A controversial bill that would would halt development of industrial wind farms in Idaho for two years narrowly made its was out of the House Local Government Committee by a vote of 6-5 and now goes to the full House. The bill would kill any future wind development in Idaho (at least for two years), and may put the breaks on many projects currently under development.
Although Rep. Simpson, the sponsor of House Bill 561, testified that the bill would not impact already "approved" wind projects, the bill does not define at what stage a project is deemed approved. This ambiguity in the bill's language raises significant concerns about the impact on projects currently under development and is making investors and lenders, who have already invested millions of dollars in Idaho based projects, very nervous. The bill states that "Projects that have been approved and against which no legal proceedings have been filed as of February 1, 2012, shall be allowed to be constructed." However, this language provides little comfort since after the effective date the bill also flatly prohibits "municipalities, counties and state agencies" from "granting approval or issuing any new licenses or permits for the construction or operation of wind turbines that exceed one hundred (100) feet in height." Even for projects that have received their Conditional Use Permit prior to February 1 and are currently under construction, this language would prohibit issuance of individual building permits,which are required for each turbine, or prohibit the state from issuing the final electrical permits for the substation and collection systems. The bill is even more problematic for projects that have undergone lengthy and expensive pre-development studies and federal environmental reviews but have not yet received a Conditional Use Permit.
Two bills were introduced in the Idaho legislature last week, both of which could significantly impact the wind industry in Idaho. The first, H250, extends a sales or use tax rebate available to purchasers of qualifying machinery and equipment used in generating electricity from renewable resources. The rebate is currently set to expire as of July 1, 2011. Under the proposed legislation, the rebate would be extended for such purchases but only if the purchaser achieves commercial operation by December 31, 2014.
The second bill, H265, would impose a moratorium on the construction of new wind projects in Idaho for two years and directs the Interim Energy Committee to meet during that time and report on various wind related issues, including the impact of wind on power rates and the ability of utilities to integrate wind into their systems. The relevant moratorium language is excerpted below. Although initial reports of the bill stated that it would not apply to wind projects that are already under construction or have permits, that is not how the legislation is written. As proposed, it prohibits municipalities, counties and state agencies from "granting approval or issuing any new licenses or permits for the construction or operation of wind turbines that exceed one hundred (100) feet in height and have a nameplate capacity that exceeds one hundred (100) kilowatts." A plain reading of this language means that a fully developed and "almost" fully permitted project with wind turbines already delivered on-site could be subject to the moratorium because of the inability to obtain building or other ministerial permits, which some Idaho counties require as each individual turbine is constructed.
We'll continue to monitor closely as the future of Idaho's wind industry is debated by the legislature.
61-1802. MORATORIUM ON CONSTRUCTION OF CERTAIN INDUSTRIAL WIND FARMS AND WIND TURBINES FOR A TIME CERTAIN. (1) From the effective date of this act until July 1, 2013, municipalities, counties and state agencies are prohibited from granting approval or issuing any new licenses or permits for the construction or operation of wind turbines that exceed one hundred (100) feet in height and have a nameplate capacity that exceeds one hundred (100) kilowatts. Projects that have been approved and for which the statute of limitations for legal proceedings of the state of Idaho against the project expire without any legal action against the project shall be allowed to be constructed. Projects for which legal proceedings are pending shall not be allowed to be constructed until the legal proceedings are complete and a court of competent jurisdiction finds that construction may proceed.
The Idaho Public Utilities Commission (the “Commission”) heard oral arguments today on the Joint Petition filed by Idaho Power, Avista Corporation and PacifiCorp d/b/a Rocky Mountain Power (collectively the “Utilities”) in Docket No. GNR-E-10-04, requesting that the Commission address various issues related to avoided costs for PURPA Qualifying Facilities (“QFs”), including ownership and valuation of Renewable Energy Credits, system reliability, lack of a standard contract template, and the increased size and scale of QF projects. Specifically, the Utilities are seeking an order reducing the published avoided cost rate eligibility cap for Idaho QFs from the current 10 aMW level to 100 kW. On December 3, 2010, the Commission issued a Notice of Joint Petition and Order No. 32131 (the “December 3rd Order”), denying the Utilities’ request to immediately reduce the eligibility cap, and breaking the proceeding up into two phases. In the first phase, the Commission will address whether the eligibility cap should be reduced temporarily, pending a decision on the broader avoided cost issues in phase two.
Today’s hearing focused solely on the Utilities’ request to reduce the eligibility cap, during which the Commission sought discussion on the appropriateness of exempting non-wind QF projects from the reduced eligibility cap, and the consequences of disaggregation (i.e., dividing larger wind projects into multiple 10 aMW projects in order to qualify each for the published avoided cost rate). The Utilities argued that temporarily reducing the eligibility cap while addressing the other avoided cost issues is the simplest and most effective way to proceed and would address one immediate concern – the large number of currently proposed contracts, which the Utilities argue are not from small, unsophisticated developers, but instead are from large scale wind projects that are being disaggregated to meet the 10 aMW cap. Each of the Utilities agreed that although the magnitude of the problem is related to wind resources, the reduction, if granted, should apply to all QF projects. Commission Staff testified in support of a reduction in the eligibility cap, but argued that the reduced cap should apply to wind resources only. Recent industry publications have reported that Commission Staff may be willing to consider instituting a rule that requires disaggregated facilities to be located at least five miles apart (rather than the current one-mile rule provided for under FERC regulations); however, that option wasn’t raised at the hearing.
The hearing room overflowed with the more than a dozen parties who have intervened in the case, whose interests and testimony varied, but each warned of the chilling effect of such reduction on development of renewable energy projects in Idaho and the need for further evidentiary hearings to resolve the issues presented. The Commission seemed sensitive to the impact of any temporary cap reduction, particularly on projects currently under development, and the need to resolve the broader avoided cost issues quickly. However, all parties agreed that such proceedings would not be quick, and would take six months to a year to resolve. Such a delay could certainly kill a project under development, and would undoubtedly dissuade new developments in Idaho in 2011.
The Commission did not say when to expect an order on the temporary reduction, only that they would issue one as soon as possible. Pursuant to the Commission’s December 3rd Order, any order reducing the eligibility cap will have a retroactive effective date of December 14, 2010.
For more information, or if you have questions regarding the Commission’s proceeding and the impact it may have on renewable energy development in Idaho, feel free to contact Teresa Hill at email@example.com or Chad Marriott at firstname.lastname@example.org.