months of the decision.
Out-of-state renewable energy projects could be adversely impacted if the proposed order were adopted. The proposed decision would define all renewable generation purchased from out-of-state facilities1 as the purchase of unbundled or tradable RECs, making any out-of-state renewable energy sale subject to the cap that bars the large investor-owned utilities from using such sales to meet more than 40% of their overall RPS obligation. Although the proposed decision states that this classification would apply only to contracts signed on or after the effective date of the decision, contracts signed prior to the effective date would be considered REC-only contracts from the effective date forward, and would be "subject to the limits and rules applying to REC-only contracts" according to the proposed decision. Furthermore, although the purchase of tradable RECs from out-of-state facilities would be permitted, the delivery requirement in the RPS legislation would still have to be met, so a comparable amount of power would have to be imported into the state, along with the RECs. The jurisdiction to determine whether and how this delivery requirement is met, however, still remains with the California Energy Commission.
Comments on the proposed decision are due on January 19, 2010, and reply comments are due January 25, 2010.
For additional information about the history and effect of the proposed decision, see our Stoel Rives alert on the topic.
