With a swift 13-page order today, FERC rejected Puget Sound Energy’s proposed wind integration rate, stating that the rate was not shown to be “just and reasonable” under section 205 of the Federal Power Act.  “Changing system conditions, such as an increasing amount of wind generation described by Puget, present unique challenges that may require novel solutions.  However, such solutions must fit the problems they are intended to solve, and the Commission must ensure that ratepayers are protected from rate proposals—such as the one proposed by Puget here—that are not shown to be related to the actual, demonstrable costs incurred in providing service.” 

To determine the rate, Puget had used a proxy rate calculated using hypothetical capacity costs from a hypothetical generator.  Puget chose its proxy from a group of five commercially available peaking units in the area.  FERC stated that although it will allow for the recovery of legitimate and verifiable opportunity costs,  Puget’s proposed rate was not a “reasonably accurate representation of the opportunity costs Puget incurs” in providing wind integration service.  Because FERC cannot permit Puget to over-recover its costs in providing the service, the rate was rejected.  Puget will undoubtedly be back to FERC with a rate that attempts to be consistent with FERC’s order.

Click here to read the order.