Federal Court Finds California PURPA Programs Non-Compliant

In a decision issued last week, the U.S. District Court for the Northern District of California granted summary judgment in favor of Winding Creek Solar LLC ("Winding Creek"). Winding Creek had alleged that certain California Public Utilities Commission (CPUC) renewable energy programs conflict with the Public Utility Regulatory Policies Act of 1978 (PURPA).1 Unless the decision is overturned on appeal, the CPUC likely will have to revise one or more of its PURPA programs or develop a new program from scratch that is consistent with federal law.

Background

Congress enacted PURPA to promote the use of domestic renewable energy resources. The law requires electric utilities, under certain circumstances, to purchase power produced from small generating facilities called "Qualifying Facilities," or "QFs."2 PURPA directs the Federal Energy Regulatory Commission (FERC) to prescribe rules to carry out this objective.

One such rule prescribed by FERC requires that QFs be given a choice in the pricing and delivery options for their PURPA sales. Under 18 C.F.R. § 292.304(d) (2017), each QF has the option to (1) provide energy as the QF determines, in which case the rate for such sales shall be based on the purchasing utility's "avoided costs"3 calculated at the time of delivery; or (2) provide energy pursuant to a legally enforceable obligation over a specified term, in which case the rate for such sales shall be based on either (i) avoided costs calculated at the time of delivery or (ii) avoided costs calculated when the obligation is incurred. PURPA directs each state regulatory authority to implement FERC's rules for the electric utilities over which the state authority has jurisdiction.4

Winding Creek Decision

Winding Creek sued the CPUC commissioners in their official capacities, challenging California's Renewable Market-Adjusting Tariff (Re-MAT) procurement program. Re-MAT, which became operational in 2013, provides a feed-in tariff for renewable generating facilities up to three megawatts (MW) in size. It requires California utilities such as Pacific Gas and Electric Company (PG&E) to purchase power from QFs under long-term contracts at prices established through a complex administrative process. California's utilities may purchase no more than 750 MW of generation, collectively, through the Re-MAT program.

Winding Creek argued in its suit that two aspects of the Re-MAT program prevent Winding Creek from obtaining a contract consistent with...

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