FERC Filings
EPSA's Motion to Intervene and Supplemental Comments on Alliant's Petition
Executive Summary
In the concurrent protest submitted to the Commission by Joint Parties, which includes EPSA, Joint Parties urge the Commission to deny Alliant’s petition because the company has failed to demonstrate that it meets the criteria set forth in PURPA § 210(m) for relief from its obligation to purchase the output of. Alliant’s petition is deficient on its face given its failure to address all the required criteria, particularly the requirement that the Commission find that the affected QFs have access to long-term energy and capacity markets. Additionally, Alliant’s reliance on the status of the Midwest Independent Transmission System Operator, Inc. (“Midwest ISO”) as a FERC-approved RTO to meet the statutory criteria of PURPA § 210(m) is misguided as it does not provide evidence as required by the statute as to the competitive vitality of the long-term capacity markets in Alliant’s service territory. While Alliant may make a showing that meaningful opportunities exist for long term capacity sales in its service territory through transactional data evidence, the company does not submit any such information. Hence, the Commission should deny Alliant’s petition and utilize the opportunity to provide guidance on the Commission’s disposition of the PURPA amendment and the factors that may be relevant in assessing the statutory criteria.
EPSA believes that the Midwest ISO’s operation of energy markets and its administration of an open access tariff have successfully improved the quality of short-term markets in the region. However, capacity markets and the infrastructure necessary to support robust long-term capacity markets are still a work in progress in the Midwest ISO. Alliant’s petition provides no evidence, which is an option available to petitioners on this matter, that would allow the Commission to conclude that QFs otherwise have meaningful access to such markets. Hence, EPSA urges the Commission to offer guidance on the submission of evidence sufficient to meet the statutory criteria, including guidance to the effect that it will presumptively conclude that affected QFs can access long-term markets in circumstances where the petitioner and its neighboring utilities rely on all-source, technology neutral, competitive solicitations for long-term capacity that meet the guidelines the Commission announced in Ameren and Allegheny.
While the Ameren/Allegheny criteria were developed as a safe harbor for evaluating affiliate abuse in power sale and asset transfer transactions, they can be equally applied in this circumstance given that the primary result of PURPA’s mandatory purchase obligation is to require utilities to purchase from QFs when the cost of doing so is no higher than the cost the utility otherwise would incur to undertake a self-build option. Surely, well-constructed and managed competitive solicitations go a long way toward showing that capacity markets are competitive, robust, and offer meaningful opportunity for long-term contracts. Hence, the Commission should take this opportunity to reiterate the utility of this simple proposition as well as outlining any other types of evidentiary showings that meet the statutory criteria with respect to specific service territories.
A. Access To The Midwest ISO’s Energy Markets And Open Access Tariff Is Not Dispositive As To The Status Of Long-Term Markets, Particularly Long-Term Capacity Markets
As discussed in the protest of the Joint Parties, Alliant has made no showing as to the competitiveness of long-term capacity markets in its service territory. While the Midwest ISO’s operation of energy markets and administration of its open access tariff have successfully improved the quality of short-term markets in the region, EPSA respectfully submits that the existence of the Midwest ISO short-term energy markets and open access tariff does not in and of itself lead to the conclusion that there are robust, competitive long-term capacity markets in the Midwest ISO as well. If meaningful opportunities to sell capacity to buyers other than the utility to which the qualifying facility is interconnected existed, Alliant could have submitted transactional data to make that showing. As stated in the statute, “In determining whether a meaningful opportunity to sell exists, the Commission shall consider, among other factors, evidence of transactions within the relevant markets….” The Commission need not rely solely on the existence of an RTO-administered long-term capacity market mechanism to make a determination, but barring that, factual transactional data is required.
To be clear, EPSA does not in any way diminish the benefits provided by well-functioning energy markets and open access tariffs provided by RTO and ISOs. But more is needed here to ensure that QFs have access to capacity markets. This is particularly true with respect to long-term markets, which are an essential element of the statutory criteria.
Long-term markets will function well only if other factors are present, e.g., regional planning that ensures the transmission infrastructure is sufficient to permit long-term access, and pricing policies that ensure such access is available at a cost that does not preclude regional transactions. Importantly, the Midwest ISO has only recently completed its 2005 regional transmission plan, which identifies the significant transmission infrastructure additions to be undertaken. The Midwest ISO states that, “completion” of this $2.9 billion expansion in 2009 “will ensure reliable service to meet the growing demand for electricity in the Midwest ISO region.”
