PSC lengthens energy contracts

Eleanor Guerrero
CCN Senior Reporter

On Oct. 5, the Montana Public Service Commission (PSC) said energy developers may obtain 15-year agreements. It said it “reaffirms level playing field” for all resources. The prior order gave only 10-year terms for solar energy projects with a five-year “review.” Whether this change will be sufficient time to finance small (but larger than single residence), long term solar projects or will be the death of the commercial solar industry in Montana is up for debate.
The PSC voted unanimously to take up reconsideration of a June 22 order to establish standard rates and contract terms for small renewable energy projects up to three megawatts in size known as Qualifying Facilities (QFs). The Commission voted 4-1 to increase the maximum term of contracts available to these projects to 15 years, up from 10 years.
The PSC declined to adopt a number of other proposed changes to its order, including modifications to the capacity payment given to solar and whether to include a hypothetical carbon price adder to payments to renewable generators.
Vote Solar, Montana Environmental Information Center, FLS Energy and Cypress Creek Renewables, and NorthWestern Energy (NWE) had filed reconsideration requests.
Butch Larcombe of NWE said, “In general, we think the prices the PSC  established for solar QF projects are fair and reflect the current electricity market, which is what federal law says is supposed to be the case.
As for the contract lengths, we have concerns. The proposed length would like make it difficult for NorthWestern to develop and finance any new generating facilities. I can't speculate on how independent developers might view the contract lengths. I think you need to ask them. I don't have information I can share on possible solar developers. We have QF agreements for six solar projects with Cypress Creek Renewable in Montana. You could contact them. Or the Montana Sun folks might also be a possibility.”
FLS Energy Inc. (FLS), has invested over $700,000 in Montana projects. Earlier, the PSC voted to suspend the state’s favorable rate for renewable energy companies. A federal law requires utilities to buy from alternative energy producers but it allows individual states to set the prices utilities pay.
FLS, a North Carolina company and now a wholly owned subsidiary of Cypress Creek Renewable, a California company, had threatened to sue Montana if state utility regulators stick by their decision on how much they can charge for electricity. The old rate was $66 per megawatt hour.
The rate available to Qualifying Facilities under the Commission’s now modified order breaks payments to Solar QFs up into two separate time periods. When demand is high NWE must pay $37.26 per megawatt hour (MWh), but when demand drops off, the rate falls to $28.14 per MWh.
Montana’s PSC adjusts those rates every two years and once companies have entered into an agreement, they can be locked into that price for several decades.
Local, smaller solar developer, Henry Dykema, of Sundance Solar Systems, Inc., in Luther, said, “It doesn’t necessarily affect me as a qualifying facility project however, it affects renewable energy installers in general in Montana.
The change from five to 15 years is good, not as good as 20 years.” Dykema was against their lowering small home energy project resales of energy from 6 cents kWh to 2 cents kWh, which he said is very harmful. He referred to the “hot mike” incident in June, after the first PSC decision to shorten contract terms and lower produced energy resale rates was announced where PSC Bob Lake was caught saying in effect, “Well the ten year might do it if the price doesn’t.” He couldn’t imagine anyone getting involved in a project with those terms.
“There’s clearly an attitude,” Dykema said. “An anti-solar attitude. It will curtail any large scale (solar) project. You can’t make money on it. “
Dykema said it will largely affect out of state energy companies who want to come to Montana or are currently working to develop a project in Montana for solar energy. “There were a few-one from North Carolina, one from California that worked on Reed Point with NorthWestern Energy. And one outside Hardin.”
He said the days of a 20 year contract “were a boon for a short period before PSC controlled it.” Now, “It’s got us back to the Dark Ages.”
Dykema reflected, “Maybe it’s just me but I sense there is an attitude about it whether political-those left leaning, radical environmentalists…”
He sees this same attitude in the legislature. “None of the progressive bills pass. Net metering is largely curtailed.”
Dykema said of the attempt to bring the price down to those selling power back to the system who now get less, “It’s part of a national effort by utilities. There seems to be an attitude to hold it back, curtail it.”
Chairman Brad Johnson, R-East Helena, said, “The Commission strives to render even-handed decisions based first and foremost on record evidence and detailed legal analysis. We listened closely to the various motions from the parties and the Commission welcomed the opportunity to further improve on our final order through the reconsideration process.”
“A 15-year contract provides sufficient protection for the ratepayer, while giving investors the certainty that they need to move forward with energy projects in Montana,” said Commissioner Bob Lake, R-Hamilton.
A federal law called the Public Utilities Regulatory Policy Act (PURPA) requires utilities like NWE to purchase power from small renewable energy projects at what it would otherwise cost the utility to purchase the same amount of energy and capacity provided by the facility, known as the utilities “avoided cost.” At the end of the 15-year contract term, if PURPA remains in effect, the utility will be required to continue purchasing electricity from the QF at an updated rate, which reflects the utilities avoided cost at that time.
Commissioner Roger Koopman, R-Bozeman, opposed the increased contract lengths, believing that 10-year contracts “were entirely fair and equitable, while providing much stronger protection to ratepayers.”
“Nothing has changed since we made our original decision, and the Commission should have stood its ground. Adding another five years to level rate contracts increases the over-charge risk to consumers exponentially. Many examples of this already exist, where Montana rate- payers are forced to pay rates that are dramatically above market, due to very long-term QF power purchase contracts,” he said.
Additionally, the Commission reaffirmed by a 4-1 vote its ruling that the 15-year limit applies to all new power plants, regardless of ownership or resource type, not just the small renewable generators. Commissioner Lake dissented. The Commission will take up this matter in NWE’s ongoing resource planning process; it plans to own or contract with a substantial number of gas-fired generators in the future.
“It’s a bedrock principle of the Commission that we need a level playing field between projects owned in one case by the monopoly utility and in the other by independent developers,” said Commissioner Travis Kavulla, R-Great Falls.
PSC Commissioner Kavulla, Cypress Creek Renewables and Montana Sun were contacted but a response was not received by press time.


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