On July 29, 2019, the Ninth Circuit Court of Appeals affirmed the lower court’s decision in Winding Creek Solar LLC v. Peterman et al., ruling that California’s feed-in tariff for small qualifying facilities (QFs), the Renewable Market Adjusting Tariff (ReMAT), violates the federal Public Utility Regulatory Policies Act (PURPA) (Ninth Circuit Case No. 17-17531). ReMAT provides small QFs of three megawatts (MW) or less with a standard contract for energy offtake, on a first-come, first-served basis. Under ReMAT, rates available to any given generator fluctuate based on the price the developers ahead in the contract queue will accept. The California investor-owned utilities must offer ReMAT contracts up to a program cap of 750 MW, which is proportionately split among the utilities, and then further divided across different types of generation, including baseload and peak/non-peak resources.

The Ninth Circuit ruled that ReMAT violated two tenets of PURPA. Under PURPA, subject to certain exemptions, utilities are required to buy at the avoided cost rate all the power produced by a QF. First, contrary to PURPA’s requirement that a utility buy all of a QF’s output, the Ninth Circuit found that ReMAT limits the amount of energy that utilities are required to purchase from QFs by placing caps on procurement. Second, ReMAT sets a market-based rate for energy from participating QFs, rather than a price based on the utilities’ avoided cost as required under PURPA.

The Ninth Circuit also rejected the QF Standard Contract as an alternative for California’s PURPA compliance, finding that the Standard Contract also violated PURPA. Under PURPA, QFs have the option of choosing an avoided cost rate as calculated at the time of contracting or at the time of delivery. According to the Ninth Circuit, since the Standard Contract only has one formula for calculating avoided costs and that formula relies on variables that are unknown at the time of contracting, the Standard Contract does not provide QFs with the required option to calculate an avoided cost rate at the time of contracting.

The plaintiff solar developer in this case sued the California Public Utilities Commission (CPUC) with the ultimate goal of expanding the capacity available under ReMAT for solar projects, raising the price paid to solar projects under ReMAT, and, more immediately, obtaining a contract at a higher price for its solar project in the ReMAT queue. However, Winding Creek Solar LLC did not succeed specifically on any of these fronts with this win at the Ninth Circuit. The CPUC’s next steps after this decision are not clear. Will it revise the ReMAT program? Will it maintain the ReMAT program as-is and revise the Standard Contract, making ReMAT a PURPA-compliant alternative? Also, what will happen to projects currently in the ReMAT queue? Given that ReMAT stems from a legislative mandate to create a feed-in tariff specific to small renewables, we predict that ReMAT will likely be reinstituted in some form, provided ReMAT, the Standard Contract, or another mechanism provides a PURPA-compliant option for QFs.

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Photo of Seth Hilton Seth Hilton

Seth Hilton, a partner in Stoel Rives’ Energy Development group, focuses his practice on energy regulation and litigation, representing clients before a variety of energy regulatory agencies in California, including the California Public Utilities Commission and California Energy Commission, as well as…

Seth Hilton, a partner in Stoel Rives’ Energy Development group, focuses his practice on energy regulation and litigation, representing clients before a variety of energy regulatory agencies in California, including the California Public Utilities Commission and California Energy Commission, as well as in stakeholder proceedings at the California Independent System Operator. His clients include developers of thermal and renewable generation, energy storage developers, transmission developers, energy service providers, and investor-owned and publicly-owned utilities. Seth also represents energy clients in state and federal court and has significant experience in a wide variety of complex commercial litigation.

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Photo of Jason Johns Jason Johns

Jason Johns advises independent power producers, utilities, investors, and large users of gas and power resources with matters arising in power markets and state and federal energy regulatory arenas. Jason appears regularly in proceedings before the Federal Energy Regulatory Commission and in negotiations…

Jason Johns advises independent power producers, utilities, investors, and large users of gas and power resources with matters arising in power markets and state and federal energy regulatory arenas. Jason appears regularly in proceedings before the Federal Energy Regulatory Commission and in negotiations at the ISO/RTO level, where he represents independent power developers and utilities. His experience includes negotiating major facility contracts, such as interconnection, transmission, and power purchase agreements; prosecuting disputes at FERC; and counseling and defending clients on issues related to regulatory compliance.

Jason also works closely with large commercial and industrial users of electricity and gas, such as aerospace companies, pulp and paper mills, steel mills, and tech company data centers. In that role, Jason helps clients negotiate power and gas supply contracts, interstate pipeline capacity asset management agreements, and pipeline bypass agreements. Jason has also assisted these clients with demand management agreements, the installation of on-site resources (such as battery storage, fuel cells, and solar PV), and with retail and wholesale power purchase agreements for renewable energy and other resources. Jason also serves as a board member of The Climate Trust, a national leader in carbon offset projects and innovative climate change solutions.

Jason and his wife are parents to two growing boys, and they live just outside of Portland, Oregon.

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Photo of Brian Nese Brian Nese

Brian Nese practices in the Energy Development group and the Renewable and Thermal Energy Initiatives. Brian focuses his practice on representing renewable energy project developers, owners and operators in drafting and negotiating various project documents, including engineering, procurement and construction agreements, operation and…

Brian Nese practices in the Energy Development group and the Renewable and Thermal Energy Initiatives. Brian focuses his practice on representing renewable energy project developers, owners and operators in drafting and negotiating various project documents, including engineering, procurement and construction agreements, operation and maintenance agreements, balance of plant agreements, supply agreements, and real property agreements. He also assists project developers with mergers and acquisitions, financings, and related due diligence. Brian is a former co-leader of the firm’s energy team and a former managing partner for the firm’s California offices. He encourages you to follow him on Twitter @BNese25 and welcomes LinkedIn connection requests.

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Photo of Allison Smith Allison Smith

Allison Smith focuses her practice in environmental and energy law. Her experience includes CEQA and land use litigation, conducting environmental due diligence, and permitting solar, wind, biomass, geothermal and gas-fired energy facilities. Allison also counsels companies on federal and state air quality and…

Allison Smith focuses her practice in environmental and energy law. Her experience includes CEQA and land use litigation, conducting environmental due diligence, and permitting solar, wind, biomass, geothermal and gas-fired energy facilities. Allison also counsels companies on federal and state air quality and greenhouse gas regulations.

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