FERC Filings
EPSA's Motion to Intervene and Comment in Support of Complaint of Michigan QFS
Requirements of Rule 206-EPSA Comments Will Track The Requirement of a Complaint Under Rule 206 In Order To Structure Our Arguements
1-2. Clearly identify the action or inaction which is alleged to violate applicable statutory standards or regulatory requirements; and explain how the action or inaction violates applicable statutory standards or regulatory requirements.
The purchasing utility, Consumers Energy, has unilaterally withheld payments to Michigan QFs. More specifically, for the purposes of calculating the avoided capacity costs of the power purchase agreements of the Michigan QFs, Consumers continues to use the lower capital costs of a bituminous coal-fired generating resource (as specified in the PPAs). However, for the purposes of calculating the avoided energy costs of the PPAs, Consumers unilaterally began to use the avoided cost of sub-bituminous western coal. Western coal is generally less expensive than the eastern grade of bituminous coal contemplated in the avoided cost calculations derived when the PPAs were executed. Thus, Michigan QFs have suffered lower energy revenues than stipulated in the PPAs and they continue to suffer from Consumers’ violations of the Commission’s regulations implementing PURPA.
1-3. Set forth the business, commercial, economic or other issues presented by the action or inaction as such relate to or affect the complainant.
The Commission’s PURPA regulations allow a qualifying facility to elect to sell to the utility at either market-based prices (avoided costs at the time of delivery) or at avoided costs estimated over the life of the power purchase agreement at the time the PPA was executed. The Michigan QF contracts at issue in this proceeding are based on the latter option. The subject power purchase agreements were executed in the 1980s and early 1990s based on the avoided capacity and energy costs of a Michigan bituminous coal-fired generating resource.
EPSA supports the sanctity and viability of QF contracts. The developers entered into such contracts, funding capital investments and maintenance decisions, based on the avoided cost calculation that was extant when the contracts were initiated. Unilateral revisions to the avoided cost price term, whether by the purchasing utility or the state, undermine QF performance, contract obligations and decisions to invest in non-utility electric generation. Also, they imperil one of the basic underpinnings of merchant investment in wholesale markets – performance-based contracts.
1-4. Make a good faith effort to quantify the financial impact or burden (if any) created for the complainant as a result of the action or inaction.
The purchasing utility, Consumers Energy, has recovered avoided costs – based on the price of bituminous coal – from retail and wholesale customers, pursuant to a rate freeze. Nevertheless, from 1997 to 2003 Consumers remitted to the Michigan QFs only a lesser amount based on the avoided cost of sub-bituminous western. During this time, Consumers unjustly enriched its shareholders by retaining the price differential between eastern and western coals. Michigan QFs have been harmed by Consumers’ breach of the energy pricing provisions of the power purchase agreements. All QFs are harmed if Consumers’ violation of the Commission’s regulations implementing PURPA is not remedied.
1-5. Indicate the practical, operational, or other non-financial impacts imposed as a result of the action or inaction, including where applicable the environmental, safety or reliability impacts of the action or inaction.
Consumers relies on the interpretation of a state law (MCL 460.6j(6)) by the Michigan Public Service Commission to justify Consumers’ unilateral revision of the energy price term in the Michigan QF’s contracts. However, the Commission’s regulations and past precedent do not permit a utility to engage in such self-help. The Commission’s regulations, as stated in Cogen Lyondell, supra, clearly requires that a state regulatory authority first seek a waiver under 18 C.F.R. § 292.402. That section provides:
(a) State regulatory authority and nonregulated electric utility waivers. Any State regulatory authority (with respect to any electric utility over which it has ratemaking authority) or nonregulated electric utility may, after public notice in the area served by the electric utility, apply for a waiver from the application of any of the requirements of Subpart C (other than § 292.302 thereof).
(b) Commission action. The Commission will grant such a waiver only if an applicant under paragraph (a) of this section demonstrates that compliance with any of the requirements of Subpart C is not necessary to encourage cogeneration and small power production and is not otherwise required under section 210 of PURPA.
In Cogen Lyondell, Inc., et al., the Commission held that in order to prevail a request for a waiver must show “that compliance with the utility purchase obligation is not necessary to encourage cogeneration and small power production or is not otherwise required under section 210 of PURPA.” On the facts of this case, the respondents have not even made a request for waiver. Instead, they have modified the energy price term of QF contracts in violation of the federal statute.
1-6. State whether the issues presented are pending in an existing Commission proceeding or a proceeding in any other forum in which the complainant is a party, and if so, provide an explanation why timely resolution cannot be achieved in that forum.
On information and belief, EPSA believes that the Michigan QFs have sought review of the decision of the Michigan Public Service Commission decision in MPSC Case No. U-13197, Feb. 28, 2005 Order.
1-7. State the specific relief or remedy requested, including any request for stay or extension of time, and the basis for that relief.
EPSA supports the Commission’s regulations implementing PURPA, on which EPSA’s members have long relied when investing capital in cogeneration and small power production facilities. Thus, EPSA supports the request for FERC enforcement of the lawful avoided cost rates (based on bituminous coal prices) in the power purchase agreements of the Michigan QFs.
1-8. Include all documents that support the facts in the complaint in possession of, or otherwise attainable by, the complainant, including, but not limited to, contracts and affidavits.
EPSA relies on the complaint and appendices submitted hereunder by the Michigan QFs.
1-9. State (i) whether the Enforcement Hotline, Dispute Resolution Service, tariff-based dispute resolution mechanisms, or other informal dispute resolution procedures were used, or why these procedures were not used; (ii whether the complainant believes that alternative dispute resolution (ADR) under the Commission’s supervision could successfully resolve the complaint; (iii) what types of ADR procedures could be used; and (iv) any process that has been agreed on for resolving the complaint.
Respondents did not seek waiver of the Commission’s regulations implementing PURPA or otherwise avail themselves of the enforcement hotline, the Commission’s dispute resolution service or other alternative dispute resolution services. Respondents rely entirely on a proceeding conducted by the Michigan Public Service Commission. Complainant Michigan QFs sought the jurisdiction of this Commission. Notice was issued on March 31, 2005, and, in response, EPSA files this Motion to Intervene and Comments.