FERC Filings
EPSA's Motion to Intervene and Comment in Support of Complaint of Michigan QFS
Statements of Facts
Congress enacted the Public Utility Regulatory Policies Act in 1978 (PURPA). One of the purposes of PURPA was to encourage the development of small power production and cogeneration facilities by non-utilities. The Commission issued implementing regulations in March 1980. In response, thousands of non-utilities and even some utilities constructed facilities that would become “qualifying facilities” for the purposes of the Commission’s regulations.
These facilities included the Michigan QFs:
NAME, DOCKET NO., DATE
Adrian Energy
Associates, LLC QF94-25-000, Nov. 16, 1993
Cadillac Renewable Energy, LLC, QF86-807-000, June 27, 1997
Genesee Power Station, LP, QF93-19-000, Aug. 25, 2000
Grayling Generating Station, LP, QF87-277-000, Aug. 25, 2000
Hillman Power Company, LLC, QF85-664-000, Jan. 5, 2000
T.E.S. Filer City Station, LP, QF87-481-000, July 22, 1988
Viking Energy of Lincoln, Inc., QF84-349-000, May 13, 1997
Viking Energy of McBain, Inc., QF84-399-000, May 13, 1997
Each of these facilities entered into a power purchase agreement with Consumers Energy to sell long-term capacity and energy at “avoided cost.” In state proceedings, the avoided capacity cost was fixed at the capital costs of a hypothetical bituminous coal-fired generating resource. The avoided energy costs were similarly fixed at the cost of bituminous coal.
Subsequently, Consumers invested $529,797,933 in capital improvements in its coal-fired generating unit to retrofit the facility to burn less expensive sub-bituminous coal. However, Consumers did not raise the avoided capacity cost paid to Michigan QFs to reflect its investment in the avoided cost unit. Consumers did, however, lower the contractual energy payment to Michigan QFs to reflect the usually lower cost of sub-bituminous coal used in the retrofitted facility. Michigan QFs brought complaints in state courts and before the Michigan Public Service Commission (MPSC). The MPSC ruled in favor of Consumers, relying on its interpretation of Michigan State Law.
Neither Consumers nor the MPSC sought a waiver of this Commission’s regulations implementing PURPA. In an Order Denying Petition for Declaratory Order issued by the Commission in response to New York State Electric & Gas, the Commission held that FERC “will not disturb existing QF contracts containing” avoided costs fixed at the time the obligation was incurred “if the contracts were not challenged at the time they were signed.” The Commission further found that the state public utility commission had not requested waiver of the Commission’s PURPA regulations.
In Cogen Lyondell, Inc., et al., the Commission denied the state public utility commission’s request for a waiver of the PURPA regulations, even though the utility purchasers were members of an RTO and the state was implementing retail competition – as is the case in Michigan. Nevertheless, the Commission upheld the validity of the QFs’ long-standing power purchase agreements. The Commission noted that other states implemented PURPA without vitiating the prices in long-term contracts. On the facts presented in this complaint, no waiver has been requested. Therefore, the Michigan QFs are entitled to immediate relief from Consumers’ violation of the QF pricing provisions.