In any event, long-term capacity markets certainly will not function properly unless any material potential for affiliate preference, including inefficient self-build options, reasonably has been mitigated. Alliant has provided no factual support or analysis that would begin to demonstrate that these types of barriers to capacity markets have been addressed in its service territory. Based on the lack of evidence as to the existence of competitive long-term capacity markets in IPL’s and WPL’s service territories, the Commission must reject Alliant’s petition.
B. The Commission Is Urged To Provide Guidance On Factors That Could Be Relevant To Granting Waiver Of The Mandatory Purchase Requirement
While EPSA does not believe that disposition of this petition requires the Commission to announce all of the policies that it will adopt in implementing PURPA § 210(m), the Commission should utilize this opportunity to provide guidance on the factors that may be relevant in assessing the statutory criteria. At a minimum, EPSA urges the Commission to state that affected QFs will be rebuttably presumed to be able to access long-term capacity markets in circumstances where the applicant and its neighboring utilities rely on all-source, technology neutral, competitive solicitations for long-term capacity that meet the guidelines the Commission announced in Ameren/Allegheny, supra. The Commission has determined that affiliate preferences can be deterred if capacity purchases are the result of open competitive solicitations that provide an unbiased assessment of the full range of choices. The Commission identified certain principles that would be incorporated in unbiased competitive solicitations.
Transparency: The competitive solicitation process should be open and fair.
Definition: The product or products sought through the competitive solicitation should be precisely defined.
Evaluation: Evaluation criteria should be standardized and applied equally to all bids and bidders.
Oversight: An independent third party should design the solicitation, administer bidding, and evaluate bids prior to the company’s selection.
By the same token, then, it could be demonstrated, at least rebuttably, that QFs have access to capacity markets, including long-term markets, if the entity seeking waiver from the mandatory purchase obligation and other utilities in the relevant market could show that they procure capacity through open, technology neutral, competitive solicitations based on these principles. While the Ameren/Allegheny criteria were developed as a safe harbor for evaluating affiliate abuse in power sale and asset transfer transactions, they are equally applicable in this circumstance given that PURPA’s mandatory purchase obligation is triggered when a utility’s cost of purchasing from the QF is no higher than the cost the utility otherwise would incur were it to undertake a self-build option. No doubt these solicitations would not only help to create and maintain long-term markets, but when met with multiple bids, serve to demonstrate the cost of alternatives and the competitiveness of the market, as well. Of course, the Commission’s endorsement of this approach would not preclude other types of evidentiary showings with respect to specific market regions.
C. The Commission Need Not Address Alliant’s Proposed Interpretation of PURPA § 210(m)(6)
Alliant asks the Commission to confirm that, if the waiver is granted, it will apply to any QF that is not constructed and in operation. Alliant points to the language of PURPA § 210(m)(1) which relieves a utility from the obligation “to enter into a new contract or obligation” to purchase a QF’s output in support. Alliant argues that the obligation to purchase QF output arises under PURPA only when the “energy and capacity is made available,” and, therefore, only when the project is operational. Alliant claims that it does not have any existing and enforceable obligation to purchase the output of any unbuilt QF, other than those with which it has voluntarily entered into a contract. Alliant admits that PURPA §210(m)(6) provides that nothing in § 210(m) affects the rights or remedies of any party under any contract or obligation, in effect or pending approval before the appropriate State regulatory authority or non-regulated electric utility on the date of enactment of this subsection . . .”. Alliant contends that there is no unbuilt QF to which it has a current obligation or that is pending approval before a state regulatory authority, even though the IPL and WPL are currently involved in state regulatory proceedings involving requests by QFs for avoided cost determinations.
Because Alliant has not satisfied the requirements for waiver in the first instance, it is not necessary for the Commission to address Alliant’s interpretation of PURPA § 210(m)(6). Moreover, Alliant has not provided sufficient information about its state regulatory proceedings to assist the Commission in determining how this section might apply to those proceedings. Accordingly, the Commission should deny Alliant’s request for an interpretation of this provision at this time. In any event, though, it is clear that “built and operating” is not the statutory standard.